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In 2023, the startup landscape of Bangladesh has been a testament to resilience and adaptability amidst global economic upheavals. This year, shaped by macro-economic pressures, including recession and global conflicts, has been a litmus test for startups, distinguishing the robust from the vulnerable. The narrative of the year has been one of endurance, strategic manoeuvring, and an unyielding spirit of innovation.
I feel that the pandemic era was a defining moment for startups. Those who had the fortune to secure funding just before the crisis found themselves in a relatively advantageous position. They had the much-needed runway to navigate through the uncertainties that lay ahead. In contrast, startups planning to raise capital later faced a tougher battle. Deals that were in the pipeline got cancelled or delayed, and for some, this reliance on future funding proved to be a significant challenge.
Yet, from these challenging circumstances, many players emerged stronger. These startups demonstrated that during crises, liquidity is paramount. Investors shifted their focus, prioritizing startups that could show a path to profitability, had substantial cash reserves, and longer runways. This shift underscored a fundamental truth of startup survival: during crisis times, cash is king. For those who raised capital just before these troubling times, such as our own journey at ShopUp, there was a silver lining. Anticipating currency devaluation, we preserved our dollar reserves against which we were able to take taka debt.
The startup funding landscape underwent significant polarization. While early-stage startups somewhat continued to enjoy access to capital, albeit with more scrutiny, late-stage companies found themselves in a more arid environment. Investors' focus shifted towards sustainability, particularly for late-stage ventures. The market contraction compelled startups in Bangladesh, to revisit their strategies. The strongest startups emerged not just by slashing costs but by increasing margins as well through tweaking their pricing or the business model itself.
An interesting phenomenon in the Bangladeshi market is the illusion of product-market fit. The market's fragmented nature means almost any product finds some level of validation. However, the true test is scalability. Startups like Pathao, Chaldal, and ourselves have successfully navigated this, moving from early to late stages by cracking the right product-market fit and growth strategies.
A misstep some startups made was compromising scalability completely in favour of achieving profitability. As the market shifts again, this ultimately becomes a move that limits their growth potential from a VC investor perspective. On the contrary, startups that maintained a balance between growth and minimizing burn, especially those improving their gross margins, found themselves on a more sustainable trajectory. At ShopUp, I believe this balanced approach has been a key to our success. We are now closing 2023 with a stable 10 per cent month-on-month growth this year while ensuring each business unit turns profitable.
Also, the past year has seen a significant rise in local investments. Entities like IDLC Venture Capital Fund, Startup Bangladesh, and SBK Tech Ventures have been instrumental in this shift, enabling startups to raise local-only rounds. 10 Minute School (10MS), for instance, is a great example of a startup that successfully raised significant investment from Bangladeshi VCs.
The Bangladeshi startup scene, highlighted by emerging companies like Markopolo, Fabric Lagbe, at the Bangladesh Startup Summit 2023, is poised for a bright future. As the cycle shifts, we anticipate that capital will become more accessible. Startups that have maintained a balance between growth and profitability are well-positioned to capitalize on the next cycle of opportunities.
2023 has been a year of learning, adaptation, and resilience for Bangladesh's startups. It has proven that with the right strategies, even in the most challenging times, there is not only a path to survival but also to success and growth. As we move forward, the lessons learned this year will undoubtedly shape the future of the startup ecosystem in Bangladesh, heralding an era of innovative growth and dynamic entrepreneurship.
About the author: Shaheen Siam is currently serving as the Chief-Strategy-Officer at ShopUp. He is one of the founding members of the organization. Siam founded his first tech company in his 20s while he was in college. He has more than 12 years of entrepreneurial experience looking after important functions like finance & strategy.