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The Financial Express

Startup boom in Bangladesh


Startup boom in Bangladesh

Bangladesh is one of the fastest developing nations in the world with 62 per cent of the population under the age of 35.

Being the 39th largest economy with an impressive annual GDP growth rate of around 6.5 per cent over the last decade, it has seen its startup industry undergo a substantial transition in recent years.

More than 1,200 active startups, with 200 new ones joining the industry annually, have been spurred by the emergence of active angel investment networks, impact investors, and a myriad of locally and internationally operating accelerators and incubators.

Over the past ten years, the Bangladesh Startup Ecosystem has grown tremendously raising over USD 800 million in funding and producing more than 1.5 million employment opportunities, with a focus on industries like Fintech, Logistics & Mobility, and eCommerce. Over USD 90 million was raised by Bangladeshi entrepreneurs in the first half of 2022.

Consumer behaviour

The robust economy and rapid growth of the nation, which fosters a supportive environment for startups, is one of the factors driving this acceleration of growth.

Bangladesh is witnessing a fast-growing middle-class group, which is projected to reach 34 million by the year 2025. This section is the one that startups most frequently target due to their consumption habits and their proportion within the population as a whole.

Use of informal technology in business

With an Internet penetration rate of more than 75 per cent (125 million+ people), where more than 123 million people have access to the internet through mobile data-based Internet services, the digital footprint of this expanding and tech-savvy population is developing. ICT use in digital commerce, education, healthcare, and agriculture has also increased as a result of the COVID-19 pandemic

A surge in skilled demography

Every year, more than 5,000 IT graduates are produced in the nation, resulting in a group of individuals with the necessary skill sets for starting a business. It is fostering a strong wave of entrepreneurship aimed at resolving pressing issues, such as those arising from the pandemic. 

The median age in the nation is 27.9 years, which indicates that more young individuals are eager to take chances and research economic advances.

Due to the limited employment options available to STEM graduates, they are looking into creating ICT-enabled businesses and startups.

Access to finance

With an excess of USD 459 million that has accumulated over the past ten years, the Bangladesh Entrepreneurship Ecosystem is at a turning point in terms of access to financing. The majority of the money received for this fund has come from corporate and venture capital investors outside. 

The firms that have been selected during the past five years are in the FinTech, Logistics, and Mobility industries.

Additionally, the criteria for the small-cap stock market have been authorised by the Bangladesh Securities and Exchange Commission (BSEC), giving investors the ability to leave startup investment holdings.

Government initiatives

In order to improve the local startup ecosystem, the government of Bangladesh has undertaken a number of efforts, including the creation of the venture capital firm ‘Startup Bangladesh Limited’ with Tk 100 crore (USD 11.5 million) in funding.

The creation of the startup ecosystem was significantly influenced by the National ICT Policy of 2009 and the Digital Bangladesh Agenda by 2021.

Additionally, the government's ICT Division unveiled a number of beneficial regulations and initiatives, such as the Innovation Design Entrepreneurship Academy (iDEA) Project, which would invest USD 65 million in enhancing the local startup environment. Also, more than 28 Hi-Tech Parks are being built with infrastructure like data centres, to help innovative firms.

The scene in Bangladesh

Since bKash's launch in 2010, startups have gained popularity in Bangladesh. Money in Motion of the US and Brac Bank Ltd. established and funded it.

Following an investment by Ant Financial, a sister company of Ali Baba, in 2018, bKash's valuation increased to about USD 1 billion (according to Brac Bank's Annual Report), making it Bangladesh's first unicorn.

The largest investment in a Bangladeshi business to date, ShopUp, a commerce platform, earned  USD 75 million from Peter Thiel's Valar Ventures and Proses Ventures.

Pathao, the largest digital services platform in Bangladesh, raised over USD 35 million in venture capital in 2021. Chaldal, a new e-commerce platform, has obtained USD 10 million in international finance for growth.

Challenges

The startup ecosystem in Bangladesh is significantly less developed than the global startup ecosystem. In the worldwide Innovation index, Bangladesh is placed 116th, India is 46th, and Sri Lanka is 101st.

The number of startup investment agreements globally each month has decreased by half (55 per cent) from the pre-COVID period as a result of the pandemic recession. Finding the proper talent, getting access to capital, managing cash flow, getting backing from the government, dealing with legal and regulatory issues, and delaying technological adoption are the main issues facing startup entrepreneurs.

Looking forward

With the government's focus on the Digital Bangladesh agenda, it is essential to create a startup policy that provides many incentives for ecosystem actors and startups, including easier access to debt financing, lower operating costs, simpler company operations, and fiscal policy assistance. 

An enabling policy would encourage the development of startups and the ecosystem, attracting foreign investment that will boost the growth and employment rate of the nation.

Bangladesh must have a conducive atmosphere for investment. It is necessary to simplify and make it easier to run business policies, procedures, and laws for startups. It is essential that businesses and academics work together to provide the proper infrastructure for fostering creativity and talent at the college and university levels.

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