The startup ecosystem in Bangladesh has become a remarkable platform as of now, and it is, at last, going through the transitioning phase. A portion of the new startup companies has become a go-to service for many people. The ecosystem focusing around Dhaka and Chattogram can be compared as the rear of flourishing sectors like IT, e-commerce, and digital marketing. These days, we are getting the benefit of these startup businesses by and large. We order food from Hungrynaki (online food delivery company), use Pathao (ride-sharing platform) bike for going somewhere, buy tickets from Shohoz (online ticketing service), use Chaldal (online grocery shopping) for buying groceries, pay through bKash (mobile financial service) and these services goes on. The number of such new companies is currently around 1000+ and is assessed to have multifold development and consecutive progress within the digital ecosystem. For more than a few years, the startup ecosystem has truly been kicking its progress and extending in various areas.
Background
The excursion of the startup ecosystem in Bangladesh has begun in the mid-2010s. It has received both criticism and worldwide commendation for moving the wrong pace along the global startup development timeline. Nonetheless, as the bubble has begun to barge at the moment, Bangladesh is in a state where it will either arrive at the pinnacle of new achievement of overcoming adversity or be a part of the burst too. In some of the initial years, the development of this ecosystem was through the endeavors of new startups and included many enthusiasts who helped these spearheading entrepreneurs. Claiming themselves as mentors, the vast majority of these enthusiasts who helped and assisted the ideas with succeeding endeavors have been private firms and different entrepreneurs from different sides. Some of the most popular startups at present are Pathao, Sheba.xyz, Chaldal, Shohoz etc. All of them have started their journey around almost the same time.
“Startup ecosystem system in Bangladesh has without a doubt progressed significantly since it began its excursion around ten years back,” says Minhaz Anwar, head of Grameenphone’s Acceleration program. To support and work with the new businesses, the public authority has curated ‘Startup Bangladesh’ in March 2020 with an allotted capital of Tk 500 crore to assist new business visionaries to improve the ecosystem quicker, create new job opportunities, foster specialized abilities, and understand the vision of ‘Digital Bangladesh’. Moreover, new startups are also provided with free workspace, co-ordinations support, logistics, training opportunities, and exposure to prominent venture capitalists and investors. At present, the selected startup companies are allocated space at the StartUp Incubator of Janata Tower STP (Software Technology Park) at Bangladesh Hi-Tech Park completely liberated from cost for a year. Immersive guidance is extended to he individuals who have been around the startup field for a couple of years and are yet to make noticeable progress. There are numerous difficulties and hurdles in the startup field that needs to be conquered in order to come out victorious. In any case, it is accepted that if these difficulties are met helpfully, and addressed with a joint exertion from both the ecosystem and the government framework, the startup blast would in fact spell accomplishment for future advancement in both economy and innovation aspects.
Bangladesh’s annual GDP growth rate in 2019 was 8.1 percent, the best in the country’s history and in South Asia for the year. A lot of variables have contributed to the inclusive economic growth, which has resulted in the outstanding output Bangladesh is experiencing. Our country is going through a demographic dividend and the Bangladesh Bureau of Statistics (BBS) reports that the country’s young population is within the median age range of 28 to 35 years. The country is also gaining from the “Density Dividend,” since we have a high population density which can be considered as a potential to construct smarter cities like Bangkok. Bangladesh can be described as a Density Dividend rather than a Demographic Dividend.
Source: Bangladesh Bank, World Bank
Bangladesh’s startup ecosystem, which began in the early 2010s, has undergone a remarkable transformation and is finally maturing. Around 63% of Bangladesh’s population is under the age of 35, and with the internet, smartphone, and social media penetration rates of 55%, 31%, and 20%, respectively, the market for technology-enabled services is expected to grow. Simultaneously, Middle and Affluent Consumers (MAC) will continue to grow at a 10%+ annual rate, propelling consumption. Propelled by the healthy growth of digital enablers and rising consumer purchasing power, the thriving startup ecosystem is simplifying the lives of thousands of people every day.
Source: BSEC, Bangladesh Startup Survival Guide Group
Currently, for both investors and startups, ride-sharing and logistics are two of the most promising sectors from the perspective of the startup ecosystem. Healthtech and Edutech are also esteemed greatly to be at the forefront of the subsequent growth.
“Despite investors’ high confidence in e-commerce sector and lucrative funds raised by Chaldal (US$5.5 Mn from International Finance Corporation), Daraz (acquired by Alibaba), Sindabad.com (US$4.2 Mn from Aavishkaar Frontier Fund), players are considering the sector as a low confidence one as the percentage of online purchase is still less than 1% of the total retail purchase regardless of the high disposable income and internet penetration rate.”
-Lightcastle Partners
Fig: Bangladesh Startup Ecosystem is diverse and operating in multiple sectors.
Fig: Homegrown Startup has raised US219.5 Mn of foreign investment for the last decade. (Source: DataBD.Co)
Opportunities and futures
Given that more than half of Bangladesh’s 165 million people are under the age of 35, youths are critical to the country’s economic recovery and vitality. One of our country’s most significant developmental challenges has been ensuring gainful employment for the 2.1 million young people who enter the labour force each year. Not only is the country’s dwindling garment manufacturing base unable to absorb the volume, but the country’s lack of diverse industries also fails to meet the aspirational needs of highly educated young professionals. Entrepreneurship is a promising avenue for nurturing the creative potential of Bangladeshi youth.
Nearly USD 3 trillion in value is generated by the global startup economy. Through innovation, job creation, regulatory advancements, the development of new sectors, and cultural transformation, startup ecosystems benefit the broader economy and society. Innovation increases operational productivity and competitiveness, resulting in not only job creation but also job creation that is of high quality and well-compensated. Governments can also foster the development of future-ready firms that drive global competitiveness and raise living standards by fostering business-friendly environments. With young people at the helm, a systematic approach to developing Bangladesh’s startup ecosystem represents an opportunity for the country to leapfrog its development.
Bangladesh has made significant investments in higher education over the last decade. Dividends are now being paid. Notably, it has excelled in STEM subjects, laying the groundwork for success in the digital economy. Bangladesh now has the world’s second-largest pool of online labour. Additionally, the country’s demographic, educational, and technological conditions have fostered the growth of high-growth, knowledge-based, and technology-driven businesses – what we refer to as startups.
Even during the pandemic, the government recognised the critical nature of startup support. The Ministry of Information, Communication Technology (ICT) requested 1 billion BDT (approximately USD $12 million) from the Ministry of Finance in order to fund 1,000 start-ups by the end of 2021. Given that the pandemic forced the government to rebalance its long-term goals and immediate needs, a sound regulatory environment in conjunction with government funding will be critical for attracting interest from early-stage commercial investors, who then provide leverage for start-ups to scale. Bangladesh is expected to have over 1,000 active startups by the end of or after 2021, creating over 1.5 million jobs and attracting over USD $200 million in foreign investment. While the startup ecosystem remains a small frontier market, it serves as a catalyst for economic vitality in the post-COVID era.
FIGURE: Startups’ Opinion on Ecosystem Development / Source: LightCastle’s Primary Research
Bangladesh, if it is to become the next Asian tiger, must maintain a stable GDP growth rate and a high rate of employment. However, the rising graduate unemployment rate (40 percent) and the declining export trend for Ready-made Garments (RMG) have created significant impediments to achieving the goals. Expanding the private sector, particularly the SME/Startup sector, can be one of the most effective strategies for sustainable economic growth.
FIGURE: The Journey of Bangladesh’s Startup Ecosystem (2013-2020)
Despite being the most powerful engine of growth in Bangladesh, startups usually face three distinct challenges. To begin, the lack of appropriate mentorship and funding makes it difficult for early-stage startups to scale. This challenge can be addressed through the effective implementation of accelerator and incubator programmes, as well as the circumvention of capital requirements through the investors’ network. Secondly, due to market malpractices (e.g., lobbying, the use of speed money, and poor payment terms), the financial cost multiplies and resulting in the premature closure of ventures. Finally, the older generation has a negative attitude toward entrepreneurship, believing that one should only engage in business if one is unable to obtain a respectable job. As a result, the younger generation frequently prefers to wait for a job rather than create one.
The presence of accelerator and incubation programs, mentorship and training, and market liquidity are insufficient to spark the ecosystem’s next great revolution. The entire business environment must be transformed to make room for evolutionary startup growth. And the conclusion behind that need is obvious: Bangladesh’s startup ecosystem is gradually maturing.
