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Bangladesh
Startup Ecosystem
The Untapped Digital Goldmine of Asia
2
Bangladesh startup ecosystem is coming of age riding on key drivers:
▪ Strong Economy Vitals for Startups: Tech adaptable young population 62%+ under 35 years, 165 million people (8th largest
in the world) with high density (1200 people/Sq Km). Middle class growing at 10% per annum to reach 34 million by 2025,
105% mobile phone connection, 70% internet penetration, 115 million+ people on internet with 106 million mobile internet
penetration. The pandemic has also accelerated the use of ICT technology, including digital commerce, education, healthcare,
agriculture.
▪ Demographic Bulge with the Right Skill-sets: The country generates 5,000+ IT graduates each year is creating a strong group
of entrepreneurial waves focused on solving critical problems, including those during the pandemic. The country’s
median age of 28 years means more young people are willing to take risks and explore innovations in the economy. With
limited opportunities from STEM graduates (due to the absence of large-scale industrialization except for RMG/Textile, which
is still more labor-intensive than automation) - they are looking into forming ICT enabled companies and Startups. NRBs (Non-
Resident Bangladeshis) are also returning, bringing in both investment capital and knowledge remittance.
▪ Bangladesh Startup Ecosystem at an Inflection Point: The Bangladesh Entrepreneurship Ecosystem is at an inflection point
with an excess of U$ 330 million accumulated over the last decade, in international investments from big-name corporate
investors and venture capitals, investing in industries like FinTech, Logistics, and Mobility over the last five years. The
emergence of active Angel Investment Networks, Impact Investing, host of local and international operating accelerators/
incubators propelled 1,200+ active Startups, generating 1.5 million+ employment - embracing products and services of
Startups as part of the country’s everyday life. Additionally, B-SEC (Bangladesh Securities and Exchange Commission) has
also approved small-cap stock exchange guidelines, which is a big step towards providing investors with Startup exits.
Government Support:
▪ The Government of Bangladesh deployed the National ICT Policy in 2009 to become Digital Bangladesh by 2021. Government
policies and projects from the ICT Ministry, such as IDEA Project and Startup Bangladesh Limited with 500 crore BDT
(U$ 65 Million) funds, are taken to improve the local startup ecosystem. Additionally, GoB is setting up 28+ Hi-Tech Parks,
including infrastructure support like data centers, to support technology companies.
COVID-19 Impact:
▪ Since March 2020, the country and all its businesses and startups have been affected drastically by the COVID-19 disruption.
24% of companies reported to have stopped operations, with 56% of startups seen at least a 50% drop on revenue
generation. 63% of Startups have runway less than three months threatening 1.5 million employment and an annual loss of
over U$ 53 Million in 2020. The disruption, however, is also propelling accelerated adoption of digital services with Digital
Financial Services, Logistics, and Grocery on-demand, EdTech, HealthTech seeing steep growth.
Executive Summary
1. Executive Summary
2. Bangladesh: The Untapped Economy in Chindia
i. Economic indicators of the past decade, suggest growth for the country
ii. MAC population will double to 34Mn in 5 years, increasing consumer appetite
iii. Markers of digital penetration are increasing, boosting startup activity
iv. Investment in the country has grown ~4X over the last decade
v. Right time to attract foreign investors as the startup epicenter of the world shifts towards Asia
3. Bangladesh Startup Ecosystem is Coming of Age
i. Bangladesh Startup Ecosystem: A glance of growth in numbers
ii. Government initiatives boosting the startup ecosystem to come of age
iii. Bangladesh Ecosystem is diverse and operating in multiple sectors
iv. With Fintech leading the ecosystem, the overall confidence of ecosystem was positive in 2019-2020
v. Increasing number of accelerators and incubators are acting as enablers in the ecosystem
vi. Bangladeshi Startups are attracting global and local investors
vii. Bangladeshi Startups raised over USD 272 Mn in last 5 years
viii. Notable Local Initiatives leading the local investment landscape
ix. Homegrown Startups have raised USD 300Mn+ of foreign investment
x. USD 33 Mn+ raised in investments in the first half of 2021
4. Challenges in the Ecosystem
i. Bangladesh Startup Ecosystem ranks far behind in comparison to the Global Startup Ecosystem
ii. Finding the right talents & access to financing still remains top problems for emerging startups
iii. Funding in Bangladesh as percentage of GDP is significantly low
iv. FDI as % of GDP low compared to peers
v. Need to solve Doing Business Index Challenges
vi. Covid-19 impact
5. Way Forward and Recommendations
Table of Contents
3
Bangladesh: The Untapped Economy
in Chindia
01 | Economic indicators of the past decade, suggest growth for the country
02 | MAC population will double in 5 years, increasing consumer appetite
03 | Markers of digital penetration are increasing, boosting startup activity
04 | Investment in the country has grown ~4X over the last decade
05 | Right time to attract foreign investors as the startup epicenter of the world shifts towards Asia
4
U$2,227
GDP Per Capita
FY 2020-21
~28
Median Age
2020
Bangladesh, the 37th largest economy and one of the fastest
growing countries, showed an impressive average annual GDP
growth rate of ~6.8% over the last decade. The country’s annual
GDP growth rate officially surpassed that of India’s in 2016 and has
been higher than that of its neighbor since then.
GDP per capita has been growing at rates over 5% since 2015
peaking at U$ 2,227 (as of June 2021). Final consumption
expenditure, which accounts for private consumption and general
government consumption, has been growing positively for the last
10 years.
The economy is on track in graduating from the LDC status in 2024
and has made impressive strides in human development. PwC, a
global consultancy, also predicts Bangladesh to become the 25th
largest economy in the world by 2035.
It dominates the global RMG market in 3rd position, right after
China and Vietnam, earning U$ 28Bn (83% of total export earnings)
as of 2020. The ICT sector is booming, exporting U$ 800Mn worth
of service across the globe.
The country has a population of 165 Mn and has reached 37%
urbanization. Connectivity has reached its peak, with 105% mobile
phone connection (174Mn) and 70% internet penetration (115Mn)
and 64% mobile internet penetration (106Mn).
Source: BTRC, World Bank, UNCTAD, Ministry Briefings, BBS, EPB & Bangladesh Bank
165Mn
Population
2020
U$28Bn
RMG Exports
FY 2019-20
5
174Mn
Mobile Subscribers
April 2021
115Mn
Internet Users
April 2021
106Mn
Mobile Internet Users
April 2021
U$2.37Bn
FDI
FY 2019-20
U$33.7Bn
Total Exports
FY 2019-20
U$800Mn
ICT Exports
FY 2018-19
~6.8%
GDP Growth Rate
FY 2020-21
U$365Bn
GDP
FY 2020-21
Economic indicators of the past decade
suggest growth for the country
MAC population will double to 34Mn in 5 years
increasing consumer appetite
Bangladesh’s rapidly growing economy has spawned an economic
class of urbanites, who are upwardly mobile with a growing appetite
for consumer spending. This Middle and Affluent Class (MAC)
population is young, tech-savvy and optimistic about their future,
leading them to spend on living standard enhancing goods and
services.
According to a study by The Boston Consulting Group (BCG) on
Bangladesh’s surging MAC population, the projected MAC population
stands at 19 Million as of 2020 and is projected to grow at 10% per
annum to reach 34 Million by 2025.
84 80 77 73 69 66 62 59 55 52 48
44 48 52 56 60 64 70 75 81 86 92
17 18 19 20 21 22 23 24 25 26 27
12 13 15 16 18 19 22 25 28 31 34
0
50
100
150
200
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions
Bangladesh Income-wise Population
BoP Aspirant Emerging Middle Middle and Affluent
Bangladesh recorded an impressive annual GDP growth rate of 8.1%
in 2020 despite the pandemic. The strong performance is attributable
to several factors that have contributed to inclusive economic growth
According to The Bangladesh Bureau of Statistics (BBS), the country
has a young population with a median age of ~28 years and 62% of
the population below the age of 35.
The country also benefits from ‘density dividend’, as 164 Million
population is nestled in a country with land size like that of Michigan,
USA.
6.1% 6.6% 7.1% 7.3% 7.9% 8.0%
5.2%
0.0%
2014 2015 2016 2017 2018 2019 2020
GDP
Growth
(%)
Annual GDP Growth (%)
Bangladesh India Vietnam Srilanka Pakistan
Source: BCG, World Bank & LightCastle Analysis 6
Forecast
Pre-pandemic Estimation*
13.6 20.5 30.1 38.8 45.1 51.1 66.1
51% 47%
29%
16%
13%
30%
0%
10%
20%
30%
40%
50%
60%
70%
0
10
20
30
40
50
60
70
2014 2015 2016 2017 2018 2019 2020
MFS is growing steadily at a 20% CAGR
Transaction (U$ Bn) Annual Growth
MFS is growing steadily at a 20% CAGR over the last 5 years
▪ Every one out of two persons (99Mn) has a MFS account in Bangladesh
▪ 9.6Mn transactions of U$ 214Mn+ everyday
eCommerce market is expected to grow to U$ 3Bn by 2023
▪ 2,000 e-commerce sites and 50,000 Facebook-based outlets which delivers
around 30,000 products everyday
▪ 80% of online sales are concentrated in Dhaka, Chattogram and Gazipur
▪ Bangladesh eCommerce market stands at U$ 1.6Bn, ranking 46th in the
global ranking
ICT sector has grown by 40% annually since 2010
▪ Over 1,500+ IT companies thrive in the country capturing a significant
share in the international markets worldwide is expected to produce 1% of
the country’s total GDP in the next five years
▪ Bangladesh is the second largest supplier of online labor with over 650,000
registered freelancers generating U$ 100Mn+ annually
Government boosting Startup activity through ICT wing
▪ Government initiated its own public startup support wing, Startup
Bangladesh Limited with U$ 65Mn fund to catalyze investments
▪ Multiple competitions conducted to boost student entrepreneurship —
100+ startups received cumulative seed fund over U$ 1.5Mn+
▪ National ICT Budget for fiscal year 2020-21 stands at U$ 0.53Bn
Markers of digital penetration are increasing,
boosting startup activity
8th
Largest Population
In the World
~62%
Population
Under the age of 35
~28Years
Median Age
A country of youth
9th
Largest Mobile User
Market in the World
7
Source: Bangladesh Bank, World Bank, e-CAB, Statista, UNCTAD, BASIS, ICT Ministry & LightCastle Analysis
Investment in the country
has grown ~4X over the last decade
102 115 128 133 150 172 195 221 250 274 302 329
26% 26%
27%
28% 28%
29%
29%
30%
31%
31%
32%
32%
-
50
100
150
200
250
300
350
400
25%
26%
27%
28%
29%
30%
31%
32%
33%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GDP (U$ Bn) Investment as % of GDP
8
Alongside steady economic growth, the investment to GDP ratio of Bangladesh has grown to 32% (U$ 96Bn) in June 2020 from 26% (U$ 26Bn) in 2009-
10. Despite the excellent progress, the country’s Foreign Direct Investment (FDI) in CY 2019 stood at a mere 3% (U$ 2.87Bn) of the country’s total
investment. With policymakers devising policies to attract FDIs, investments are expected to increase in the new decade.
219 520 432 498 541 280 697 911 539 1,124 804 472
365 365 490 588 697 989 1,145 1,215 1,279 1,309 1,467 1,119
117 29 215 207 361 282 394 206 333 1,180 603 144
700 913 1,136 1,293 1,599 1,551 2,235 2,333 2,152 3,613 2,874 1,735
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Equity Capital Re-invested Earnings Intra-company Loans Total
Investment as % of nominal Annual GDP of Bangladesh FDI Breakdown by Component (U$ Mn)
Source: Bangladesh Bank, World Bank & LightCastle Analysis
Till Sep*
Emergence of Asia a startup hotspot
▪ Asia now has 42% (262 out of 615) of all the total unicorns
▪ Market valuation of unicorns from Asia stands at U$ 960 Bn
Boom in global startup funding
▪ 2018-19 saw record investment of total U$ 21.5Bn for mature stage companies
▪ 30% increase in funding in Asia Pacific countries the last 5 years
Aspiring ecosystem activates in Bangladesh
▪ Educational institutions are creating focused curriculum for integration of
technology, producing 5,000+ IT professionals annually
▪ 28 High tech parks are launched to support startups and innovations
▪ Ecosystem enablers such as, co-working spaces, competitions, accelerators
and incubators have come up in the last 5 years boosting the ecosystem
Government of Bangladesh focusing on ease of doing business
▪ GoB is on the mission to improve ‘Doing Business’ ranking from 168 to top 100
▪ GoB imposing new policies and pushing special economic zones in accordance
to Bangladesh’s formal graduation to middle income status in 2024
▪ Multiple incentives for foreign investment:
- Tax exemption for up to 15 years for foreign investors
- No import duties for export oriented sectors
- Retained earnings treated as new investments;
- Foreign ownership companies can also secure working capital/long term
financing from local financial institutions
Right time to attract foreign investors
as the startup epicenter of the world shifts towards Asia
Strategic Location
at the Heart of Asia
Beneficial location at
the crux of “Chindia”
China
India
9
Source: Startup Genome, learnbonds.com, NASSCOM, LightCastle Doing Business 2018-19 & LightCastle Analysis
Bangladesh Startup Ecosystem
is Coming of Age
01 | Bangladesh Startup Ecosystem: A glance of growth in numbers
02 | Government initiatives boosting the startup ecosystem to come of age
03 | Bangladesh Ecosystem is diverse and operating in multiple sectors
04 | With Fintech leading the ecosystem, the overall confidence of ecosystem was positive in 2019-2020
05 | Increasing number of accelerators and incubators are acting as enablers in the ecosystem
06 | Bangladeshi Startups are attracting global and local investors
07 | Bangladeshi Startups raised over USD 272 Mn in last 5 years
08 | Notable Local Initiatives leading the local investment landscape
09 | Homegrown Startups have raised USD 300Mn+ of foreign investment
10 | USD 33 Mn + raised in investments in the 1st quarter of 2021
10
Bangladesh Startup Ecosystem
A glance of growth in numbers
11
U$39Mn+
Startup Investment
Raised in 2020
U$308Mn+
International VC Fund
Brought in the last decade
1,200+
Active Startups
in Bangladesh
200+
New Startups
born every year
U$80Mn+
Alternative Investment Fund
Registered in Bangladesh
200+
Active Angels
Boosted by Angel Networks
92%
Global Investment
U$ 34Mn in 2020
Fintech
eCommerce
Logistics
Popular Growth Sector
In 2020
30+
Accelerators & Incubators
Active in the Country
1.5Mn+
Total Employment Created
by the Startup Ecosystem
Dhaka
Chattogram
Sylhet
Major Active Cities
in the Startup Ecosystem
U$65Mn
Startup Bangladesh Limited
VC Fund under ICT Ministry
Source: BSEC, Bangladesh Startup Survival Guide Group, LightCastle Startup Index & LightCastle Analysis
2014 2015 2016 2017 2018 2019 2020 2021
Founder’s Institute
TiE Dhaka
GP Accelerator
Makerlab
Banglalink IT
Incubator; YGAP
R- Ventures YY Goshti
Tiger Cage
Bangladesh Angels
Startup Dhaka Incubator
Biniyog Briddhi
Startup Bangladesh VC
Bangladesh Startup
Consortium
U$1Mn : Priyo.com
Innovation Extreme
U$7Mn : Surecash
Digital World
U$2Mn : Cloudwell
U$1.3Mn:AjkerDeal
$1Mn : Direct Fresh
U$0.83Mn: Pathao
Connecting
Startups
Robi-Airtel M&A
Idea Project
Launched
U$2Mn :
Pathao
Social Media
Expo
Bangabandhu
Satellite launched
U$56Mn : bKash
U$15Mn : Shohoz
U$10Mn : Pathao
U$5.5Mn : Chaldal
U$5Mn : Zero
Gravity
U$3.8Mn : Bdjobs
U$1.7Mn :
SOLshare
U$1.6Mn : ShopUp
U$1Mn : Sheba
JTI - Akij M&A
Tier-4 Data Center
Launched
State owned VC
launched – Startup
Bangladesh Limited
Launched EkSheba,
EkPay, EkShop
U$4.2Mn : Sindabad
U$2Mn : Deligram
U$3.2Mn : ShopUp
Student to Startup
Competition
Accelerating Asia
Jerra - Summit Partial
M&A
BDT 500 Cr. Seed
Investment Fund by
Startup Bangladesh
28 High-tech Parks
launched
2,650 Unions under
broadband internet
connectivity
U$ 22.5Mn : ShopUp
U$18Mn : Augmedix
U$1.1Mn : SOLshare
U$0.83Mn : Gaze
U$0.6Mn : LoopFreight
Call 4 Nation
COVID Accelerator
EverCare - Apollo M&A
Unilever-GSK M&A
Janata Jute Mills M&A
Startup Bangladesh
Limited – “Shoto
Borshe Shoto Asha”
Fund” – investment
in 7 startups
BIG: Bangabandhu
Innovation Grant
$2.16Mn: Maya
$3Mn: Truck Lagbe
$5.6Mn: Praava
Health
$6Mn: Frontier
Nutrition
$11.8Mn: Paperfly
Government Initiatives, Private Sector Participation is
boosting the startup ecosystem to come of age
12
Multiple events initiate the
entrepreneurship spirit
Ecosystem enablers,
accelerators & incubators initiate
Local & global investors
bet on the ecosystem
Govt initiatives boost the startup
ecosystem to come of age
Government Initiatives
Notable Investments
Notable Events
Merger & Acquisition
Ecosystem Enablers
LEGENDS
Source: LightCastle Analysis List is indicative only and not exhaustive*
Bangladesh Startup Ecosystem
is diverse and operating in multiple sectors
Growth Sectors: Sectors with large funded startup base with the highest adoption of deep-
tech coupled with local & global investor attraction
Emerging Sectors: Sectors with medium funded startup base with relatively low-to-high
adoption of technology and medium investor interest
Nascent Sectors: Sectors with small startup base with relatively low investor activity
Investment
Index
=
f
(Total
investment
/
Total
Start-up,
Funding
by
stages)
Maturity Index
= f (No. of Startups, % of funded, adoption of technology)
Nascent Sectors
• Gaming
• Agri-tech
• IOT, Analytics,
Deep Tech
Emerging Sectors
• EdTech
• Health Tech
• Service (Marketplace)
Growth Sectors
• Digital Finance & Fintech
• Logistics & Mobility
• Digital Media & Content
• eCommerce & Retail
Source: LightCastle Analysis 13
Fintech Logistics & Mobility
Travel Tech
Job Marketplace Service
eCommerce & Retail
Agri Tech Deep Tech
Digital Media and Content
EdTech
Health Tech
Software & Development
Startup Sector Maturity vs Investment
Not an Exhaustive List*
With Fintech leading the ecosystem,
the overall confidence of ecosystem was positive in 2019-20
A survey source from 100+ startup
founders and investors rated Fintech
and Ride-sharing and Logistics as the
most promising sectors.
Online-enabled service marketplace
platforms has captured the urban
market significantly over the last 5
years. Players like Sheba.xyz,
Smanager, Jantrik and Hellotask are
formalizing the unstructured SME
market and informal workers boosting
financial inclusion.
eCommerce & fCommerce sector
garners high confidence from
investors. Startup players like ShopUp,
Chaldal, eValy, Daraz and Sindabad
Meanwhile, digital marketing showed a
drop in confidence, due to market
saturation and thinning profit margin
coupled with latest TAX issuance.
14
Startup Ecosystem Confidence Index
Source: LightCastle Startup Confidence Index 2019
Sector-specific Confidence
Overall Confidence
Increasing number of accelerators and incubators, ecosystem builders
are acting as enablers in the ecosystem
15
GLOBAL
LOCAL
COMMERCIAL
IMPACT
Startup Media
Universities Competitions
Development Partners
Telecom
Gov. Initiative
Not an Exhaustive List*
Source: LightCastle Analysis
Bangladeshi Startups
are attracting global and local investors
16
GLOBAL
LOCAL
COMMERCIAL
IMPACT
Angel Networks
Corporate Foundation
Corporates
Gov. Initiative
Multilateral Development Agency
Investment Co.
THE ANGELS
NETWORK
Source: LightCastle Analysis Not an Exhaustive List*
Corporates
17
Startups
Funded
81
Investment Deals
Closed
146
Investment Deals
Publicly Disclosed
48%
Investments made by
Local Investors
8%
Investments made by
Foreign Investors
92%
In the last 5 years,
Source: Compiled by LightCastle Partners and Anchorless Bangladesh with extensive support from Bangladesh Startup Consortium, Startup Bangladesh Limited, BAN, BD Startup Founders Group
Bangladeshi Startups
raised investments over USD 272 Millions in the Last 5 Years
Startup Funding in Bangladesh (USD Million)
3.6 100.1 78.6 34.8 33.2
3.0
2.8
8.8
4.3 2.4
2017 2018 2019 2020 2021
Global Local
$6.6Mn $102.9Mn $ 87.4 Mn $39.1Mn $36.6 Mn
18
Notable Local Initiatives
Leading the local investment landscape
Startup Bangladesh Limited
SBL, the gov. backed VC fund recently
signed investment agreement with 7
startups investing an aggregate
$2Mn+. The fund aims to invest BDT
100 Cr (USD 12Mn) in 50 startups
Portfolio
Anchorless Bangladesh
Anchorless Bangladesh is an early
stage venture investment fund focused
on advancing the local startup
ecosystem and the brilliant founders
behind transformative ideas
Portfolio
Biniyog Briddhi
Biniyog Briddhi is impact investment
catalytic programme backed the
embassy of Switzerland in Bangladesh
with the mission to empower impact
enterprises in Bangladesh
Portfolio
Homegrown Startups
have raised USD 300Mn+ of foreign investment over the last decade
19
Full Funding Undisclosed
Source: Databd.co, Crunchbase & LightCastle Analysis
U$ 4.7Mn
TruckLagbe
Logistics
from
ARIA Group, Betatron &
Mount Parker Ventures
U$ 3.5Mn
Maya
HealthTech
from
Osiris, Anchorless Bangladesh
U$ 4.9Mn
SOLshare
cleantech
from
IIX Growth Fund
U$ 12.8Mn
Paperfly
Logistics
from
Ecom Express
U$ 9Mn+
Zero Gravity
(Sindabad & Kiksha)
ecommerce
from
Aavishkar VC & Frontier Fund
U$ 6Mn
Sheba.xyz
service marketplace
from
Epyllion Group, BFP-B DFID
and Local Angel Investors
U$ 26Mn+
SureCash
fintech
from
Osiris Group
U$ 8.8Mn+
BDjobs
job marketplace
from
SEEK
U$ 36Mn+
Pathao
logistics
from
GO-JEK, Osiris Group
Openspace Ventures, and
Battery Road Digital Holdings
U$ 19.6Mn+
Shohoz
logistics
from
Linear Venture,
Golden Gate Venture
U$ 28Mn+
Shop Up
Fintech and B2B Commerce
from
Sequoia Capital India, Omidyar
Network, Flourish Ventures
U$ 19.5Mn+
Chaldal
ecommerce
from
IFC, IDLC, Mir Group,
Y Combinator
U$ 81Mn+
Bkash
fintech
from
Money in Motion, BRAC Bank,
Gates Foundation & Ant Financial
U$ 10.6Mn
Praava Health
HealthTech
from
SBK Tech Ventures
and Angels
U$ 7Mn+
Bongo
entertainment
from
Razor Capital
Not an Exhaustive List*
20
Notable Deals of 2021:
USD 33 Mn+ investments raised in first half of 2021
Startup Deal Lead Investor Investor Source Investment Type Investment
Pre-Seed Vint Valley Global Venture Fund $110,000
Pre-Seed _ Global Angels $200,000
Seed Robi Local Corporate $400,000
Seed IDLC Local Venture Fund $470,000
Seed
Anchorless
Bangladesh
Global Venture Fund $500,000
Seed Osiris Global Venture Fund $2,160,000
Bridge Skycatcher Global Venture Fund $3,000,000
Series A IFC Global DFI $3,000,000
Series A _ Global Angels $5,600,000
Series B Adjuvant Capital Global Venture Fund $6,000,000
Series A Ecom Express Global Corporate $11,800,000
Source: LightCastle Partners Startup Dashboard
21
We have come a long way but now it’s time to go
further: Challenges in the ecosystem
01 | Bangladesh Startup Ecosystem ranks far behind in comparison to the Global Startup Ecosystem
02 | Finding the right talents & access to financing still remains the top problems for emerging startups
03 | Funding in Bangladesh as percentage of GDP is significantly low
04 | FDI as a percentage of GDP needs to go up
05 | Challenges in Doing Business Index and what we need to do
06 | Covid-19 impact
21
Category United States China India Indonesia Bangladesh
Global Startup Ranking 1 14 23 54 98
Global Innovation Index[1] 61.73 54.82 36.58 29.72 23.31
Total Number of Startups[5] 100,000+[3] 25,000+ 50,000+ 5,000+ 1,000+
Time taken to setup a new
business (days)
4-8 30-40 15-30 15-30 15-30
Corporate Tax Rate 39% 25% 34% 22% 25%-35%
Number of local VC Firms[5] 1000+ - 700+ 300+ 25+
Number of Angel Investors 300,000+ - 1,800+ 5,000+ 200+
Number of Accelerators/
Incubators
1,500+ 12,000+[4] 250+ - 20+
Bangladesh Startup Ecosystem ranks far behind
in comparison to the Global Startup Ecosystem
[1] The Global innovation Index
ranks the innovation performance
of 128 countries based on 82
indicators
[2]Global startup ranking by Startup
Blink ranks the top 100 countries
based on the quantity/quality of
startups and enablers in the
ecosystem coupled with business
environment and critical mass.
[3] United States has the highest
number of startups in the world
[4] China ranks #1 in number of
incubators and accelerators across
the world due to Chinese
Government initiatives
22
Source: Global Innovation Index 2019,Startup Blink, [5]Crunchbase, AngelList, Xinhua net, Swiss Global Enterprise & LightCastle Analysis
Finding the Right Talents & Access to Financing
still remains the top problems for emerging startups
23
4.0 4.0
3.6 3.6
3.3 3.2 3.2 3.1 3.0
2.9
2.6 2.6
2.3 2.3 2.2 2.1 2.0 1.9
-
1.0
2.0
3.0
4.0
5.0
0%
20%
40%
60%
80%
100% Finding
the
right
co-founder
Finding
a
good
team
Access
to
funding
Steady
cash
flow
Government
support
Legal
&
regulatory
affairs
Access
to
market
information
Retaining
a
good
team
Market
research
Traffic
Family
pressure
Retaining
clients
Strategic
Partnerships
Attracting
clients
Changing
technology
Political
unrest
Access
to
mentorship
Office
setup
Difficulty
Scale
Level
of
Difficulty
High Difficulty Medium difficulty Difficulty Scale
Startup Difficulty Index
Source: LightCastle Startup Index 2019
The already low Startup Funding State of Bangladesh (GDP 10x lower than India), (GDP 50x lower than
China) - is at stake due to COVID-19
$0.12 $0.03
Funding in Bangladesh
as percentage of GDP is significantly low
24
State of Startup Funding in Southeast Asia (2018)
Source: IMF, Crunchbase, Statista, Yourstory.com, Anchorless Bangladesh and LightCastle Analysis
Foreign Direct Investment
Comparison with regional peers
25
Source: UNCTAD World Investment Report, World Bank Data
Despite the excellent progress, the country’s Foreign Direct Investment (FDI) in CY 2019 stood at a mere 3% (U$ 2.87Bn) of
the country’s total investment. With policymakers devising policies to attract FDIs, investments are expected to increase in
the new decade
0%
1%
2%
3%
4%
5%
6%
7%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
FDI
as
%
of
GDP
Bangladesh India Indonesia Myanmar Pakistan Sri Lanka Vietnam
0.5% 1.8% 2.2% 4.2% 0.8% 0.8% 6.2%
(FDI as % of GDP, 2019)
Comparison with Regional Peers: FDI as % of GDP
Source: World Economic Forum, Doing Business 2020 - World Bank, Doing Business- Economy Profile Bangladesh - World Bank, Destination Bangladesh - PwC
Doing Business Index
Govt. has taken an initiative to become double digit by 2025
26
Ranking in 2020
63rd
70th
73rd
99th
108th
168th
Bangladesh
The World Bank Group’s Doing Business 2020 study ranked Bangladesh 168th in the
global ease of doing business rankings this year from 176th in the previous year.
The government of Bangladesh has undertaken a number of initiatives to improve the
ranking :
• Setting up a new business became less expensive with the reduction of
registration and name clearance fees and removal of the certifying fee for digital
certificates.
• In Dhaka, obtaining an electrical connection was made more efficient as the city
invested in digitization and human capital. At the same time, the country reduced
the amount of the security deposit required for a new connection.
• Access to credit information was improved thanks to expanded coverage by the
credit information bureau. This reform delivered Bangladesh’s most significant
improvement.
• Bangladesh Investment Authority (BIDA) has introduced an One Stop Service
Center to assist foreign investors.
Maldives
India
Sri Lanka
Vietnam
Indonesia
27
56% of businesses saw at least a 50% drop on revenue generation,
while 52% seed stage startups saw decrease in business
Reduction of Variable Cost and Salary are the first measure
taken by 54% of the startups
63% of Startups had less than 3 months of runway 59% of the Startups seek leverage (loans and bonds)
COVID 19 Impact
1 out of 2 businesses saw revenue was halved during 2020 wave 1 lockdown
Source: Bangladesh Startup Consortium, LightCastle COVID Impact Research
28
Source: LightCastle Analysis
COVID 19 Impact
Has accelerated some sectors, while setting others back
29
Charting our Way Forward
Source: LightCastle Analysis
Increase Focus Towards Creating Global Brand Perception
30
Source: LightCastle Analysis 30
Systemically promote Brand Bangladesh by emulating successful competitors
Capitalize on Government incentives and tax subsidy for value addition in country
Target Investors and Stakeholders including global brands to instill trust among
international investors.
Reforming the
Market Entry
Process
Strategic partnerships across platforms can play vital role in gaining
international coverage
Create advocates from globally acclaimed Bangladeshis / influential NRBs to reach
out to prospective investors and create positive association
Promote BIDA’s ‘one stop solution’ service
Creating global
brand perception
Recommendations
31
▪ Startup Policy: With the Digital Bangladesh agenda in Government’s core, it is eminent to form a startup
policy to offer multiple benefits for the startup and ecosystem players such as ease of access to debt
finance, reducing the cost of doing business, ease of doing business, fiscal policy support - VAT/tax
exemptions and rebates. An enabling policy will promote the growth of startups and the ecosystem
attracting foreign investment in the ecosystem, benefiting the country's growth and employment rate.
▪ Fund of Funds: Startup Bangladesh and ICT Ministry can form a fund of funds through a public private
collaboration to invest in Startups. The fund of funds makes downstream investments in venture capital
and alternative investment funds that in turn invest in startups.
▪ Investor Benefits: The government needs to ensure an investment friendly environment in Bangladesh.
Recommendations would be to update Foreign Exchange Regulation Act 1947, reduce entry barriers,
introduce TAX benefits and ease repatriation of profits of foreign investors to attract foreign investments.
▪ Ease of Doing Business: Business processes, policies, and regulations have to be streamlined and more
comfortable to start and operate startups/SMEs. A way forward could be to use technology and fintech
platforms to make tax payments seamless, transparent and secure.
▪ Industry-Academia Collaboration: Industry-academia is mandatory to set up the right kind of
infrastructure to nurture innovation and talents at school/university level as well as leverage knowledge
remittances from NRBs all over the world through incentivized initiatives.
▪ Corporate Venture Capital: Corporates investing in Startups would provide viable exits for early-stage
investors and founders as well as accelerate capital from both local and international markets. Also, this
portrays confidence in the ecosystem to the international audience
▪ Continued GoB Support: The ICT ministry has championed Startup growth be it in setting by the flagship
venture capital fund Startup Bangladesh Limited or supporting ecosystem building initiatives across the
country. Continue to provide infrastructure, policy and bringing in other ministries onboard in the process.
LightCastlePartners
Level 5, House 10/12, Road 1, Block B, Niketan,
Gulshan 1, Dhaka - 1212,Bangladesh
Email:info@lightcastlebd.com
Mobile:+8801744736621, +8801711 385988
Web:www.lightcastlebd.com
Dataon DemandPlatform:www.databd.co
Bijon Islam
Chief Executive Officer
LightCastle Partners
Silvia Rozario
Project Manager &
Sr. Business Consultant
LightCastle Partners
Mehad ul Haque
Project Manager &
Sr. Business Consultant
LightCastle Partners
Authors
Acknowledgement
LightCastle Partners acknowledges the valuable contribution of the following notable personnel
and organizations from the Bangladesh Startup Ecosystem to prepare this report.
Tina Jabeen
Investment Advisor
Startup Bangladesh,
iDEA Project, ICT Division
Rahat Ahmed
Founding Partner
& CEO
Anchorless Bangladesh
Asif Iqbal
Country Director
Entrepreneurship World Cup
GEN Bangladesh
Bangladesh
Fairuz Joyeeta
Business Analyst
LightCastle Partners
Salem Abrar
Business Analyst
LightCastle Partners
33
Thank You !

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Bangladesh Startup Ecosystem Report 2021

  • 1. Bangladesh Startup Ecosystem The Untapped Digital Goldmine of Asia
  • 2. 2 Bangladesh startup ecosystem is coming of age riding on key drivers: ▪ Strong Economy Vitals for Startups: Tech adaptable young population 62%+ under 35 years, 165 million people (8th largest in the world) with high density (1200 people/Sq Km). Middle class growing at 10% per annum to reach 34 million by 2025, 105% mobile phone connection, 70% internet penetration, 115 million+ people on internet with 106 million mobile internet penetration. The pandemic has also accelerated the use of ICT technology, including digital commerce, education, healthcare, agriculture. ▪ Demographic Bulge with the Right Skill-sets: The country generates 5,000+ IT graduates each year is creating a strong group of entrepreneurial waves focused on solving critical problems, including those during the pandemic. The country’s median age of 28 years means more young people are willing to take risks and explore innovations in the economy. With limited opportunities from STEM graduates (due to the absence of large-scale industrialization except for RMG/Textile, which is still more labor-intensive than automation) - they are looking into forming ICT enabled companies and Startups. NRBs (Non- Resident Bangladeshis) are also returning, bringing in both investment capital and knowledge remittance. ▪ Bangladesh Startup Ecosystem at an Inflection Point: The Bangladesh Entrepreneurship Ecosystem is at an inflection point with an excess of U$ 330 million accumulated over the last decade, in international investments from big-name corporate investors and venture capitals, investing in industries like FinTech, Logistics, and Mobility over the last five years. The emergence of active Angel Investment Networks, Impact Investing, host of local and international operating accelerators/ incubators propelled 1,200+ active Startups, generating 1.5 million+ employment - embracing products and services of Startups as part of the country’s everyday life. Additionally, B-SEC (Bangladesh Securities and Exchange Commission) has also approved small-cap stock exchange guidelines, which is a big step towards providing investors with Startup exits. Government Support: ▪ The Government of Bangladesh deployed the National ICT Policy in 2009 to become Digital Bangladesh by 2021. Government policies and projects from the ICT Ministry, such as IDEA Project and Startup Bangladesh Limited with 500 crore BDT (U$ 65 Million) funds, are taken to improve the local startup ecosystem. Additionally, GoB is setting up 28+ Hi-Tech Parks, including infrastructure support like data centers, to support technology companies. COVID-19 Impact: ▪ Since March 2020, the country and all its businesses and startups have been affected drastically by the COVID-19 disruption. 24% of companies reported to have stopped operations, with 56% of startups seen at least a 50% drop on revenue generation. 63% of Startups have runway less than three months threatening 1.5 million employment and an annual loss of over U$ 53 Million in 2020. The disruption, however, is also propelling accelerated adoption of digital services with Digital Financial Services, Logistics, and Grocery on-demand, EdTech, HealthTech seeing steep growth. Executive Summary
  • 3. 1. Executive Summary 2. Bangladesh: The Untapped Economy in Chindia i. Economic indicators of the past decade, suggest growth for the country ii. MAC population will double to 34Mn in 5 years, increasing consumer appetite iii. Markers of digital penetration are increasing, boosting startup activity iv. Investment in the country has grown ~4X over the last decade v. Right time to attract foreign investors as the startup epicenter of the world shifts towards Asia 3. Bangladesh Startup Ecosystem is Coming of Age i. Bangladesh Startup Ecosystem: A glance of growth in numbers ii. Government initiatives boosting the startup ecosystem to come of age iii. Bangladesh Ecosystem is diverse and operating in multiple sectors iv. With Fintech leading the ecosystem, the overall confidence of ecosystem was positive in 2019-2020 v. Increasing number of accelerators and incubators are acting as enablers in the ecosystem vi. Bangladeshi Startups are attracting global and local investors vii. Bangladeshi Startups raised over USD 272 Mn in last 5 years viii. Notable Local Initiatives leading the local investment landscape ix. Homegrown Startups have raised USD 300Mn+ of foreign investment x. USD 33 Mn+ raised in investments in the first half of 2021 4. Challenges in the Ecosystem i. Bangladesh Startup Ecosystem ranks far behind in comparison to the Global Startup Ecosystem ii. Finding the right talents & access to financing still remains top problems for emerging startups iii. Funding in Bangladesh as percentage of GDP is significantly low iv. FDI as % of GDP low compared to peers v. Need to solve Doing Business Index Challenges vi. Covid-19 impact 5. Way Forward and Recommendations Table of Contents 3
  • 4. Bangladesh: The Untapped Economy in Chindia 01 | Economic indicators of the past decade, suggest growth for the country 02 | MAC population will double in 5 years, increasing consumer appetite 03 | Markers of digital penetration are increasing, boosting startup activity 04 | Investment in the country has grown ~4X over the last decade 05 | Right time to attract foreign investors as the startup epicenter of the world shifts towards Asia 4
  • 5. U$2,227 GDP Per Capita FY 2020-21 ~28 Median Age 2020 Bangladesh, the 37th largest economy and one of the fastest growing countries, showed an impressive average annual GDP growth rate of ~6.8% over the last decade. The country’s annual GDP growth rate officially surpassed that of India’s in 2016 and has been higher than that of its neighbor since then. GDP per capita has been growing at rates over 5% since 2015 peaking at U$ 2,227 (as of June 2021). Final consumption expenditure, which accounts for private consumption and general government consumption, has been growing positively for the last 10 years. The economy is on track in graduating from the LDC status in 2024 and has made impressive strides in human development. PwC, a global consultancy, also predicts Bangladesh to become the 25th largest economy in the world by 2035. It dominates the global RMG market in 3rd position, right after China and Vietnam, earning U$ 28Bn (83% of total export earnings) as of 2020. The ICT sector is booming, exporting U$ 800Mn worth of service across the globe. The country has a population of 165 Mn and has reached 37% urbanization. Connectivity has reached its peak, with 105% mobile phone connection (174Mn) and 70% internet penetration (115Mn) and 64% mobile internet penetration (106Mn). Source: BTRC, World Bank, UNCTAD, Ministry Briefings, BBS, EPB & Bangladesh Bank 165Mn Population 2020 U$28Bn RMG Exports FY 2019-20 5 174Mn Mobile Subscribers April 2021 115Mn Internet Users April 2021 106Mn Mobile Internet Users April 2021 U$2.37Bn FDI FY 2019-20 U$33.7Bn Total Exports FY 2019-20 U$800Mn ICT Exports FY 2018-19 ~6.8% GDP Growth Rate FY 2020-21 U$365Bn GDP FY 2020-21 Economic indicators of the past decade suggest growth for the country
  • 6. MAC population will double to 34Mn in 5 years increasing consumer appetite Bangladesh’s rapidly growing economy has spawned an economic class of urbanites, who are upwardly mobile with a growing appetite for consumer spending. This Middle and Affluent Class (MAC) population is young, tech-savvy and optimistic about their future, leading them to spend on living standard enhancing goods and services. According to a study by The Boston Consulting Group (BCG) on Bangladesh’s surging MAC population, the projected MAC population stands at 19 Million as of 2020 and is projected to grow at 10% per annum to reach 34 Million by 2025. 84 80 77 73 69 66 62 59 55 52 48 44 48 52 56 60 64 70 75 81 86 92 17 18 19 20 21 22 23 24 25 26 27 12 13 15 16 18 19 22 25 28 31 34 0 50 100 150 200 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Millions Bangladesh Income-wise Population BoP Aspirant Emerging Middle Middle and Affluent Bangladesh recorded an impressive annual GDP growth rate of 8.1% in 2020 despite the pandemic. The strong performance is attributable to several factors that have contributed to inclusive economic growth According to The Bangladesh Bureau of Statistics (BBS), the country has a young population with a median age of ~28 years and 62% of the population below the age of 35. The country also benefits from ‘density dividend’, as 164 Million population is nestled in a country with land size like that of Michigan, USA. 6.1% 6.6% 7.1% 7.3% 7.9% 8.0% 5.2% 0.0% 2014 2015 2016 2017 2018 2019 2020 GDP Growth (%) Annual GDP Growth (%) Bangladesh India Vietnam Srilanka Pakistan Source: BCG, World Bank & LightCastle Analysis 6 Forecast Pre-pandemic Estimation*
  • 7. 13.6 20.5 30.1 38.8 45.1 51.1 66.1 51% 47% 29% 16% 13% 30% 0% 10% 20% 30% 40% 50% 60% 70% 0 10 20 30 40 50 60 70 2014 2015 2016 2017 2018 2019 2020 MFS is growing steadily at a 20% CAGR Transaction (U$ Bn) Annual Growth MFS is growing steadily at a 20% CAGR over the last 5 years ▪ Every one out of two persons (99Mn) has a MFS account in Bangladesh ▪ 9.6Mn transactions of U$ 214Mn+ everyday eCommerce market is expected to grow to U$ 3Bn by 2023 ▪ 2,000 e-commerce sites and 50,000 Facebook-based outlets which delivers around 30,000 products everyday ▪ 80% of online sales are concentrated in Dhaka, Chattogram and Gazipur ▪ Bangladesh eCommerce market stands at U$ 1.6Bn, ranking 46th in the global ranking ICT sector has grown by 40% annually since 2010 ▪ Over 1,500+ IT companies thrive in the country capturing a significant share in the international markets worldwide is expected to produce 1% of the country’s total GDP in the next five years ▪ Bangladesh is the second largest supplier of online labor with over 650,000 registered freelancers generating U$ 100Mn+ annually Government boosting Startup activity through ICT wing ▪ Government initiated its own public startup support wing, Startup Bangladesh Limited with U$ 65Mn fund to catalyze investments ▪ Multiple competitions conducted to boost student entrepreneurship — 100+ startups received cumulative seed fund over U$ 1.5Mn+ ▪ National ICT Budget for fiscal year 2020-21 stands at U$ 0.53Bn Markers of digital penetration are increasing, boosting startup activity 8th Largest Population In the World ~62% Population Under the age of 35 ~28Years Median Age A country of youth 9th Largest Mobile User Market in the World 7 Source: Bangladesh Bank, World Bank, e-CAB, Statista, UNCTAD, BASIS, ICT Ministry & LightCastle Analysis
  • 8. Investment in the country has grown ~4X over the last decade 102 115 128 133 150 172 195 221 250 274 302 329 26% 26% 27% 28% 28% 29% 29% 30% 31% 31% 32% 32% - 50 100 150 200 250 300 350 400 25% 26% 27% 28% 29% 30% 31% 32% 33% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 GDP (U$ Bn) Investment as % of GDP 8 Alongside steady economic growth, the investment to GDP ratio of Bangladesh has grown to 32% (U$ 96Bn) in June 2020 from 26% (U$ 26Bn) in 2009- 10. Despite the excellent progress, the country’s Foreign Direct Investment (FDI) in CY 2019 stood at a mere 3% (U$ 2.87Bn) of the country’s total investment. With policymakers devising policies to attract FDIs, investments are expected to increase in the new decade. 219 520 432 498 541 280 697 911 539 1,124 804 472 365 365 490 588 697 989 1,145 1,215 1,279 1,309 1,467 1,119 117 29 215 207 361 282 394 206 333 1,180 603 144 700 913 1,136 1,293 1,599 1,551 2,235 2,333 2,152 3,613 2,874 1,735 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Equity Capital Re-invested Earnings Intra-company Loans Total Investment as % of nominal Annual GDP of Bangladesh FDI Breakdown by Component (U$ Mn) Source: Bangladesh Bank, World Bank & LightCastle Analysis Till Sep*
  • 9. Emergence of Asia a startup hotspot ▪ Asia now has 42% (262 out of 615) of all the total unicorns ▪ Market valuation of unicorns from Asia stands at U$ 960 Bn Boom in global startup funding ▪ 2018-19 saw record investment of total U$ 21.5Bn for mature stage companies ▪ 30% increase in funding in Asia Pacific countries the last 5 years Aspiring ecosystem activates in Bangladesh ▪ Educational institutions are creating focused curriculum for integration of technology, producing 5,000+ IT professionals annually ▪ 28 High tech parks are launched to support startups and innovations ▪ Ecosystem enablers such as, co-working spaces, competitions, accelerators and incubators have come up in the last 5 years boosting the ecosystem Government of Bangladesh focusing on ease of doing business ▪ GoB is on the mission to improve ‘Doing Business’ ranking from 168 to top 100 ▪ GoB imposing new policies and pushing special economic zones in accordance to Bangladesh’s formal graduation to middle income status in 2024 ▪ Multiple incentives for foreign investment: - Tax exemption for up to 15 years for foreign investors - No import duties for export oriented sectors - Retained earnings treated as new investments; - Foreign ownership companies can also secure working capital/long term financing from local financial institutions Right time to attract foreign investors as the startup epicenter of the world shifts towards Asia Strategic Location at the Heart of Asia Beneficial location at the crux of “Chindia” China India 9 Source: Startup Genome, learnbonds.com, NASSCOM, LightCastle Doing Business 2018-19 & LightCastle Analysis
  • 10. Bangladesh Startup Ecosystem is Coming of Age 01 | Bangladesh Startup Ecosystem: A glance of growth in numbers 02 | Government initiatives boosting the startup ecosystem to come of age 03 | Bangladesh Ecosystem is diverse and operating in multiple sectors 04 | With Fintech leading the ecosystem, the overall confidence of ecosystem was positive in 2019-2020 05 | Increasing number of accelerators and incubators are acting as enablers in the ecosystem 06 | Bangladeshi Startups are attracting global and local investors 07 | Bangladeshi Startups raised over USD 272 Mn in last 5 years 08 | Notable Local Initiatives leading the local investment landscape 09 | Homegrown Startups have raised USD 300Mn+ of foreign investment 10 | USD 33 Mn + raised in investments in the 1st quarter of 2021 10
  • 11. Bangladesh Startup Ecosystem A glance of growth in numbers 11 U$39Mn+ Startup Investment Raised in 2020 U$308Mn+ International VC Fund Brought in the last decade 1,200+ Active Startups in Bangladesh 200+ New Startups born every year U$80Mn+ Alternative Investment Fund Registered in Bangladesh 200+ Active Angels Boosted by Angel Networks 92% Global Investment U$ 34Mn in 2020 Fintech eCommerce Logistics Popular Growth Sector In 2020 30+ Accelerators & Incubators Active in the Country 1.5Mn+ Total Employment Created by the Startup Ecosystem Dhaka Chattogram Sylhet Major Active Cities in the Startup Ecosystem U$65Mn Startup Bangladesh Limited VC Fund under ICT Ministry Source: BSEC, Bangladesh Startup Survival Guide Group, LightCastle Startup Index & LightCastle Analysis
  • 12. 2014 2015 2016 2017 2018 2019 2020 2021 Founder’s Institute TiE Dhaka GP Accelerator Makerlab Banglalink IT Incubator; YGAP R- Ventures YY Goshti Tiger Cage Bangladesh Angels Startup Dhaka Incubator Biniyog Briddhi Startup Bangladesh VC Bangladesh Startup Consortium U$1Mn : Priyo.com Innovation Extreme U$7Mn : Surecash Digital World U$2Mn : Cloudwell U$1.3Mn:AjkerDeal $1Mn : Direct Fresh U$0.83Mn: Pathao Connecting Startups Robi-Airtel M&A Idea Project Launched U$2Mn : Pathao Social Media Expo Bangabandhu Satellite launched U$56Mn : bKash U$15Mn : Shohoz U$10Mn : Pathao U$5.5Mn : Chaldal U$5Mn : Zero Gravity U$3.8Mn : Bdjobs U$1.7Mn : SOLshare U$1.6Mn : ShopUp U$1Mn : Sheba JTI - Akij M&A Tier-4 Data Center Launched State owned VC launched – Startup Bangladesh Limited Launched EkSheba, EkPay, EkShop U$4.2Mn : Sindabad U$2Mn : Deligram U$3.2Mn : ShopUp Student to Startup Competition Accelerating Asia Jerra - Summit Partial M&A BDT 500 Cr. Seed Investment Fund by Startup Bangladesh 28 High-tech Parks launched 2,650 Unions under broadband internet connectivity U$ 22.5Mn : ShopUp U$18Mn : Augmedix U$1.1Mn : SOLshare U$0.83Mn : Gaze U$0.6Mn : LoopFreight Call 4 Nation COVID Accelerator EverCare - Apollo M&A Unilever-GSK M&A Janata Jute Mills M&A Startup Bangladesh Limited – “Shoto Borshe Shoto Asha” Fund” – investment in 7 startups BIG: Bangabandhu Innovation Grant $2.16Mn: Maya $3Mn: Truck Lagbe $5.6Mn: Praava Health $6Mn: Frontier Nutrition $11.8Mn: Paperfly Government Initiatives, Private Sector Participation is boosting the startup ecosystem to come of age 12 Multiple events initiate the entrepreneurship spirit Ecosystem enablers, accelerators & incubators initiate Local & global investors bet on the ecosystem Govt initiatives boost the startup ecosystem to come of age Government Initiatives Notable Investments Notable Events Merger & Acquisition Ecosystem Enablers LEGENDS Source: LightCastle Analysis List is indicative only and not exhaustive*
  • 13. Bangladesh Startup Ecosystem is diverse and operating in multiple sectors Growth Sectors: Sectors with large funded startup base with the highest adoption of deep- tech coupled with local & global investor attraction Emerging Sectors: Sectors with medium funded startup base with relatively low-to-high adoption of technology and medium investor interest Nascent Sectors: Sectors with small startup base with relatively low investor activity Investment Index = f (Total investment / Total Start-up, Funding by stages) Maturity Index = f (No. of Startups, % of funded, adoption of technology) Nascent Sectors • Gaming • Agri-tech • IOT, Analytics, Deep Tech Emerging Sectors • EdTech • Health Tech • Service (Marketplace) Growth Sectors • Digital Finance & Fintech • Logistics & Mobility • Digital Media & Content • eCommerce & Retail Source: LightCastle Analysis 13 Fintech Logistics & Mobility Travel Tech Job Marketplace Service eCommerce & Retail Agri Tech Deep Tech Digital Media and Content EdTech Health Tech Software & Development Startup Sector Maturity vs Investment Not an Exhaustive List*
  • 14. With Fintech leading the ecosystem, the overall confidence of ecosystem was positive in 2019-20 A survey source from 100+ startup founders and investors rated Fintech and Ride-sharing and Logistics as the most promising sectors. Online-enabled service marketplace platforms has captured the urban market significantly over the last 5 years. Players like Sheba.xyz, Smanager, Jantrik and Hellotask are formalizing the unstructured SME market and informal workers boosting financial inclusion. eCommerce & fCommerce sector garners high confidence from investors. Startup players like ShopUp, Chaldal, eValy, Daraz and Sindabad Meanwhile, digital marketing showed a drop in confidence, due to market saturation and thinning profit margin coupled with latest TAX issuance. 14 Startup Ecosystem Confidence Index Source: LightCastle Startup Confidence Index 2019 Sector-specific Confidence Overall Confidence
  • 15. Increasing number of accelerators and incubators, ecosystem builders are acting as enablers in the ecosystem 15 GLOBAL LOCAL COMMERCIAL IMPACT Startup Media Universities Competitions Development Partners Telecom Gov. Initiative Not an Exhaustive List* Source: LightCastle Analysis
  • 16. Bangladeshi Startups are attracting global and local investors 16 GLOBAL LOCAL COMMERCIAL IMPACT Angel Networks Corporate Foundation Corporates Gov. Initiative Multilateral Development Agency Investment Co. THE ANGELS NETWORK Source: LightCastle Analysis Not an Exhaustive List* Corporates
  • 17. 17 Startups Funded 81 Investment Deals Closed 146 Investment Deals Publicly Disclosed 48% Investments made by Local Investors 8% Investments made by Foreign Investors 92% In the last 5 years, Source: Compiled by LightCastle Partners and Anchorless Bangladesh with extensive support from Bangladesh Startup Consortium, Startup Bangladesh Limited, BAN, BD Startup Founders Group Bangladeshi Startups raised investments over USD 272 Millions in the Last 5 Years Startup Funding in Bangladesh (USD Million) 3.6 100.1 78.6 34.8 33.2 3.0 2.8 8.8 4.3 2.4 2017 2018 2019 2020 2021 Global Local $6.6Mn $102.9Mn $ 87.4 Mn $39.1Mn $36.6 Mn
  • 18. 18 Notable Local Initiatives Leading the local investment landscape Startup Bangladesh Limited SBL, the gov. backed VC fund recently signed investment agreement with 7 startups investing an aggregate $2Mn+. The fund aims to invest BDT 100 Cr (USD 12Mn) in 50 startups Portfolio Anchorless Bangladesh Anchorless Bangladesh is an early stage venture investment fund focused on advancing the local startup ecosystem and the brilliant founders behind transformative ideas Portfolio Biniyog Briddhi Biniyog Briddhi is impact investment catalytic programme backed the embassy of Switzerland in Bangladesh with the mission to empower impact enterprises in Bangladesh Portfolio
  • 19. Homegrown Startups have raised USD 300Mn+ of foreign investment over the last decade 19 Full Funding Undisclosed Source: Databd.co, Crunchbase & LightCastle Analysis U$ 4.7Mn TruckLagbe Logistics from ARIA Group, Betatron & Mount Parker Ventures U$ 3.5Mn Maya HealthTech from Osiris, Anchorless Bangladesh U$ 4.9Mn SOLshare cleantech from IIX Growth Fund U$ 12.8Mn Paperfly Logistics from Ecom Express U$ 9Mn+ Zero Gravity (Sindabad & Kiksha) ecommerce from Aavishkar VC & Frontier Fund U$ 6Mn Sheba.xyz service marketplace from Epyllion Group, BFP-B DFID and Local Angel Investors U$ 26Mn+ SureCash fintech from Osiris Group U$ 8.8Mn+ BDjobs job marketplace from SEEK U$ 36Mn+ Pathao logistics from GO-JEK, Osiris Group Openspace Ventures, and Battery Road Digital Holdings U$ 19.6Mn+ Shohoz logistics from Linear Venture, Golden Gate Venture U$ 28Mn+ Shop Up Fintech and B2B Commerce from Sequoia Capital India, Omidyar Network, Flourish Ventures U$ 19.5Mn+ Chaldal ecommerce from IFC, IDLC, Mir Group, Y Combinator U$ 81Mn+ Bkash fintech from Money in Motion, BRAC Bank, Gates Foundation & Ant Financial U$ 10.6Mn Praava Health HealthTech from SBK Tech Ventures and Angels U$ 7Mn+ Bongo entertainment from Razor Capital Not an Exhaustive List*
  • 20. 20 Notable Deals of 2021: USD 33 Mn+ investments raised in first half of 2021 Startup Deal Lead Investor Investor Source Investment Type Investment Pre-Seed Vint Valley Global Venture Fund $110,000 Pre-Seed _ Global Angels $200,000 Seed Robi Local Corporate $400,000 Seed IDLC Local Venture Fund $470,000 Seed Anchorless Bangladesh Global Venture Fund $500,000 Seed Osiris Global Venture Fund $2,160,000 Bridge Skycatcher Global Venture Fund $3,000,000 Series A IFC Global DFI $3,000,000 Series A _ Global Angels $5,600,000 Series B Adjuvant Capital Global Venture Fund $6,000,000 Series A Ecom Express Global Corporate $11,800,000 Source: LightCastle Partners Startup Dashboard
  • 21. 21 We have come a long way but now it’s time to go further: Challenges in the ecosystem 01 | Bangladesh Startup Ecosystem ranks far behind in comparison to the Global Startup Ecosystem 02 | Finding the right talents & access to financing still remains the top problems for emerging startups 03 | Funding in Bangladesh as percentage of GDP is significantly low 04 | FDI as a percentage of GDP needs to go up 05 | Challenges in Doing Business Index and what we need to do 06 | Covid-19 impact 21
  • 22. Category United States China India Indonesia Bangladesh Global Startup Ranking 1 14 23 54 98 Global Innovation Index[1] 61.73 54.82 36.58 29.72 23.31 Total Number of Startups[5] 100,000+[3] 25,000+ 50,000+ 5,000+ 1,000+ Time taken to setup a new business (days) 4-8 30-40 15-30 15-30 15-30 Corporate Tax Rate 39% 25% 34% 22% 25%-35% Number of local VC Firms[5] 1000+ - 700+ 300+ 25+ Number of Angel Investors 300,000+ - 1,800+ 5,000+ 200+ Number of Accelerators/ Incubators 1,500+ 12,000+[4] 250+ - 20+ Bangladesh Startup Ecosystem ranks far behind in comparison to the Global Startup Ecosystem [1] The Global innovation Index ranks the innovation performance of 128 countries based on 82 indicators [2]Global startup ranking by Startup Blink ranks the top 100 countries based on the quantity/quality of startups and enablers in the ecosystem coupled with business environment and critical mass. [3] United States has the highest number of startups in the world [4] China ranks #1 in number of incubators and accelerators across the world due to Chinese Government initiatives 22 Source: Global Innovation Index 2019,Startup Blink, [5]Crunchbase, AngelList, Xinhua net, Swiss Global Enterprise & LightCastle Analysis
  • 23. Finding the Right Talents & Access to Financing still remains the top problems for emerging startups 23 4.0 4.0 3.6 3.6 3.3 3.2 3.2 3.1 3.0 2.9 2.6 2.6 2.3 2.3 2.2 2.1 2.0 1.9 - 1.0 2.0 3.0 4.0 5.0 0% 20% 40% 60% 80% 100% Finding the right co-founder Finding a good team Access to funding Steady cash flow Government support Legal & regulatory affairs Access to market information Retaining a good team Market research Traffic Family pressure Retaining clients Strategic Partnerships Attracting clients Changing technology Political unrest Access to mentorship Office setup Difficulty Scale Level of Difficulty High Difficulty Medium difficulty Difficulty Scale Startup Difficulty Index Source: LightCastle Startup Index 2019
  • 24. The already low Startup Funding State of Bangladesh (GDP 10x lower than India), (GDP 50x lower than China) - is at stake due to COVID-19 $0.12 $0.03 Funding in Bangladesh as percentage of GDP is significantly low 24 State of Startup Funding in Southeast Asia (2018) Source: IMF, Crunchbase, Statista, Yourstory.com, Anchorless Bangladesh and LightCastle Analysis
  • 25. Foreign Direct Investment Comparison with regional peers 25 Source: UNCTAD World Investment Report, World Bank Data Despite the excellent progress, the country’s Foreign Direct Investment (FDI) in CY 2019 stood at a mere 3% (U$ 2.87Bn) of the country’s total investment. With policymakers devising policies to attract FDIs, investments are expected to increase in the new decade 0% 1% 2% 3% 4% 5% 6% 7% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 FDI as % of GDP Bangladesh India Indonesia Myanmar Pakistan Sri Lanka Vietnam 0.5% 1.8% 2.2% 4.2% 0.8% 0.8% 6.2% (FDI as % of GDP, 2019) Comparison with Regional Peers: FDI as % of GDP
  • 26. Source: World Economic Forum, Doing Business 2020 - World Bank, Doing Business- Economy Profile Bangladesh - World Bank, Destination Bangladesh - PwC Doing Business Index Govt. has taken an initiative to become double digit by 2025 26 Ranking in 2020 63rd 70th 73rd 99th 108th 168th Bangladesh The World Bank Group’s Doing Business 2020 study ranked Bangladesh 168th in the global ease of doing business rankings this year from 176th in the previous year. The government of Bangladesh has undertaken a number of initiatives to improve the ranking : • Setting up a new business became less expensive with the reduction of registration and name clearance fees and removal of the certifying fee for digital certificates. • In Dhaka, obtaining an electrical connection was made more efficient as the city invested in digitization and human capital. At the same time, the country reduced the amount of the security deposit required for a new connection. • Access to credit information was improved thanks to expanded coverage by the credit information bureau. This reform delivered Bangladesh’s most significant improvement. • Bangladesh Investment Authority (BIDA) has introduced an One Stop Service Center to assist foreign investors. Maldives India Sri Lanka Vietnam Indonesia
  • 27. 27 56% of businesses saw at least a 50% drop on revenue generation, while 52% seed stage startups saw decrease in business Reduction of Variable Cost and Salary are the first measure taken by 54% of the startups 63% of Startups had less than 3 months of runway 59% of the Startups seek leverage (loans and bonds) COVID 19 Impact 1 out of 2 businesses saw revenue was halved during 2020 wave 1 lockdown Source: Bangladesh Startup Consortium, LightCastle COVID Impact Research
  • 28. 28 Source: LightCastle Analysis COVID 19 Impact Has accelerated some sectors, while setting others back
  • 30. Source: LightCastle Analysis Increase Focus Towards Creating Global Brand Perception 30 Source: LightCastle Analysis 30 Systemically promote Brand Bangladesh by emulating successful competitors Capitalize on Government incentives and tax subsidy for value addition in country Target Investors and Stakeholders including global brands to instill trust among international investors. Reforming the Market Entry Process Strategic partnerships across platforms can play vital role in gaining international coverage Create advocates from globally acclaimed Bangladeshis / influential NRBs to reach out to prospective investors and create positive association Promote BIDA’s ‘one stop solution’ service Creating global brand perception
  • 31. Recommendations 31 ▪ Startup Policy: With the Digital Bangladesh agenda in Government’s core, it is eminent to form a startup policy to offer multiple benefits for the startup and ecosystem players such as ease of access to debt finance, reducing the cost of doing business, ease of doing business, fiscal policy support - VAT/tax exemptions and rebates. An enabling policy will promote the growth of startups and the ecosystem attracting foreign investment in the ecosystem, benefiting the country's growth and employment rate. ▪ Fund of Funds: Startup Bangladesh and ICT Ministry can form a fund of funds through a public private collaboration to invest in Startups. The fund of funds makes downstream investments in venture capital and alternative investment funds that in turn invest in startups. ▪ Investor Benefits: The government needs to ensure an investment friendly environment in Bangladesh. Recommendations would be to update Foreign Exchange Regulation Act 1947, reduce entry barriers, introduce TAX benefits and ease repatriation of profits of foreign investors to attract foreign investments. ▪ Ease of Doing Business: Business processes, policies, and regulations have to be streamlined and more comfortable to start and operate startups/SMEs. A way forward could be to use technology and fintech platforms to make tax payments seamless, transparent and secure. ▪ Industry-Academia Collaboration: Industry-academia is mandatory to set up the right kind of infrastructure to nurture innovation and talents at school/university level as well as leverage knowledge remittances from NRBs all over the world through incentivized initiatives. ▪ Corporate Venture Capital: Corporates investing in Startups would provide viable exits for early-stage investors and founders as well as accelerate capital from both local and international markets. Also, this portrays confidence in the ecosystem to the international audience ▪ Continued GoB Support: The ICT ministry has championed Startup growth be it in setting by the flagship venture capital fund Startup Bangladesh Limited or supporting ecosystem building initiatives across the country. Continue to provide infrastructure, policy and bringing in other ministries onboard in the process.
  • 32. LightCastlePartners Level 5, House 10/12, Road 1, Block B, Niketan, Gulshan 1, Dhaka - 1212,Bangladesh Email:info@lightcastlebd.com Mobile:+8801744736621, +8801711 385988 Web:www.lightcastlebd.com Dataon DemandPlatform:www.databd.co Bijon Islam Chief Executive Officer LightCastle Partners Silvia Rozario Project Manager & Sr. Business Consultant LightCastle Partners Mehad ul Haque Project Manager & Sr. Business Consultant LightCastle Partners Authors Acknowledgement LightCastle Partners acknowledges the valuable contribution of the following notable personnel and organizations from the Bangladesh Startup Ecosystem to prepare this report. Tina Jabeen Investment Advisor Startup Bangladesh, iDEA Project, ICT Division Rahat Ahmed Founding Partner & CEO Anchorless Bangladesh Asif Iqbal Country Director Entrepreneurship World Cup GEN Bangladesh Bangladesh Fairuz Joyeeta Business Analyst LightCastle Partners Salem Abrar Business Analyst LightCastle Partners