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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, 164 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,
98% mobile phone connection, 62% internet penetration, 102 million+ people on internet with 94 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 27.9 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$ 200 million in international investments from big-name corporate investors and venture capitals,
investing in industries like FinTech, Logistics, and Mobility over the last four years. The emergence of active Angel Investment
Networks, Impact Investing, host of local and international operating accelerators/ incubators propelled 1,000+ 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 100 crore BDT
(U$ 11.5 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. 60% 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. Public, Private and Development Initiatives boosting Startup Ecosystem towards “Coming 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 2019-20
v. Increasing number of accelerators and incubators are acting as enablers in the ecosystem
vi. Bangladeshi Startups are attracting global and local investors
vii. Homegrown Startups have raised U$ 200Mn+ of foreign investment
4. Low Funding & COVID-19 Pandemic Inflict a Critical Blow
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. Pandemic Recession has slowed down startup investments worldwide
v. COVID-19 Disruption in Bangladesh leaves 60% of Startups with less than three months of runway
vi. While all sectors are in peril, 3 Essential sectors have seen revenue growth in Bangladesh
5. 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$1,855
GDP Per Capita
2019
27.9
Median Age
2019
Bangladesh, the 39th largest economy and one of the fastest
growing countries, showed an impressive annual GDP growth rate of
~6.5% over the last decade. The country’s annual GDP growth rate
officially surpassed that of India’s in 2016 and has been higher than
that of its neighbor since then.
GDP per capita has been growing at rates over 5% since 2015
peaking at U$ 1,855 (as of 2019), which is almost equal to China in
2005. 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 28th
largest economy in the world by 2030.
It dominates the global RMG market in 3rd position, right after
China and Vietnam, earning U$ 34Bn (83% of total export earnings)
as of 2019. It’s ICT sector is booming, exporting U$ 800Mn worth of
service across the globe.
The country has a population of 164 Mn and has reached 37%
urbanization. Connectivity has reached its peak, with 98% mobile
phone connection (161Mn) and 62% internet penetration (102Mn)
and 57% mobile internet penetration (94Mn).
Source: BTRC, World Bank, UNCTAD, Ministry Briefings, BBS, EPB & Bangladesh Bank
164Mn
Population
2019
U$34Bn
RMG Exports
FY 2018-19
5
161Mn
Mobile Subscribers
May 2020
102Mn
Internet Users
May 2020
94Mn
Mobile Internet Users
May 2020
U$3.61Bn
FDI
Average (2010-19)
U$41Bn
Total Exports
FY 2018-19
U$800Mn
ICT Exports
FY 2018-19
~6.5%
GDP Growth Rate
Average (2010-19)
U$299Bn
GDP
FY 2018-19
Economic indicators of the past decade
suggest growth for the country
MAC population will double to 34Mn in 5 years
increasing consumer appetite
Bangladesh’s rapidly growing economy has spawned an economic
class of urbanites, who are upwardly mobile with a growing appetite
for consumer spending. This Middle and Affluent Class (MAC)
population is young, tech-savvy and optimistic about their future,
leading them to spend on living standard enhancing goods and
services.
According to a study by The Boston Consulting Group (BCG) on
Bangladesh’s surging MAC population, the projected MAC population
stands at 19 Million as of 2020 and is projected to grow at 10% per
annum to reach 34 Million by 2025.
84 80 77 73 69 66 62 59 55 52 48
44 48 52 56 60 64 70 75 81 86 92
17 18 19 20 21 22 23 24 25 26 2712 13 15 16 18 19 22 25 28 31 34
0
50
100
150
200
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions
Bangladesh Income-wise Population
BoP Aspirant Emerging Middle Middle and Affluent
Bangladesh recorded an impressive annual GDP growth rate of 8.1%
in 2019; the highest in the country’s history and in South Asia for
2019. The strong performance is attributable to a number of factors
that have contributed to inclusive economic growth
According to The Bangladesh Bureau of Statistics (BBS), the country
has a young population with a median age of ~28 years and 62% of
the population below the age of 35.
The country also benefits from ‘density dividend’, as 164 Million
population is nestled in a country with land size similar to that of
Michigan, USA.
6.06 6.55 7.11 7.28 7.86 8
0
3
6
9
2014 2015 2016 2017 2018 2019
GDPGrowth(%)
Annual GDP Growth (%)
Bangladesh India Vietnam Srilanka Pakistan
Source: BCG, World Bank & LightCastle Analysis 6
Forecast
20.5 30.1 38.8 45.1 51.1
51%
47%
29%
16%
13%
0%
10%
20%
30%
40%
50%
60%
70%
0
10
20
30
40
50
60
2015 2016 2017 2018 2019
MFS is growing steadily at a 20% CAGR
Transaction (U$ Bn) Annual Growth
MFS is growing steadily at a 20% CAGR over the last 5 years
▪ Every one out of two persons (85Mn) has a MFS account in Bangladesh
▪ 5.3Mn people conducts 7.6Mn transactions of U$ 151Mn+ everyday
▪ 7Mn new MFS accounts registered during pandemic surge (Mar-May’20)
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 with 100 crore BDT (U$ 11.5Mn) 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
5th
Most Densely
Populated in the World
7Source: 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
26% 26%
27%
28%
28%
29%
29%
30%
31%
31%
32%
-
50
100
150
200
250
300
350
25%
26%
27%
28%
29%
30%
31%
32%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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 FY 2018-19 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
365 365 490 588 697 989 1,145 1,215 1,279 1,309 1,467
117 29 215 207 361 282 394 206 333 1,180 603
700 913 1,136 1,293 1,599 1,551 2,235 2,333 2,152 3,613 2,874
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Equity Capital Re-invested Earnings Intra-company Loans
Investment as % of nominal Annual GDP of Bangladesh FDI Breakdown by Component (U$ Mn)
Source: Bangladesh Bank, World Bank & LightCastle Analysis
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
9Source: 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 | Public, Private and Development Initiatives boosting the Startup Ecosystem towards “Coming 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 2019-20
05 | Increasing number of accelerators and incubators are acting as enablers in the ecosystem
06 | Bangladeshi Startups are attracting global and local investors
07 | Homegrown Startups have raised U$ 200Mn+ of foreign investment
10
Bangladesh Startup Ecosystem
A glance of growth in numbers
11
U$15Mn+
Startup Investment
Raised in 2019
U$200Mn+
International VC Fund
Brought in the last decade
1,000+
Active Startups
in Bangladesh
200+
New Startups
born every year
U$80Mn+
Alternative Investment Fund
Registered in Bangladesh
200+
Active Angels
Boosted by Angel Networks
40%
Local Investment
U$ 6Mn in 2019
Fintech
Ride-Sharing
Logistics
Popular Growth Sector
In 2019
20+
Accelerators & Incubators
Active in the Country
1.5Mn+
Total Employment Created
by the Startup Ecosystem
U$11.5Mn
Startup Bangladesh Fund
Established in 2020
Dhaka
Chattogram
Sylhet
Major Active Cities
in the Startup Ecosystem
Source: BSEC, Bangladesh Startup Survival Guide Group, LightCastle Startup Index & LightCastle Analysis
Public, Private and Development Initiatives
boosting the Startup Ecosystem towards “Coming 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
2013 2014 2015 2016 2017 2018 2019 2020
Google Groups
Startup Weekend
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
BYLC Ventures
U$5Mn : Bd Jobs
Startup
Documentary by
Startup Dhaka,
Startup Bash
Startup Weekend
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
Innovation Fair
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$1.5Mn : ShopUp
Student to Startup
Competition
Accelerating Asia
Jerra - Summit Partial
M&A
BDT 100 Cr. Seed
Investment Fund by
Startup Bangladesh
28 High-tech Parks
launched
2,650 Unions under
broadband internet
connectivity
U$18Mn : Augmedix
U$1.1Mn : SOLshare
U$0.83Mn : Gaze
U$0.6Mn : LoopFreight
U$0.5Mn : iFarmer
Call 4 Nation
COVID Accelerator
EverCare - Apollo M&A
Unilever-GSK M&A
Janata Jute Mills M&A
Government Initiatives
Notable Investments
Notable Events
Merger & Acquisition
Ecosystem Enablers
LEGENDS
Source: LightCastle Analysis List is indicative only and not exhaustive*
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.
13
Startup Ecosystem Confidence Index
Source: LightCastle Startup Confidence Index 2019
Sector-specific Confidence
Overall Confidence
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 activityInvestmentIndex
=f(Totalinvestment/TotalStart-up,Fundingbystages)
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 14
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*
GLOBAL
LOCAL
COMMERCIAL
IMPACT
Increasing number of accelerators and incubators
are acting as enablers in the ecosystem
15
Startup MediaUniversities Competitions
Development Partners
Telecom
Gov. Initiative
Source: LightCastle Analysis Not an Exhaustive List*
GLOBAL
LOCAL
COMMERCIAL
IMPACT
Bangladeshi Startups
are attracting global and local investors
16
Angel Network
Corporate Foundation
Corporates
Gov. Initiative
Multilateral Development Agency
Investment Co.
THE ANGELS
NETWORK
Source: LightCastle Analysis Not an Exhaustive List*
Corporates
U$ 2Mn
Deligram
ecommerce
from
SkyCatcher
U$ 0.9Mn
Gaze
deeptech
from
Anchorless Bangladesh
U$ 2.8Mn
SOLshare
cleantech
from
IIX Growth Fund
U$ 2Mn
CloudWell
fintech
from
Aavishkar Venture Capital
U$ 9Mn+
Zero Gravity
(Sindabad & Kiksha)
ecommerce
from
Aavishkar VC & Frontier Fund
Homegrown Startups
have raised U$ 200Mn+ of foreign investment over the last decade
17
U$ 6Mn
Sheba.xyz
service marketplace
from
Epyllion Group, BFP-B DFID
and Local Angel Investors
U$ 7Mn+
SureCash
fintech
from
Osiris Group
U$ 3.8Mn+
BDjobs
job marketplace
from
SEEK
U$ 12.8Mn+
Pathao
logistics
from
GO-JEK, Osiris Group
Openspace Ventures, and
Battery Road Digital Holdings
U$ 15Mn+
Shohoz
logistics
from
Linear Venture,
Golden Gate Venture
Full Funding Undisclosed
U$ 3Mn+
Shop Up
fintech
from
Sequoia Capital India, Omidyar
Network & Lonsdale
U$ 14.8Mn+
Chaldal
ecommerce
from
IFC, IDLC, Mir Group,
Y Combinator
U$ 80Mn+
Bkash
fintech
from
Money in Motion, BRAC Bank,
Gates Foundation & Ant Financial
U$ 1.3Mn
AjkerDeal
ecommerce
from
Innotech Corporation
Source: Databd.co, Crunchbase & LightCastle Analysis
U$ 1Mn+
Bongo
entertainment
from
Razor Capital
Not an Exhaustive List*
18
Low Funding & COVID-19 Pandemic
Inflict a Critical Blow
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 | Pandemic Recession has slowed down startup investments worldwide
05 | COVID-19 Disruption in Bangladesh leaves 60% of Startups with less than three months of runway
06 | While all sectors are in peril, 3 Essential sectors have seen growth in Bangladesh
18
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
19Source: Global Innovation Index 2019,Startup Blink, [5]Crunchbase, Angellist, Xinhuanet, Swiss Global Enterprise & LightCastle Analysis
Finding the Right Talents & Access to Financing
still remains the top problems for emerging startups
20
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% Findingtherightco-founder
Findingagoodteam
Accesstofunding
Steadycashflow
Governmentsupport
Legal&regulatoryaffairs
Accesstomarketinformation
Retainingagoodteam
Marketresearch
Traffic
Familypressure
Retainingclients
StrategicPartnerships
Attractingclients
Changingtechnology
Politicalunrest
Accesstomentorship
Officesetup
DifficultyScale
LevelofDifficulty
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
21
State of Startup Funding in Southeast Asia (2018)
Source: IMF, Crunchbase, Statista, Yourstory.com and LightCastle Analysis
-55%
Pandemic Recession
has slowed down startup investments worldwide
22
-30%
-20%
-10%
0%
10%
20%
30%
DifferenceinDealCount(%)
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
2018 2019 2020
Due to pandemic recession kindled by COVID-19, number of startup investment deals worldwide per
month have dropped by half (55%) since pre-COVID era (November 2019)
No. of Investment Deals Per Month Worldwide
Source: Startup Genome
COVID-19 Disruption in Bangladesh
leaves 60% of Startups with less than three months of runway
23
24%
32%
22%
10%
7%
5%
19%
21%
12%
9%
7%
2%
3%
9%
10%
1%
2%
2%
3%
(-100%) Businesses Operation Shutdown
(-50%) Significant decrease in business
(-20%) Slight decrease in business
(0%) No Change in business
(+20%) Slight increase in business
(+50%) Significant increase in business
Column2 Seed Series A Series B+
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 have less than 3 months of runway 59% of the Startups seek leverage (loans and bonds) in times of crisis
2%
5%
18%
21%
26%
28%
No Measures
Disposal of assets
Employee layoffs
Senior management
reducing/foregoing salaries
Reduction/freeze of salaries
Reduction of variable costs
1%
3%
15%
17%
17%
20%
26%
Short-Term, No Interest Loans
Grant
Short-Term, Low Interest Loans
Quasi-equity
Convertible Bonds
Equity
Long-Term, Low Interest Loan
5%
17%
42%
24%
8%
3%
No runway at
all
1 month 1 to 3
months
3 to 6
months
6 to 12
months
12+ months
Source: Bangladesh Startup Survival Guide Group & LightCastle Analysis
While all sectors are in peril,
3 Essential sectors have seen revenue growth in Bangladesh
24Source: Bangladesh Startup Survival Guide Group & LightCastle Analysis
-100% -50% 0% 50% 100%
COVID-19 Sectorial Revenue Impact in Bangladesh
Grocery
Logistics
Digital Financial Services
are the essential sectors
that have seen positive impact in business
25
Recommendations
Recommendations
26
▪ 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.
▪ COV-19 Startup Support Fund: The ICT ministry can establish a BDT 150 crore startup support
fund program in the form of grant/ quasi-equity/ matching fund nature to support the 150 startups
for a runway of 12+ months. Based on multiple criteria i.e. employment, market potential, and post-
pandemic adjusted valuation, startups can be categorized as- small, medium, and large.
Appendix
27
Y-shaped
Non recovery of a decay into a depression, driven
by failed responses to the pandemic and
economic crisis. This would represent a deep and
long global depression due to the
interconnectedness of world economies.
Recovery is a combination of U- and L-shaped
recoveries — in this(likely) case, the economy
divides into two tracks: fast and slow sectors that
represents fast and slow recoveries.
Recovery with a possible short lived boom, driven
by huge stimulus needed for a hard stop to the
pandemic. This would be a surprise scenario.
Recovery based on a longer crisis, driven by a
more modest response to the pandemic. This
appears increasingly likely.
L-shaped
Stabilize
Mitigate short term risk and stabilize
operations
Reopen
Plan & orchestrate to resume operations
Grow
Accelerate change to grow in the post Covid
world
Startups will face
different trajectories
based on their industry,
but planning and
adapting is the way out
with the right kind of
Capacity
U-shaped
most likely
economic
recovery
trajectory
V-shaped
U-shaped
Probable Economic Trajectories & Way-out of Pandemic
28Source: Salesforce: Covid-19 Response Playbook
29
ORIGIN
Bangladesh
Founders of Bangladesh origin,
with HQ or core product
development in Bangladesh
STAGE
Prototype+
The start-up must have at least
a prototype or MVP; (idea-stage
excluded)
INCEPTION
2010 onwards
Active technology product/
platform/ business incepted in
2010 or later
DIFFERENTIATOR
Innovation
Innovation in technology,
business process or business
model being executed at speed
Startup is an entity working
towards innovation,
development, deployment
and commercialization of
new products, processes, or
services driven by
technology or intellectual
property
How to define a Bangladeshi Startup?
Source: LightCastle Analysis
30
Startup Insights: Why Startups Succeed or Fail? (I/II)
Source: Startup Genome
31
Startup Insights: Why Startups Succeed or Fail? (II/II)
Source: Startup Genome
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
K. M. Saqiful Alam
Senior Expert
LightCastle Partners
Silvia Rozario
Project Manager &
Sr. Business Consultant
LightCastle Partners
Mehad ul Haque
Project Manager &
Sr. Business Consultant
LightCastle Partners
Ishtiak Mourshed
Business Analyst
LightCastle Partners
Risalat Huda
Business Analyst
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
Lead Authors
Support & Advisory

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Bangladesh Startup Ecosystem: The Untapped Digital Goldmine of Asia

  • 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, 164 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, 98% mobile phone connection, 62% internet penetration, 102 million+ people on internet with 94 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 27.9 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$ 200 million in international investments from big-name corporate investors and venture capitals, investing in industries like FinTech, Logistics, and Mobility over the last four years. The emergence of active Angel Investment Networks, Impact Investing, host of local and international operating accelerators/ incubators propelled 1,000+ 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 100 crore BDT (U$ 11.5 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. 60% 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. Public, Private and Development Initiatives boosting Startup Ecosystem towards “Coming 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 2019-20 v. Increasing number of accelerators and incubators are acting as enablers in the ecosystem vi. Bangladeshi Startups are attracting global and local investors vii. Homegrown Startups have raised U$ 200Mn+ of foreign investment 4. Low Funding & COVID-19 Pandemic Inflict a Critical Blow 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. Pandemic Recession has slowed down startup investments worldwide v. COVID-19 Disruption in Bangladesh leaves 60% of Startups with less than three months of runway vi. While all sectors are in peril, 3 Essential sectors have seen revenue growth in Bangladesh 5. 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$1,855 GDP Per Capita 2019 27.9 Median Age 2019 Bangladesh, the 39th largest economy and one of the fastest growing countries, showed an impressive annual GDP growth rate of ~6.5% over the last decade. The country’s annual GDP growth rate officially surpassed that of India’s in 2016 and has been higher than that of its neighbor since then. GDP per capita has been growing at rates over 5% since 2015 peaking at U$ 1,855 (as of 2019), which is almost equal to China in 2005. 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 28th largest economy in the world by 2030. It dominates the global RMG market in 3rd position, right after China and Vietnam, earning U$ 34Bn (83% of total export earnings) as of 2019. It’s ICT sector is booming, exporting U$ 800Mn worth of service across the globe. The country has a population of 164 Mn and has reached 37% urbanization. Connectivity has reached its peak, with 98% mobile phone connection (161Mn) and 62% internet penetration (102Mn) and 57% mobile internet penetration (94Mn). Source: BTRC, World Bank, UNCTAD, Ministry Briefings, BBS, EPB & Bangladesh Bank 164Mn Population 2019 U$34Bn RMG Exports FY 2018-19 5 161Mn Mobile Subscribers May 2020 102Mn Internet Users May 2020 94Mn Mobile Internet Users May 2020 U$3.61Bn FDI Average (2010-19) U$41Bn Total Exports FY 2018-19 U$800Mn ICT Exports FY 2018-19 ~6.5% GDP Growth Rate Average (2010-19) U$299Bn GDP FY 2018-19 Economic indicators of the past decade suggest growth for the country
  • 6. MAC population will double to 34Mn in 5 years increasing consumer appetite Bangladesh’s rapidly growing economy has spawned an economic class of urbanites, who are upwardly mobile with a growing appetite for consumer spending. This Middle and Affluent Class (MAC) population is young, tech-savvy and optimistic about their future, leading them to spend on living standard enhancing goods and services. According to a study by The Boston Consulting Group (BCG) on Bangladesh’s surging MAC population, the projected MAC population stands at 19 Million as of 2020 and is projected to grow at 10% per annum to reach 34 Million by 2025. 84 80 77 73 69 66 62 59 55 52 48 44 48 52 56 60 64 70 75 81 86 92 17 18 19 20 21 22 23 24 25 26 2712 13 15 16 18 19 22 25 28 31 34 0 50 100 150 200 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Millions Bangladesh Income-wise Population BoP Aspirant Emerging Middle Middle and Affluent Bangladesh recorded an impressive annual GDP growth rate of 8.1% in 2019; the highest in the country’s history and in South Asia for 2019. The strong performance is attributable to a number of factors that have contributed to inclusive economic growth According to The Bangladesh Bureau of Statistics (BBS), the country has a young population with a median age of ~28 years and 62% of the population below the age of 35. The country also benefits from ‘density dividend’, as 164 Million population is nestled in a country with land size similar to that of Michigan, USA. 6.06 6.55 7.11 7.28 7.86 8 0 3 6 9 2014 2015 2016 2017 2018 2019 GDPGrowth(%) Annual GDP Growth (%) Bangladesh India Vietnam Srilanka Pakistan Source: BCG, World Bank & LightCastle Analysis 6 Forecast
  • 7. 20.5 30.1 38.8 45.1 51.1 51% 47% 29% 16% 13% 0% 10% 20% 30% 40% 50% 60% 70% 0 10 20 30 40 50 60 2015 2016 2017 2018 2019 MFS is growing steadily at a 20% CAGR Transaction (U$ Bn) Annual Growth MFS is growing steadily at a 20% CAGR over the last 5 years ▪ Every one out of two persons (85Mn) has a MFS account in Bangladesh ▪ 5.3Mn people conducts 7.6Mn transactions of U$ 151Mn+ everyday ▪ 7Mn new MFS accounts registered during pandemic surge (Mar-May’20) 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 with 100 crore BDT (U$ 11.5Mn) 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 5th Most Densely Populated in the World 7Source: 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 26% 26% 27% 28% 28% 29% 29% 30% 31% 31% 32% - 50 100 150 200 250 300 350 25% 26% 27% 28% 29% 30% 31% 32% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 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 FY 2018-19 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 1,124 804 365 365 490 588 697 989 1,145 1,215 1,279 1,309 1,467 117 29 215 207 361 282 394 206 333 1,180 603 700 913 1,136 1,293 1,599 1,551 2,235 2,333 2,152 3,613 2,874 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Equity Capital Re-invested Earnings Intra-company Loans Investment as % of nominal Annual GDP of Bangladesh FDI Breakdown by Component (U$ Mn) Source: Bangladesh Bank, World Bank & LightCastle Analysis
  • 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 9Source: 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 | Public, Private and Development Initiatives boosting the Startup Ecosystem towards “Coming 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 2019-20 05 | Increasing number of accelerators and incubators are acting as enablers in the ecosystem 06 | Bangladeshi Startups are attracting global and local investors 07 | Homegrown Startups have raised U$ 200Mn+ of foreign investment 10
  • 11. Bangladesh Startup Ecosystem A glance of growth in numbers 11 U$15Mn+ Startup Investment Raised in 2019 U$200Mn+ International VC Fund Brought in the last decade 1,000+ Active Startups in Bangladesh 200+ New Startups born every year U$80Mn+ Alternative Investment Fund Registered in Bangladesh 200+ Active Angels Boosted by Angel Networks 40% Local Investment U$ 6Mn in 2019 Fintech Ride-Sharing Logistics Popular Growth Sector In 2019 20+ Accelerators & Incubators Active in the Country 1.5Mn+ Total Employment Created by the Startup Ecosystem U$11.5Mn Startup Bangladesh Fund Established in 2020 Dhaka Chattogram Sylhet Major Active Cities in the Startup Ecosystem Source: BSEC, Bangladesh Startup Survival Guide Group, LightCastle Startup Index & LightCastle Analysis
  • 12. Public, Private and Development Initiatives boosting the Startup Ecosystem towards “Coming 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 2013 2014 2015 2016 2017 2018 2019 2020 Google Groups Startup Weekend 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 BYLC Ventures U$5Mn : Bd Jobs Startup Documentary by Startup Dhaka, Startup Bash Startup Weekend 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 Innovation Fair 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$1.5Mn : ShopUp Student to Startup Competition Accelerating Asia Jerra - Summit Partial M&A BDT 100 Cr. Seed Investment Fund by Startup Bangladesh 28 High-tech Parks launched 2,650 Unions under broadband internet connectivity U$18Mn : Augmedix U$1.1Mn : SOLshare U$0.83Mn : Gaze U$0.6Mn : LoopFreight U$0.5Mn : iFarmer Call 4 Nation COVID Accelerator EverCare - Apollo M&A Unilever-GSK M&A Janata Jute Mills M&A Government Initiatives Notable Investments Notable Events Merger & Acquisition Ecosystem Enablers LEGENDS Source: LightCastle Analysis List is indicative only and not exhaustive*
  • 13. 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. 13 Startup Ecosystem Confidence Index Source: LightCastle Startup Confidence Index 2019 Sector-specific Confidence Overall Confidence
  • 14. 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 activityInvestmentIndex =f(Totalinvestment/TotalStart-up,Fundingbystages) 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 14 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*
  • 15. GLOBAL LOCAL COMMERCIAL IMPACT Increasing number of accelerators and incubators are acting as enablers in the ecosystem 15 Startup MediaUniversities Competitions Development Partners Telecom Gov. Initiative Source: LightCastle Analysis Not an Exhaustive List*
  • 16. GLOBAL LOCAL COMMERCIAL IMPACT Bangladeshi Startups are attracting global and local investors 16 Angel Network Corporate Foundation Corporates Gov. Initiative Multilateral Development Agency Investment Co. THE ANGELS NETWORK Source: LightCastle Analysis Not an Exhaustive List* Corporates
  • 17. U$ 2Mn Deligram ecommerce from SkyCatcher U$ 0.9Mn Gaze deeptech from Anchorless Bangladesh U$ 2.8Mn SOLshare cleantech from IIX Growth Fund U$ 2Mn CloudWell fintech from Aavishkar Venture Capital U$ 9Mn+ Zero Gravity (Sindabad & Kiksha) ecommerce from Aavishkar VC & Frontier Fund Homegrown Startups have raised U$ 200Mn+ of foreign investment over the last decade 17 U$ 6Mn Sheba.xyz service marketplace from Epyllion Group, BFP-B DFID and Local Angel Investors U$ 7Mn+ SureCash fintech from Osiris Group U$ 3.8Mn+ BDjobs job marketplace from SEEK U$ 12.8Mn+ Pathao logistics from GO-JEK, Osiris Group Openspace Ventures, and Battery Road Digital Holdings U$ 15Mn+ Shohoz logistics from Linear Venture, Golden Gate Venture Full Funding Undisclosed U$ 3Mn+ Shop Up fintech from Sequoia Capital India, Omidyar Network & Lonsdale U$ 14.8Mn+ Chaldal ecommerce from IFC, IDLC, Mir Group, Y Combinator U$ 80Mn+ Bkash fintech from Money in Motion, BRAC Bank, Gates Foundation & Ant Financial U$ 1.3Mn AjkerDeal ecommerce from Innotech Corporation Source: Databd.co, Crunchbase & LightCastle Analysis U$ 1Mn+ Bongo entertainment from Razor Capital Not an Exhaustive List*
  • 18. 18 Low Funding & COVID-19 Pandemic Inflict a Critical Blow 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 | Pandemic Recession has slowed down startup investments worldwide 05 | COVID-19 Disruption in Bangladesh leaves 60% of Startups with less than three months of runway 06 | While all sectors are in peril, 3 Essential sectors have seen growth in Bangladesh 18
  • 19. 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 19Source: Global Innovation Index 2019,Startup Blink, [5]Crunchbase, Angellist, Xinhuanet, Swiss Global Enterprise & LightCastle Analysis
  • 20. Finding the Right Talents & Access to Financing still remains the top problems for emerging startups 20 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% Findingtherightco-founder Findingagoodteam Accesstofunding Steadycashflow Governmentsupport Legal&regulatoryaffairs Accesstomarketinformation Retainingagoodteam Marketresearch Traffic Familypressure Retainingclients StrategicPartnerships Attractingclients Changingtechnology Politicalunrest Accesstomentorship Officesetup DifficultyScale LevelofDifficulty High Difficulty Medium difficulty Difficulty Scale Startup Difficulty Index Source: LightCastle Startup Index 2019
  • 21. 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 21 State of Startup Funding in Southeast Asia (2018) Source: IMF, Crunchbase, Statista, Yourstory.com and LightCastle Analysis
  • 22. -55% Pandemic Recession has slowed down startup investments worldwide 22 -30% -20% -10% 0% 10% 20% 30% DifferenceinDealCount(%) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 2018 2019 2020 Due to pandemic recession kindled by COVID-19, number of startup investment deals worldwide per month have dropped by half (55%) since pre-COVID era (November 2019) No. of Investment Deals Per Month Worldwide Source: Startup Genome
  • 23. COVID-19 Disruption in Bangladesh leaves 60% of Startups with less than three months of runway 23 24% 32% 22% 10% 7% 5% 19% 21% 12% 9% 7% 2% 3% 9% 10% 1% 2% 2% 3% (-100%) Businesses Operation Shutdown (-50%) Significant decrease in business (-20%) Slight decrease in business (0%) No Change in business (+20%) Slight increase in business (+50%) Significant increase in business Column2 Seed Series A Series B+ 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 have less than 3 months of runway 59% of the Startups seek leverage (loans and bonds) in times of crisis 2% 5% 18% 21% 26% 28% No Measures Disposal of assets Employee layoffs Senior management reducing/foregoing salaries Reduction/freeze of salaries Reduction of variable costs 1% 3% 15% 17% 17% 20% 26% Short-Term, No Interest Loans Grant Short-Term, Low Interest Loans Quasi-equity Convertible Bonds Equity Long-Term, Low Interest Loan 5% 17% 42% 24% 8% 3% No runway at all 1 month 1 to 3 months 3 to 6 months 6 to 12 months 12+ months Source: Bangladesh Startup Survival Guide Group & LightCastle Analysis
  • 24. While all sectors are in peril, 3 Essential sectors have seen revenue growth in Bangladesh 24Source: Bangladesh Startup Survival Guide Group & LightCastle Analysis -100% -50% 0% 50% 100% COVID-19 Sectorial Revenue Impact in Bangladesh Grocery Logistics Digital Financial Services are the essential sectors that have seen positive impact in business
  • 26. Recommendations 26 ▪ 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. ▪ COV-19 Startup Support Fund: The ICT ministry can establish a BDT 150 crore startup support fund program in the form of grant/ quasi-equity/ matching fund nature to support the 150 startups for a runway of 12+ months. Based on multiple criteria i.e. employment, market potential, and post- pandemic adjusted valuation, startups can be categorized as- small, medium, and large.
  • 28. Y-shaped Non recovery of a decay into a depression, driven by failed responses to the pandemic and economic crisis. This would represent a deep and long global depression due to the interconnectedness of world economies. Recovery is a combination of U- and L-shaped recoveries — in this(likely) case, the economy divides into two tracks: fast and slow sectors that represents fast and slow recoveries. Recovery with a possible short lived boom, driven by huge stimulus needed for a hard stop to the pandemic. This would be a surprise scenario. Recovery based on a longer crisis, driven by a more modest response to the pandemic. This appears increasingly likely. L-shaped Stabilize Mitigate short term risk and stabilize operations Reopen Plan & orchestrate to resume operations Grow Accelerate change to grow in the post Covid world Startups will face different trajectories based on their industry, but planning and adapting is the way out with the right kind of Capacity U-shaped most likely economic recovery trajectory V-shaped U-shaped Probable Economic Trajectories & Way-out of Pandemic 28Source: Salesforce: Covid-19 Response Playbook
  • 29. 29 ORIGIN Bangladesh Founders of Bangladesh origin, with HQ or core product development in Bangladesh STAGE Prototype+ The start-up must have at least a prototype or MVP; (idea-stage excluded) INCEPTION 2010 onwards Active technology product/ platform/ business incepted in 2010 or later DIFFERENTIATOR Innovation Innovation in technology, business process or business model being executed at speed Startup is an entity working towards innovation, development, deployment and commercialization of new products, processes, or services driven by technology or intellectual property How to define a Bangladeshi Startup? Source: LightCastle Analysis
  • 30. 30 Startup Insights: Why Startups Succeed or Fail? (I/II) Source: Startup Genome
  • 31. 31 Startup Insights: Why Startups Succeed or Fail? (II/II) Source: Startup Genome
  • 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 K. M. Saqiful Alam Senior Expert LightCastle Partners Silvia Rozario Project Manager & Sr. Business Consultant LightCastle Partners Mehad ul Haque Project Manager & Sr. Business Consultant LightCastle Partners Ishtiak Mourshed Business Analyst LightCastle Partners Risalat Huda Business Analyst 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 Lead Authors Support & Advisory