How Bangladeshi startups fared in 2023

[Imrul Hasan Tusher]

How Bangladeshi startups fared in 2023

Bangladesh in 2023 has seen pivotal shifts in the realms of investment and strategic approaches within the startup sector.

In 2023, amidst a landscape of global economic instability largely influenced by geopolitical tensions, Bangladesh's startup ecosystem has showcased a notable degree of resilience and adaptability. This period, significantly impacted by factors such as the Russia-Ukraine conflict, rising inflation rates, and overall economic strain, has also seen pivotal shifts in the realms of investment and strategic approaches within the startup sector.

Economic background and global context

The global scenario for startup funding witnessed a substantial downturn in 2023, with investment figures falling by 38% year-on-year to a total of USD 285 billion, as reported by the Bangladesh Startup Investment Report 2023 by Lightcastle Partners. Despite Bangladesh's relatively swift recovery from the Covid-19 pandemic, the nation faced amplified structural challenges due to the ongoing war. This included a sharp rise in inflation, sluggish growth in exports, remittance bottlenecks, and a significant depreciation of the local currency against the USD. Furthermore, the depletion of foreign exchange reserves and the imposition of stringent import restrictions added to the economic pressures. In this turbulent environment, Bangladesh's startup ecosystem navigated through with some level of success.

Investment trends in Bangladesh's startup ecosystem

According to the report by Lightcastle Partners in 2023, startups in Bangladesh managed to raise USD 72 million across 45 deals, marking a 42% decrease in funding compared to the previous year. The year commenced with a robust first quarter, witnessing the highest funding at USD 37 million. However, the investment landscape fluctuated throughout the year before seeing considerable quarter-on-quarter growth in the fourth quarter, reaching USD 22 million.

Venture capital firms were central to these investments, contributing to 50% of the total startup investments. A key development was the entry of local conglomerates into the startup arena, as exemplified by BSRM's USD 2.2 million investment in Sheba. This indicates an increasing interest from traditional business sectors in the startup domain.

Sectoral performance and top startups

The report highlighted that in 2023, financial services, garments & textiles, and education sectors were at the forefront, securing USD 49 million across 14 deals. Despite the overall downturn, sectors such as healthcare experienced significant investment increases, reflecting maturity and resilience in the face of funding challenges. Notable startups including ShopUp, Nitex, 10 Minutes School, Arogga, and Jatri collectively secured USD 53 million, highlighting the attractiveness and potential of Bangladeshi startups to investors.

Government initiatives and local investor confidence

The Bangladeshi government's commitment to fostering the startup ecosystem was apparent through initiatives like the Fund of Funds and the Startup Summit. The increasing involvement of local investors suggests a rising confidence in the resilience and potential of domestic startups. This local support is vital in an environment where global investor sentiment remains cautious due to wider economic uncertainties.

Prospects and strategic focus for 2024

As the ecosystem looks towards 2024, expectations lean towards a gradual recovery. The focus is likely to remain on strategic resilience, with startups emphasising unit economics, effective burn rate management, and thorough risk assessments. Collaborative efforts, both within the local investment community and backed by government support, are anticipated to be crucial in maintaining the growth trajectory of the ecosystem.

Source:https://www.thedailystar.net/tech-startup/news/how-bangladeshi-startups-fared-2023-3527201