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Post-pandemic recovery, the Russia-Ukraine war, harvesting and production challenges, and supply-chain disruptions are leading to economic downturns worldwide. This has brought slowdowns in startup investments worldwide. It declined by 34% from USD 113 Bn in quarter 2 to USD 75 Bn in quarter 3 in 2022.
The growing gap in global funding has also been felt by Bangladeshi startups. They raised only USD 5 Mn in Quarter 3 – 5% of the total USD 95 Mn raised so far this year.
To address pressing concerns about the global funding winter and how startups should tackle the current situation and approach investors for a further round of funding, LightCastle Partners, Startup Bangladesh Limited, Anchorless Bangladesh, Bangladesh Angels, and BD Startup Founders organized a webinar on November 28, 2022 on Navigating Global Startup Funding Undercurrents.
The panel consisting of local and international investment and startup exerts, moderated by Bijon Islam, CEO and Co-Founder at LightCastle Partners, included:
The event began with a keynote address by Mehad ul Haque, Project Manager and Sr. Business Consultant, LightCastle Partners.
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If you are interested to learn more about the Startup Ecosystem of Bangladesh
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With the nascent state of the Bangladesh startup ecosystem, the country still fares at its early stages of digitalization and venture capital flows compared to its peers. According to Sturgeon Capital, which has an investment portfolio stretching between Bangladesh, India, China, Indonesia, and Latin America, Venture Capital funding per capita in Bangladesh stands at around US $1 – half of that in Pakistan and a quarter of that in Indonesia. With a better understanding of its fit in the global cycle, the country holds considerable opportunities to attract more global investors with a coherent global brand perception.
According to Rahat Ahmed, at its current stage, mid to late-stage investors are faced with a quality crisis when it comes to Bangladeshi startups. Moreover, because investors are more comfortable with directing their funds to peer countries whose ecosystems are further developed, Bangladeshi startups have an additional expectation to be ahead of regional counterparts to gain global attention.
“One of the things that is a bit frustrating lately is the negativity regarding Bangladesh, domestically. When we speak to international investors, they understand that the Bangladesh story still has 10 years to develop – the population is maturing, there is a rising middle class, etc. So short-term worries are not reflected in the western view of the Bangladesh market [unlike in the domestic perspectives].”
– Rahat Ahmed, Founding Partner & CEO of Anchorless Bangladesh
One key to building a better image of Bangladesh in the global market is to restructure the problems as opportunities. For example, with a growing population and a median age of 27 years, the country has enormous potential in its consumption patterns. By reframing the issues into solutions, startups in Bangladesh can leverage the early-stage position of the country to build a strong outline for their business models.
“Bangladesh needs to work on its PR for the venture ecosystem and the startup opportunities present in the country. There is work being done to raise awareness regarding the successful Bangladeshi origin founders, and these efforts are what is important for raising awareness about what is happening in Bangladesh.”
– Robin Butler, Partner at Sturgeon Capital
Bangladesh Angels Network is the largest angel forum in Bangladesh, with 250+ angels. Over the last three years, they built a portfolio of 37 startups, investing USD 6 Mn. The decline in global startup investments reflects in their funding trends in the past year, with a considerable number of deals in the first half of 2022 but slowdowns in deals in the second half.
With a number of non-residents Bangladeshi investors in Bangladesh Angels Network relying on wealth from stocks or housing, international economic uncertainty has caused increased conservativeness when it comes to funding. As a result, due diligence and term sheets are more rigorous and strict, and ticket sizes have waned.
“For the VCs that we co-invest with or do follow-ons to our own investments, they are definitely taking longer with due diligence, liquidation preferences are higher than they used to be, maybe stronger languages regarding exit clauses and redemption rights.”
– Nirjhor Rahman, CEO of Bangladesh Angels Network
Surviving the tighter due diligence process requires a thorough and up-to-date profile for startups. Hasan A. Arif explains that they must ensure that they have the necessary licenses to prevent misunderstandings, and have a clear and coherent data room that can be backed by financial statements.
“From the due diligence perspective – firstly financial and regulatory compliance – make sure you have the proper licenses to avoid ambiguity, this is important for newer innovative startups. From the data perspective – you have to make sure that your data room is crisp and clean, and that the financial statements you produce are coherent with the financial transactions in the bank. Another thing to keep in mind is to keep a clean cap table, updated with the filings.”
– Hasan A. Arif, Head of Portfolio Investments, Startup Bangladesh Limited
Moreover, homegrown startups can turn to strategic long-term envisioning for resilience. Sadia Haque shares the experience of ShareTrip, an online travel platform that provides end-to-end travel solutions. As a travel platform, the COVID-19 pandemic has not been kind to ShareTrip’s operations when the travel industry shut down as a result of repeated lockdowns. Yet, with a clear goal of creating a long-term presence in the market, ShareTrip looked towards opportunities in collaborating with players in the same market – offline travel agencies – who were looking to get onboarded online. Now, with a collaborative effort with suppliers in the market, ShareTrip has higher revenue and hit profitability from the last quarter of 2021, when the pandemic’s hold on the economy was still strong.
“You need to have the right planning, vision and goals so that you are not going to be disrupted by the current situation, but you are looking into the changes and dynamics taking place in the market and converting those into opportunities.”
– Sadia Haque, Founder and CEO of ShareTrip
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