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Bangladesh Startup Investment Report Q’1 2023: Embracing The Uncertainty [Readable Version]

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LightCastle Analytics Wing
April 13, 2023
Bangladesh Startup Investment Report Q’1 2023: Embracing The Uncertainty [Readable Version]

Economic Shocks & Unstable Financial Markets Intensifies Uncertainty Leading to Continued Global Funding Slowdown for Startups in 2023

  • Inflation, dollar crisis, and unstable financial markets denote turbulent times for economies around the globe:
    • High inflation and recessionary phases have made investors more risk-averse, as consumer purchasing power shrinks and the cost of borrowing hikes up.
    • Rising interest rates to contain inflation is leading to readjustment of company valuations – leading to startups being forced to lower their valuations. 
    • Failure of the three biggest banks for tech startups in the U.S. – Silvergate Bank, Signature Bank, and Silicon Valley Bank – disrupts startup investments, across the globe.
  • Startups across borders anticipate hard times for 2023, marked by lower investments and mass layoffs:
    • USD 31 Bn was raised by startups around the world in January 2023 – 50% less than the previous year, according to Crunchbase.
    • Climate-tech, generative AI, electric vehicles, and financial services (embedded finance and fintech) rise as the top industries attracting global investors – as already seen by Microsoft investing USD 10 Bn into OpenAI in January 2023.
    • Mass job cuts further underpin the precautionary measures among global startups, as tech layoffs wiped out more than 118 K jobs in Q’1 of 2023.
  • Despite heat from the global funding downturn, Bangladeshi startups have secured more deals in Q’1:
    • USD 36.55 Mn was raised by Bangladeshi startups in Q’1, an almost 2x QoQ rise, driven mostly by ShoUp’s deal of USD 30 Mn with Lendable and the City Bank.
    • Deals secured by startups rose by 66% QoQ, from 12 deals in Q’4 2022 to 20 deals in Q’1 2023, largely due to higher small-ticket funding by local investors.
    • Leading homegrown startups reported adopting more conservative cash-flow management measures to survive the bleak global funding landscape.

Financial Market Instability in the West Can Be an Opportunity for Asia as Global Investors Look Towards Portfolio Diversification

Month by month global startup funding since January 2022
Source: LightCastle Partners Bangladesh Economic Update 2022, CB Insights Q3 2022 State of Venture Report, Crunchbase.com
  • The startup funding landscape started off strong in 2022, raising USD 63 Bn in January 2022. Funding slowly declined as many economies around the world slowed in growth rates from COVID-19 aftershocks and the Russia-Ukraine war.
  • As inflationary pressures climbed, dollar prices increased, and financial markets in the West witnessed failures. January 2023 saw investments worth USD 31 Bn, a third of which was captured by Microsoft’s USD 10 Bn investment into OpenAI.
  • Despite a bleak outlook of the global startup funding scenario, Asian startups have the golden opportunity to stand out as investors look towards diversifying their portfolios.

Bangladesh Demonstrates Strong Vitals for Startup Opportunities with Growing Trends for Digitization and Consumerism

Bangladesh Demonstrates Strong Vitals for Startup Opportunities with Growing Trends for Digitization and Consumerism
*Projected from the latest World Bank data
Source: World Bank, BBS, Bangladesh Bank, GSMA, Global Findex Database 2021, IMF, UNESCAP, BCG
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WRITTEN BY: LightCastle Analytics Wing

At LightCastle, we take a systemic and data-driven approach to create opportunities for growth and impact. We are an international management consulting firm which creates systemic and data-driven opportunities for growth and impact in emerging markets. By collaborating with development partners and leveraging the power of the private sector, we strive to boost economies, inspire businesses, and change lives at scale.

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