Startups in Bangladesh raised around $35.58 million from January to March of this calendar year, according to Dhaka-based research and business consulting firm LightCastle Partners.
Covid-19 and the Russia-Ukraine war have exposed the fragility of economic interdependence affecting supply chains, commodity markets, and the flow of capital, LightCastle said in its “Bangladesh Startup Investment Report 2023: Embracing the Uncertainty” for Q1.
As a result, global startup funding declined by 50% from $63 billion in January 2022 to $31 billion in January 2023.
Against this, Bangladesh secured $35.58 million through 17 deals in Q1 of 2023, primarily spurred by small ticket funding from local investors.
As global investors grow risk-averse and gravitate towards portfolio diversification, opportunities are emerging for Asian startups, it added.
E-commerce platform ShopUp alone raised about $30 million of the amount from UK-based lender Lendable and City Bank Ltd as debt financing.
Insiders said the overall inflow of global funding for startups in the country remained very low in the first quarter as local and global economic downturns continued.
Furthermore, the failure of three banks in the US that fund startups — Silvergate Bank, Signature Bank, and Silicon Valley Bank — further casts shadows on global financing for emerging companies.
Meanwhile, startup investments come from venture capital firms which in turn seek an equity stake in the business in the form of shares.
In Bangladesh, the tech-startup industry has enjoyed years of a boom driven by people’s increasing access to the internet, higher smartphone penetration and a decade of economic growth.
Now, the founders and executives of technology start-ups are facing a new reality as global venture capital investors are becoming cautious regarding investments amid rising inflation and widespread economic uncertainty, said industry people.
Bangladeshi start-ups raised $109 million in 2022, much lower than the $415 million raised a year earlier, according to LightCastle.
But progress in the tech-startup segment has received a blow since the start of the war in Ukraine as the Federal Reserve, the central bank of the United States, has started to increase the key interest rates to combat higher inflation, raising the cost of funds raised by venture capital firms.
In the latest report, LightCastle identified that local investors have also amplified their contributions to the funding landscape.
Among the 17 deals, 11 were led locally in small-ticket funding rounds, the firm said.
The top three leading industries were financial services, sports and entertainment, and education.
As local investors continue to contribute towards the funding gap, ongoing contributions can alleviate the gaps in global funding facing Bangladesh’s startup ecosystem, the report added.