The convergence of global inflationary pressures, macroeconomic disruptions, and increased geoeconomic fragmentation has unleashed shockwaves that reverberate across economies worldwide. The COVID-19 pandemic and the Russia-Ukraine war have laid bare the vulnerability of economic interdependence, unleashing a cascading effect on supply chains, commodity markets, and the flow of capital. This intricate web of challenges has been further compounded by the recent failures of three prominent banks that served as pillars of support for tech startups in the United States: Silvergate Bank, Signature Bank, and Silicon Valley Bank. These developments have cast ominous shadows over the landscape of global funding for startups, contributing to a precipitous decline of 50% in global startup funding. From a robust USD 63 billion in January 2022, the funding landscape dwindled to a mere USD 31 billion in January 2023, reflecting the magnitude of the crisis at hand and its profound implications for the startup ecosystem worldwide.

Against this backdrop, Bangladeshi startups have secured a total USD 36.55 Mn through 20 deals in the first quarter of 2023. This has been predominantly driven by small ticket funding from local investors, showcasing their crucial support for the country’s budding startup ecosystem. As global investors turn increasingly risk-averse and seek portfolio diversification, Asian startups, including those in Bangladesh, are presented with newfound opportunities. The recent investment raise of an astounding USD 30 Mn by ShopUp through Lendable, a financial institution based in the United Kingdom, and the City Bank, a local financial institution, serves as a striking testament to this trend.

While the overall deal volume witnessed a decline of 34% compared to the previous year, and a substantial 55% decrease from the previous quarter (excluding the monumental ShopUp deal in Q1 2023), it is worth noting that ShopUp accounted for a staggering 84% of the total funding raised in the first quarter. Despite these fluctuations, the number of deals made in Q1 2023 increased compared to both the same period last year and the previous quarter, indicating a promising upward trajectory for the startup ecosystem in Bangladesh.

In Q1 2023, venture capital firms played a prominent role in the funding landscape, contributing more than USD 4 Mn. VCs also made up 12 startup deals in the quarter, which accounted for an impressive 73% of the total deals. Notably, the quarter saw significant early-stage funding activity, showcasing the confidence and support from venture capital firms. Taking a closer look at the sectors, the standout industries were financial services, sports & entertainment, and education. This indicates a growing adoption of technology and a maturing startup ecosystem within these sectors. The strong presence of venture capital investment in these areas serves as a testament to the increasing potential for growth in the local startup landscape.

Find the full report on Bangladesh Startup Investments Q’1 2023 on LightCastle Partners’ website here.

Bangladesh presents a plethora of opportunities for startups to thrive in its evolving ecosystem. Despite fluctuations in the global economy and funding landscape, local investors have played a pivotal role in bridging the gap, ensuring a steady influx of capital. In fact, in 2022, local investors accounted for an impressive 55% of all deals, showcasing their growing influence and commitment to fuelling the growth of startups. This trend continued into Q1 2023, with 11 out of a total of 20 deals being led by local investors, with an average investment of USD 166 K. Furthermore, the presence of public sector initiatives like Startup Bangladesh Limited, along with accelerator programs offered by private entities, has significantly improved access to financial resources for startups. These initiatives not only provide funding but also offer invaluable support, mentorship, and networking opportunities to nurture the startup scene in the country.

While Bangladesh has showcased remarkable resilience in the face of various challenges, the impact of the global economic downturn is undeniably felt within its startup community. The prevailing worldwide recession has presented significant hurdles in attracting foreign investment, especially in the realm of venture capital. In such a scenario, the survival and growth of startups in Bangladesh hinge on their ability to devise cost-effective innovations with a clear trajectory for scalability. Adopting a lean burn rate becomes crucial, as does assembling a strong team that drives positive unit economic growth on a month-over-month basis. These factors are pivotal in navigating the current landscape, securing fundraising opportunities, and ensuring the long-term sustainability of startups in Bangladesh.

Amidst the ongoing funding slowdown, Bangladeshi startups are tasked with weathering the storm and charting their course towards success. To navigate these challenging times, startups must proactively recalibrate their unit economics and maintain a keen focus on monitoring operating leverage ratios, ensuring their financial sustainability. It becomes crucial for startups to meticulously assess their runway before seeking external funding, ensuring they have sufficient resources to generate organic cash flow even in adverse circumstances. By conducting comprehensive risk assessments, encompassing industry dynamics, market trends, and product viability, startups can minimize potential shocks and proactively adapt to changes in the funding landscape. With a strategic approach and prudent financial management, Bangladeshi startups can overcome the funding challenges and pave the way for long-term growth and resilience.