Bangladesh's maturing start-up ecosystem is attracting not just Bangladeshi investors and venture capital firms, but those from around the globe as well.
In the world of start-ups, good investors provide not just the necessary finance, but guidance and know-how as well. In fact, in a country lacking the necessary institutions to equip an entrepreneur with knowledge and experience, the latter can be more important.
With this in mind, the country's first network of investors – Bangladesh Angels Network (BAN), was established in 2018.
"The best way of growing the start-up ecosystem is not just by pooling financial resources but also the intellectual resources of people who can help start-ups to get investment, guide them for 3-5 years and help grow them," said Nirjhor Rahman, CEO of Bangladesh Angel Network (BAN), during an interview with The Business Standard.
Creating a culture around start-up investing and advising was not easy. Nirjhor, who spent most of his life in the US, came back in 2014 to see how he could contribute to Bangladesh. He began with the social enterprise sector, then branched out to social business accelerators where he enjoyed working with entrepreneurs.
"Some of them were doing quite well but needed more capital and advice to take their business to the next level." Not sure how to help them, Nirjhor began conversing with leaders of the start-up ecosystem, who had the same idea and were working to launch the first angel investment network in the country.
"I was lucky they offered me the chance to be the CEO and that is how it all started," Nirjhor expressed his gratitude. Now, BAN has around 65 members of which, 60-70% are based in Bangladesh.
BAN board members have been volunteering their time to guide start-ups that can offer quality products or services, have dedicated team members, a proper revenue model, and a unique value proposition that can easily raise funds within the circle of investors. The most important factor, however, is finding the right founder.
From BAN's perspective, the right founder can find the right business with nimbleness and flexibility that only comes from someone who is resilient, passionate, coachable, willing to see the head wins, understand where to make adjustments, and be able to communicate that as well.
BAN looks for companies at the pre-seed round and "it is kind of expected that whatever business model is being presented, within 12 months' time, it could turn out to be a very different business model or that there could be changes
"A start-up is generally a hypothesis and the right founder can change a hypothesis very quickly based on their ability to turn a dime, lead people, stakeholders, etc," said Nirjhor. BAN looks for companies at the pre-seed round and "it is kind of expected that whatever business model is being presented, within 12 months' time, it could turn out to be a very different business model or that there could be changes."
The Covid-19 pandemic has been equivalent to a bullet train hitting economies and business ecosystems. But it has also shaped the start-up ecosystem of Bangladesh, "The pandemic has made founders realistic about expectations, pushed them to exercise their leadership skills and try to pull their companies out from failing."
Not every company will survive the blow of Covid-19, almost 60 percent of start-ups were on the verge of a shut-down, but the ones that survive this pandemic will become much stronger than before. According to BAN, there are two types of companies that they are excited about, "First, are ones that see traction because of Covid-19, like food delivery and online restaurants that are becoming more efficient with fewer people."
As people are migrating to online education rapidly - BAN sees a lot of opportunities in the education sector as well, Nirjhor mentioned, "We have invested in two start-ups and are currently looking into other EduTech star-ups. Situations like these create opportunities for companies to expand their footprint, sign-up more users, retain them, and then hopefully, monetise them."
One such example is telemedicine - which has certainly become very common and widely adopted.
BAN has taken the pandemic as a blessing in disguise. Now, instead of being a Bangladesh focused network, they are expanding footprint not only locally but globally as well. "We have members from Australia, Singapore, and affiliates from the Middle East, Europe, UK, Canada, and the USA. The pandemic has allowed us to reach a much greater audience."
We have members from Australia, Singapore, and affiliates from the Middle East, Europe, UK, Canada, and the USA. The pandemic has allowed us to reach a much greater audience
BAN themselves faced challenges due to the changing situation, "March was very difficult, the pandemic changed our model in certain ways." In Nirjhor's opinion, he thought Bangladeshis are still sceptical about doing things online especially when it comes to investing in a company.
With every aspect of BAN moving online, instead of just showcasing start-ups to investors, they are also carrying out digital learning sessions where people can learn from each other about the global market. Nirjhor believes that mentorship, professional and technical support, are as important as financial support for start-ups.
To take starts-ups to the next level, mentors are actively getting involved with the business activities. "This is why BAN exists, our motto is to connect entrepreneurs with smart capital. It is finance that comes with strategic advice, and certain expectations around becoming more professional in your business," remarked Nirjhor.
For start-ups, investment is one of the most important factors needed to sustain in a competitive market. Even when start-ups receive funding from venture capital firms, 25-30 percent of the venture-backed businesses end up failing, according to the National Venture Capital Association of the USA.
Out of many reasons behind start-ups' failure, the most common ones are - lack of product-market need, not the right team, and competition depicts a CB Insights' analysis.
"There are a lot of externalities when it comes to starting a business - you have an idea; put together a group of people who start working on it. In the beginning, founders work part-time but we really like to come in when the founders have settled their affairs and are committed to their idea full-time," said Nirjhor.
BAN believes that starting up a company needs full-time attention. It is easy to put money into a venture but the challenge lies in sustaining it.
BAN is a non-profit company, and they exist for the benefit of the ecosystem. They do charge membership fees for funds raised for start-ups. But the revenue stays within the company so that it can sustain itself in the long run and serve more companies.