In a brief telephone interview, The Business Standard's Masum Billah catches up with Sajid Amit, Associate Professor, ULAB, and Richard Hofstadter Faculty Fellow at Columbia University, 2005-2007, on his views on startups in Bangladesh. Sajid Amit is also Director, Executive MBA Program at ULAB, and Director, Center for Enterprise and Society. He is a stakeholder in the Bangladesh startup ecosystem, having brokered deals and invested in early-stage startups in various sectors. He is also an executive committee member of Digital Finance Forum Bangladesh and Country Ambassador, Bangladesh, for the World Innovation Forum.
1. What are your views on the startup ecosystem in Bangladesh? How does it compare with our neighbors?
Well, it's certainly an interesting ecosystem, but at the same time, it's not without its areas for development. If I compare it with neighboring countries like Myanmar and India, it's certainly not as large in revenue and investment generation, as I think it has the potential to be. Granted India is 9 times larger than us, in pure GDP numbers, but when you consider that they have 27 unicorns, and we have only 1 - if you count bKash as a unicorn - then you have to wonder. Yes, I understand their market is larger, so it's easier for companies to grow, but having lived and worked in India for 3 years, and interacted with their ecosystem, I think there are structural differences in India's favor that appear to incentivize entrepreneurship far more.
To elaborate on this point, the average Indian family is just as conservative as in Bangladesh, with parents equating a stable job with marital prospects and having a "well-established" life, but slowly but surely startups have made a significant dent in the psyche of the Indian middle class. Their media has had a lot to do with it, as has their universities.
Their universities had a lot to do with it. Their IITs and IIMs have, for decades, produced serious entrepreneurs as well as CEOs at leading Indian conglomerates. Our top universities, whether engineering or business, have focused more squarely on creating executives rather than entrepreneurs. This is beginning to change. I know a lot of IBA graduates who are running successful startups, but this could have happened 10 years ago, if not more. Slowly but surely, many BUET graduates are also doing well in the startup space, but again, a lot of this could have been inspired much earlier by forward-thinking academics and administrators.
Although ULAB is a relatively young university, we have attempted to create a favorable ecosystem for entrepreneurship early on in our growth trajectory, and we hope this will begin to pay off dividends in the next few years. I think it's important that entrepreneurship be promoted at the university-level so there is acceptance in middle class households, and, gradually, the larger society.
If you look at the US, even children are encouraged to partake of entrepreneurship, whereas here, I think, we still struggle with negative associations of businessmen and industrialists, and by extension entrepreneurship, as too risky at best, and fraught with corruption and greed at worst.
Of course, you will have negatives with any profession, but you have to appreciate the good, if you are calling out the bad.
2. How has COVID impacted our startups?
Just to balance some of the things I said in response to your earlier question, there are lots of positives with the startup ecosystem in Bangladesh. You take the news of ShopUp's big raise, around $22 million, at a time of COVID. This is a startup founded by IBA alumni, and what this does is encourage more IBA graduates, and gradually graduates of BRAC, ULAB and East West to actively consider startup entrepreneurship as a career.
It's also heartening to see our largest startup bKash innovate successfully and repeatedly throughout COVID, and critical regulatory changes that have made using bKash easier. The Bangladesh Bank has been relatively open-minded about encouraging fintech all through COVID, so that has to be appreciated. Meanwhile, challengers like Nagad have also grown and are fast becoming household names.
Meanwhile, our leading local ridesharing startup Pathao also appears to have braced COVID well. In a recent conversation with their leadership, I learned some of their verticals have returned to profitability, which is quite impressive for a startup that appears to have inspired many others.
E-commerce is a mixed bag in Bangladesh. Facebook commerce appears to be doing relatively well despite COVID. In fact, probably as a result of COVID, we now have more entrepreneurs who use Facebook to transact, than ever before, which seems to have gone in ShopUp's favor, leading to their recent raise. But it's great for the entrepreneurs who can now make a living off Facebook. Beyond Facebook, e-commerce platforms like Daraz and eValley have had their struggles as well as opportunities. eValley's struggles are well-known, of course.
In general, for website or app-based e-commerce companies, ensuring quality control at the merchant end has been a huge issue. I think we will see more policy support for e-commerce in the coming months, because the sector is not where it can be, both with regard to ticket sizes of average transactions, as well as number of transactions per month. These are sectors in which if people have poor first impressions, they are likely to harbor reluctance to use that platform's service for a long time, so the platform's early days are critical.
However, COVID has wreaked havoc for several smaller startups. I know even midsize startups that are relatively well-known that are hanging on existentially speaking, by massively cutting spending during COVID, and COVID has exposed their weaknesses. Many founders have shut shop and joined the workforce as salaried professionals.
So it's a mixed bag, the impact of COVID on startups, but I have to say that startups that survive it will thrive in the future, by being stronger and fitter.
3. Where do you think our startup ecosystem will be 5-10 years from now?
Predictions are never completely correct, but foreseeably, I think we will see a lot of growth in the fintech space with the likes of bKash and Nagad offering a rich portfolio of services; more banks using technology to underwrite loans; more fintech services offered by platforms whose primary business is not fintech, whether it's a Pathao or an Uber. The growth of fintech has been slow but steady, but holds promise, given that the Bangladesh Bank appears to be serious about exploring the potential of digital finance, as is the ICT Ministry. Beyond fintech, I would love to see a locally grown ride sharing startup grow to the point that it can raise public equity from the capital markets, which would be huge. But of course, for that to happen, structural changes in the capital markets need to continue, already set in place by the current leadership, which is very progressive. I think we will also have lots of apps being deployed by individual companies to sell their wares. These will be better locally-made apps that we will be happily downloading and using, as 5G kicks in. Of course, there will be more IoT-based startups in an area of 5G, and our telecom operators' data revenue will continue to scale. I also hope to see more successful incubation projects being run by our telecom companies and also other stakeholders. Some overseas collaboration in the running of incubation projects is always helpful, since knowledge and experience sharing is critical, as evidenced in my recent experience with the Founder Institute Bangladesh.
4. Any last comment or thought about the startup ecosystem?
There is this romantic image of young minds congregating in co-working spaces, figuring out what industry to disrupt, what value chain to optimize or what social problem to solve, using faster internet speeds which enable connectivities between buyers, sellers and middlemen. This is supposed to be the heart of any startup ecosystem. Of course, we have fragments of this scattered throughout Bangladesh, but I hope to see more investments in this area.
I also hope to see more investments into startups by established and conventional businesses and entrepreneurs, especially in overlapping sectors, because that has worked well in other countries, and has begun to happen in Bangladesh.
English medium schools which have more liberty to innovate with their curriculum and extracurricular activities ought to also consider ways to encourage an understanding of startups, especially in grades 10-12, if not earlier.
Last but not least, universities ought to find ways to connect external resources in the startup world with their students, so that more students actively consider entrepreneurship as a career. We definitely need more job creators and not just job seekers, if Bangladesh is to continue its remarkable growth journey, which I believe it will.