In 2022, the startup ecosystem in Bangladesh experienced its fair share of highs and lows.
Insiders said that 2022 had its ups and downs, 2023 will be a crucial year as the global recession nears and support from all stakeholders will be crucial to sustaining the growth of the sector.
During the first half of 2022, Bangladeshi startups raised over $90 million, even landing the largest-ever pre-seed funding in the country's history in the same year.
The largest business-to-business (B2B) e-commerce platform in the country raised $65 million in June, while the largest B2C e-commerce platform in the country, 10 Minute School, earned $2 million in early funding from Surge, Sequoia Capital India's rapid scale-up program, in January.
10 Minute School became the first Bangladeshi EdTech startup to get funding from Surge as a result of the investment.
On the other hand, the edtech startup Shikho raised another $4 million in new seed funding in March, bringing its total round to $5.3 million, the largest seed funding a Bangladeshi startup has raised to date.
However, according to LightCastle BD, startup funding declined by 34% in Q3 of 2022 compared to the previous quarter.
Post-pandemic recovery, the Russia-Ukraine war, harvesting and production challenges, and supply-chain disruptions, that lead to economic downturns worldwide, had also slowed down the flow of investments to startups worldwide.
Despite global venture capital (VC) cutting down the flow of investments, local startups raised around $5 million over 16 deals, amid the fund crunch.
Dhaka-based agritech startup Agroshift, which helps farmers sell their produce to businesses and consumers by providing a tech-enabled supply chain, has raised $1.8 million in seed funding during Q3 of 2022, marking the country's largest-ever pre-seed round in the startup ecosystem.
Industry insiders said that the investments received during the fund crunch speak volumes for the local start-up sector as it was raised during the ongoing global economic downturn with VC cutting down on investment from the beginning of the second quarter of 2022.
Additionally, in 2022, the local startup ecosystem saw an increase in investments from local sources, as well as efforts of strengthened startup policy to facilitate ease of starting and operating startups, with streamlined regulations and requirements, to encourage investments towards startups through better incentives for investors.
The government already started to work on a proposed draft of regulations from last year.
As per the proposed draft, startups will have a specific duration after which a startup will be categorized as any other normal business organization. But prior to that, businesses will receive benefits under the startup category.
According to sources, policymakers are considering the duration to be 10 years.
Other than that, according to Hasan A Arif of Startup Bangladesh, the government has already taken several initiatives to increase the flow of investments in the startup sector with the Bangladesh Securities and Exchange Commission (BSEC) already drafting rules that will allow loss-making good startups to be listed on the country's stock exchanges and offer IPO.
“We are collaboratively trying to build a triangle relationship with two vital regulatory bodies which are Bangladesh Bank and NBR to promote foreign investment, venture capital and private equity firms in Bangladesh,” the BSEC commissioner Dr Shaikh Shamsuddin Ahmed said last year.
The government also proposed a reduction in turnover tax for startups to 0.1 % from 0.6% in the national budget for the financial year 2022-23.
The government also proposed exempting start-up businesses from the bindings of all other types of reporting except submitting income tax returns.
It also allowed start-up companies to set off and carry forward losses over a period of nine years.
Government sources also said that almost all the startups that the government has invested in through its Startup Bangladesh initiative successfully started operating on the Dhaka Stock Exchange with some startups starting preparation last year to get registered.
In regards to local investment in startups, Bangladesh's startup ecosystem also saw a rise in 2022, with brands like Robi, Huawei, GP and Banglalink among many others hosting programs that incubate and help startups develop.
Startup Bangladesh, the first and only venture capital fund sponsored by the government, started its journey in March 2020 with an allocated capital of Tk500 crore and also made several investments during the year in startups such as Bimafy, Shuttle, Pickaboo, etc.
However, during the same year, in the current fiscal budget, the government imposed a 5% VAT on online sales and deliveries and excessive import duties impeded the growth of the e-commerce sector, which is deeply connected to startups of the country.