Start-ups in fight for survival

The scenario of start-ups in Bangladesh

Delivery service provider ‘Paperfly’ was thriving in business, in particular during the pandemic. However, the company halted its activities citing fund-crisis last October. However, they re-launched activities on a limited scale in November.

Other than Paperfly, many other start-up companies are also struggling to continue business. Some of them are trying to return after halting the business for a long time while many could not make the comeback.

People’s movement outside reduced greatly during the coronavirus pandemic, which skyrocketed the demand for online delivery services. As a result, the start-up market was booming at the time of the pandemic.

However, the demand for online delivery services fell as people returned to normal life following the end of the coronavirus pandemic. As a result, a number of start-ups faced multifaceted crises.

At the same time, several start-ups closed down their activities during the pandemic. They could not make any comeback.

Prothom Alo spoke to three start-up entrepreneurs and two other relevant persons. They all cited the investment crisis as the main reason behind the collapse in the start-up sector.

They say the amount of investments in the start-up sector is declining all over the world. It also has an impact in Bangladesh. Besides, there are several other problems in this sector, including lack of independent business model, lack of understanding of markets and not being able to properly use the fund.

More than 61 per cent of the total investment on start-ups has come in the ‘fintech’ (financial technology) sector.

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The impact of the pandemic

The idea of start-ups started getting popular from 2013. The investments for this sector, especially foreign investments, increased rapidly following the outbreak of the coronavirus pandemic in 2020. At the same time, some local initiatives also came forward with investments. As a result, the start-up market started expanding.

People's lives were almost confined within four walls during the pandemic, which led to the emergence of technology based start-ups in the market to provide services at home. It was an instant success for many of these new start-ups. Many of the old start-ups also saw progress at the time. However, the demand for these services dwindled following people’s return to normalcy. In addition, several financial crises, including inflation and the dollar crisis, emerged as an impact of the Russia-Ukraine war.

The REDX Delivery, which was launched during the coronavirus pandemic, gained popularity within a very short time. However, the company had to limit its operations after two years for not getting expected investments. The company has already laid off some of its employees.

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Another start-up named Jobike became quite popular with its campus-based bicycle service. The company started providing services in several top universities of the country, upscale areas in the capital and Cox’s Bazar before the outbreak of the pandemic. The company became non-existent after the outbreak of the coronavirus.

Many of the former employees blamed some of the internal policies of the committee apart from the investment-related challenges behind its failure. Salary-allowances of many of the employees are still pending, they say.

Speaking to Prothom Alo, Jobike chief executive officer (CEO) Mehedi Reza said, “People’s movement reduced greatly during the pandemic. All the universities were closed down. As a result, we had to close our operations. And the bicycles went out of order in this gap of pandemic. However, we want to restart after Eid.”

Investments dwindling

Local consultancy agency LightCastle Partners published reports and observations on the start-up sector on a regular basis. According to their reports, there are some 2,500 active start-ups in Bangladesh. Around 1.5 million people work in this sector.

A total of USD 967 million has been invested in the start-up sector so far since its inception in the country. Some USD 887 million of them came from foreign investors. And 66 per cent of the total investments came during or after the pandemic in the last four years.

According to the Bangladesh Start-up Investment Report-2023 published by the LightCastle, some USD 72 million was invested in the start-up sector last year, which was 42 per cent less than that was in the previous year.

The amount of investment was around USD 110 million in 2022 and USD 410 million in 2021, which is the highest amount of investment in a year in this sector. The amount of local investments in this sector has always been low. Some 63 per cent of the total investments in this sector came from abroad.

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The Startup Bangladesh Limited under the Information and Technology Division of the government has invested a total of Tk 765 million in 30 start-ups so far. The Bangladesh Computer Council (BCC) has invested a little less than USD 260 million in some 385 start-ups through its project named ‘Idea’.

Startup Bangladesh Limited managing director Sami Ahmed told Prothom Alo, “Usually the big corporate groups invest in the start-ups in other countries. Bangladesh lacks that. However, we provide assistance to struggling start-up companies based on their market value.

However, several persons relevant to the start-up sectors say Bangladesh lacks an investment-friendly environment. Besides, the young entrepreneurs take too much risk nowadays. They are more focused on enhancing market and company image than developing a sustainable model. If they fail to make profit or make the most of the investments, they walk down the path of lay off.

Failure to capture the market

Hungrynaki was the first food delivery service of the country. However, it could not survive. E-commerce agency Daraz purchased Hungrynaki from local entrepreneurs saying that they will spread the business across the country. However, the service doesn’t exist anymore.

According to experts, only the start-ups that succeeded to grab customers from among the middle and lower class people are doing well. For instance, the service provided by the bkash is also suitable for low income people. At the same time, companies like ShopUp, which has a grocery shop based business model, also succeeded in grabbing the low and lower-middle-class customers.

Startup Bangladesh CEO Sami Ahmed most of the start-up related ideas are e-commerce or retail market based. The ideas related to deep technologies (artificial intelligence, biotechnology, robotics, drones, quantum computing and so on).

E-commerce company AjkerDeal founder Fahim Mashrur told Prothom Alo that the e-commerce market is not that big as yet. But it suddenly boomed during the pandemic. However, people returned to normal life after the end of the pandemic. So those who started business based on needs during the pandemic are now realising the true nature of the market in Bangladesh.

* This report appeared on the print and online versions of Prothom Alo and has been rewritten in English by Ashish Basu