Three early-stage Bangladeshi tech companies have secured funding from international backers as more investors are taking an interest in the country’s startup ecosystem, which for so long had relied on financing from local angel investors.
Dhaka-based agritech startup iFarmer has raised a seed funding of $450,000 from Singapore-based VC fund Accelerating Asia and angels from Singapore, Bangladesh and Indonesia.
The company, which provides farmers with access to finance, technology-driven advisory and access to premium markets for their produce, has developed a network of 5,000 smallholder farmers, says iFarmer co-founder and CEO Fahad Ifaz.
The fresh capital will be invested in hiring staff, onboarding more farmers to its platform and building a data-driven supply chain network for agriculture produce. The startup also intends to facilitate finance for other agriculture actors such as agri input retailers and traders through a proprietary credit scoring algorithm that could enable financial institutions (Banks, NBFIs, MFIs) to lend to farmers, agri MSMEs through its platform.
Another startup to have bagged new funding is cloud kitchen and food delivery player Kludio. The company, seen as the Rebel Foods of Bangladesh, recently closed its seed round at $400,000 from Myanmar VC firm BOD Tech Ventures, local investor Samad Miraly of Olympic Industries, and employees of tech giants Gojek and Uber.
According to co-founder and CEO Kishwar Hashemee, Kludio has built a considerable following and is now looking to disrupt the fast-growing food delivery (CAGR 80%) economy by taking over the consumer relationship through our direct to customer applications. Fuelled by the current funding and an upcoming pre-Series A round, he said the company is targeting expansion and increase revenue by up to 5X by 2021.
Similarly, truck booking marketplace platform TruckLagbe says it has secured a new pre-Series A from regional and international investors. While the startup declined to disclose the size of the round, it said that it was closed “at a significant premium to our last round” of $1.2 million, backed by Hong Kong’s Mount Parker Ventures and Aria Group.
A shift in investor perspective
The funding by these regional investors serves as a boost for the Bangladesh startup scene, which has seen a dearth in the access to capital. The country had witnessed investments from overseas investors into players like ride-sharing and logistics sector players Pathao, which bagged $12 million the likes of Gojek and Openspace, and Shohoz that raised $15 million from Golden Gate Ventures, among others. These, however, are major outliers.
According to a report by local consulting firm LightCastle Partners, over the years, the Bangladesh startup scene has been largely driven by the local angel market with the help of players like Bangladesh Angels, SBK Tech Ventures and Bangladesh Ventures. Angel networks, the report notes, have been working towards bringing together promising early-stage startups to and introduce them to serial entrepreneurs, tech executives and investors.
TruckLagbe CFO Ravid Chowdury, who was a former CFO at Pathao and handled the company’s capital raising, said overseas funding had been scarce in Bangladesh due to the nascent nature of the tech ecosystem, as well as other factors.
“Bangladesh was not a geographic focus for most funds thus any investments would fall under discretionary allocation, and there were very few first movers. Most international and regional VC investors I spoke to had never invested in or visited Bangladesh before. In addition, there remains a real Bangladesh stigma. You often hear about Bangladesh in the media in regards to floods and garment factories,” he said.
Now, he said, more investors are becoming increasingly appreciative of Bangladesh’s massive market of 170 million people, 8% GDP growth, stable currency, high internet penetration, and rapidly rising incomes set to surpass India on GDP per capita basis. Additionally, there has been a significant positive shift in the quality and maturity of start-up founders and management in recent years.
“Bangladesh offers immense opportunities for those comfortable with taking some risk,” says Craig Dixon, Co-Founder and General Partner at Singapore-based Accelerating Asia.
Dixon, whose firm has invested in iFarmer and automotive maintenance startup Zantrik, cites Asian Development Bank data, forecasting an 8 per cent average annual rate growth for Bangladesh, as well its high connectivity accounted for 93 million internet subscribers and 160 million mobile subscriptions.
He also identifies opportunities in the digitization of traditional industries such as logistics, manufacturing, and solving inefficiencies in service and product delivery (eCommerce, telehealth, edtech) and combinations of these like fintech/agritech.
“In some ways, Bangladesh resembled Indonesia 5-10 years ago. If we look at how far Indonesia tech has come during that era, it inspires confidence that Bangladesh can achieve something similar,” he said.
On Sequoia’s radar
According to data from the report by LightCastle Partners, Bangladeshi startups raised around $27 million in 2018, while Indian startups raised $4.2 billion in the same year. It argues that the huge discrepancy between the two markets with similar digital ecosystems can be partially answered by the difference in the number of startups, but the absence of an enabling environment is the pivotal reason behind the gap.
Sequoia, which has a significant presence and track record in India, believes that Bangladesh now has the user base that could enable building several large businesses. The market has started to show several interesting segments emerging in Bangladesh, such as e-commerce and food delivery, which is likely to attract even more investment interest in years to come.
Sequoia itself has invested in digital commerce startup ShopUp after the company was selected to take part in Sequoia’s accelerator program Surge. The VC firm says that it hopes to find more companies from the region, but would not be the only one doing so.
“Venture capital funding flows to the countries where there is the most potential – and there is no question that Bangladesh has significant long-term potential. The timing of the funding will really depend on the number of companies that emerge that are truly breakthrough,” says Sequoia Capital India managing partner Rajan Anandan.