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Why do investors prefer start-ups in India, Pakistan over Bangladesh?

Khan_21

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Why do investors prefer start-ups in India, Pakistan over Bangladesh?​

Bangladeshi start-ups raised $165 million in 2021, whereas Indian counterparts raised $38 billion and Pakistani ones raised more than $350 million





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Zisan Bin Liaquat
March 27, 2022 10:50 AM
Bangladesh has been consistently outperforming neighbouring India and Pakistan on various economic indicators, and its start-up scene — propelled by the government’s Digital Bangladesh vision — is growing at a breakneck speed.
And yet when it comes to raising funds from venture capitalists (VCs), the Bangladeshi start-up sector is dwarfed by those in neighbouring countries.
Bangladesh received over $750 million in foreign investment for start-ups in the last decade, raising the highest $165 million in 2021.
In that same year, Indian start-ups raised $42 billion, according to a report by Orios Venture Partners. And in Pakistan, whose start-up sector is still at a rudimentary stage, the companies raised more than $350 million, according to Pakistani consultancy firm Invest2Innovate.
According to industry experts and insiders, the narrative of Bangladesh in the global arena has been a major barrier to raising funds as most global investors do not know that Bangladesh has more to offer than just cheap labour and goods.
“Our storytelling needs to be better,” says Rahat Ahmed, the founder of Anchorless Bangladesh — a New York-based early-stage venture investment fund focused on advancing the Bangladeshi start-up ecosystem through access to global resources.
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“As a country, we don’t often understand the criteria foreign investors look for in private investments, including deal structure and founder mentality. However, it's definitely starting to get better,” he told Dhaka Tribune.
Apart from the lack of creating a compelling story for big ticket investors, including foreign angels and VCs who can literally invest their capital anywhere, there are several other bottlenecks.
“Some of the lingering challenges include a lack of liquidity, including follow-on funds, a growing need for more product development and management expertise other than creating a compelling story and proposition,” Nirjhor Rahman, the CEO of Bangladesh Angels explains.
He pointed out that in neighbouring markets such as India and Pakistan, there is a flourishing industry of domestic venture capital, particularly in the early stages within the fundraising value chain, often affiliated with local corporations and family offices.
However, despite Bangladeshi corporations and financial institutions turning towards start-ups for potential investment, they are still cutting relatively small — $250,000-500,000 — cheques.
“If we can create more domestic liquidity, more and more start-ups in Bangladesh can start scaling and get to Series A, B and C, and more foreign investors will start looking at Bangladeshi start-ups, because their minimum cheques are much larger and range in the millions of dollars,” Rahman said.
Rahat Ahmed also believes the lack of consistent and appropriately structured local funding is one of the single biggest weaknesses that has limited the development of the ecosystem.
“In comparison, our regional peers in India, Indonesia and Pakistan have benefitted from local corporations and angels playing a critical role in the early development and future funding of start-ups. Not only does Bangladesh need more such investors, but we also need them to invest in a manner so that founders can raise future rounds of funding abroad to scale their businesses,” he explained.
Bangladeshi tech start-ups have also been slacking in terms of fundraising compared to their neighbours because of certain policy bottlenecks, which unless resolved, will not attract foreign investors at a greater scale and with more significant sums.
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“First, we need to recognize that foreign investors will prefer indirect investments via holding entities in Singapore, or US, versus investing directly into a legal entity in Bangladesh. From that perspective, we need to allow Bangladeshi start-ups to legally create offshore entities to receive investments, with the goal of bringing them back to Bangladesh for operations,” Nirjhor Rahman said.
“We also need to allow for cross-shareholding, where local investors should be able to own shares in those foreign holding entities alongside foreign investors, even if they invest money locally,” he added.
Rahman also noted that there is still a lot of ambiguity and lack of case studies regarding successful repatriation of capital — be it dividends or share sales — in privately-held Bangladeshi companies.
“Without that, foreigners will feel uneasy because they are not fully sure how their money will be returned,” he added.
Local start-ups that pitch for foreign investment also face barriers that have been holding Bangladesh from keeping up with neighbours.
“When we are trying to look for foreign investors, the “sloth” regulatory process becomes a big issue that acts against the interest of investors,” a top official of MyCash told Dhaka Tribune.
“Suppose we are planning to launch our product by June, but our papers aren't ready yet because the whole process is very slow. If we say we could not launch in time, our investors will naturally shy away from investing anything,” he added.
Nazmul Arefin, the CEO of parenting services start-up ToguMogu, on the other hand, says that there is a lack of data, and such resources are very crucial in attracting foreign investors through an empirical projection that is realistic.
“When an investor looks for insights such as the size of a certain market, we hardly have any data to back our claim of its potential for growth. We cannot prove to them why our start-up has the potential to become a unicorn like bKash as we do not have enough data on unconventional or latent markets,” he said.
Bangladesh also needs to pick up pace on adapting the trend of reverse brain drain like India and Pakistan, which helped out their start-up ecosystems immensely.
Bangladeshi alumni of global tech companies who have made an impact in the West or in the local scenario need to reconnect with the local community to help them flourish through mentorship and investment, industry insiders say.
This has been the case for start-up GreenGrocery.
Green Grocery received angel investments by a group of young investors, led by M Asif Rahman, founder of ARCom and WPDeveloper.
Noor-E-Saba, co-founder and director of Marketing and Customer Service at GreenGrocery, said that unlike other similar start-ups that had faced several barriers in landing investments from foreign sources, it has been able to raise funds without much hassle as it was being backed by a veteran.
 

UKBengali

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BD and Pakistan difference is insignificant here.

350 million US dollars to 165 million is neither here or now.

India is the one that is really doing well at 38 billion US dollars.

I think the major reason is that BD is still in LDC category and once it graduates out of that then it will get significantly more money from venture capitalists. BD still has a bit of an image problem from LDC status.


PS - Written by a Pakistani and hence overexaggerating Pakistan compared to BD.
 

Khan_21

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BD and Pakistan difference is insignificant here.

350 million US dollars to 165 million is neither here or now.

India is the one that is really doing well at 38 billion US dollars.

I think the major reason is that BD is still in LDC category and once it graduates out of that then it will get significantly more money from venture capitalists. BD still has a bit of an image problem from LDC status.


PS - Written by a Pakistani and hence overexaggerating Pakistan compared to BD.

Pakistan is getting $700 million this year that will almost be 3X of BD. Alot of factors at play here:

1) BD is still known for producing garments. There has been numerous international coverage about PK being the next big thing for startups. Has been covered by bloomberg ,Nikkei etc etc.

2) Ease of doing business. PK has significantly improved here and is about 50 positions ahead of BD.

3) Establishment of special zones for startups. Credit has to go to IK for putting PK on the map for startups. We are all set to get out first unicorn.

4) Its written by a bengali who was my classmate. Notice the name "zisan" in PK we use Zeeshan and not ""zisan"
 

Protest_again

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Lol. Do you really think that the world (of investors) believe their trumped up per capita numbers? Potential of that country as perceived by the world is represented by their FDI and stock market investments. Bangladesh significantly lack in both.
 

Bilal9

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He is a reporter for the Dhaka Tribune. Just having a Muslim name doesn't mean the guy is Pakistani.

I had harsh comments, but starting to feel sorry for some of these blowhard people @Khan_21 . :lol:

Too much shilling for Hasina and AL.

All this said - I've known plenty of people in Bangladesh (both men and women) named Zeeshan though. Zisan is unusual spelling.
 

Splurgenxs

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Pakistan and Bangladesh are the same from where im looking.

It is all in the eco system(this includes minds that support or disrupt high tech ,or manufacturing ability that can increase gross margins for the investor) , supply chain , perceived stability, and trust in the institutions to protect there interests.

If you are perceived to be irrational illiterates ,you will get that treatment.
India in actively projecting BD to be doing good, which will result in more investments.

No matter what bs ppl like to peddle on this forum the results are in the data.
You can directly infer the perception people have on countries by where they are looking to put there money into. (The most self serving instinct on the planet).
You can always trust a man to serve his own interests. The facts lie in the stats.

Why does china do better than India? much more robust supply chain and commodities ecosystem including negligible land acquisition time, on top they dont let any negative news go out. I don't need to say more.

It all falls in the category of 'ease of doing business'.
 
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UKBengali

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India in actively projecting BD to be doing good, which will result in more investments.

No matter what bs ppl like to peddle on this forum the results are in the data.
You can directly infer the perception people have on countries by where they are looking to put there money into. (The most self serving instinct on the planet).
You can always trust a man to serve his own interests. The facts lie in the stats.

Why does china do better than India? much more robust supply china and commodities ecosystem including negligible land acquisition time, on top they dont let any negative news go out. I don't need to say more.

It all falls in the category of 'ease of doing business'.



I agree both Pakistan and BD are equally bad in this area.

No idea why thread starter thinks Pakistan is significantly ahead with just 2x more per capita funding.


India by contrast gets 30x more per capita funding than BD.
 

UKBengali

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@Splurgenxs

Not only will India assist BD in this field but the two countries are actively co-operating to have complementary economies.

I am afraid that the thread starter has no idea how the India-BD economic partnership will totally and utterly change the economic landscape of S Asia.
 

N.Siddiqui

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No idea why thread starter thinks Pakistan is significantly ahead with just 2x more per capita funding.


Pakistan is getting $700 million this year that will almost be 3X of BD. Alot of factors at play here:

Just the other day you were bragging about a 20% i.e 0.2 times more home appliances sales in BD over Pak, how conveniently you cherry picks and chest thumps which is too obvious.
 
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UKBengali

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Pakistan is getting $700 million this year that will almost be 3X of BD. Alot of factors at play here:

Just the other day you were bragging about a 20% i.e 0.2 times more home appliances sales in BD over Pak, how conveniently you cherry picks and chest thumps which too obvious.


Why do you not wait for BD's figues for this year as it has not been puslished yet?

Don't jump to conclusions please.
 

Splurgenxs

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Not only will India assist BD in this field but the two countries are actively co-operating to have complementary economies.

I am afraid that the thread starter has no idea how the India-BD economic partnership will totally and utterly change the economic landscape of S Asia.
This whole region could stand to improve , only if we could give up on our beloved fairy tales.
The very fact that these fairy tales are pitted against each other locally and globally , defines the perception also if a person will find his investments safe within a community.
 

UKBengali

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This whole region could stand to improve , only if we could give up on our beloved fairy tales.
The very fact that these fairy tales are pitted against each other locally and globally , defines the perception also if a person will find his investments safe within a community.


India and BD have realised the folly of their previous ways and have formed a partnership now that will also pull Nepal and Bhutan up with them.

Not sure what Pakistan's plan is at this moment.
 

Protest_again

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I agree both Pakistan and BD are equally bad in this area.

No idea why thread starter thinks Pakistan is significantly ahead with just 2x more per capita funding.


India by contrast gets 30x more per capita funding than BD.
You got your math wrong. It's 250 times Bangladesh. I hope the economic superpower of South Asia forgive us.
 

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