08 Interesting Facts About Bangladesh’s Digital Entrepreneurial Ecosystem

08 Interesting Facts About Bangladesh’s Digital Entrepreneurial Ecosystem

Banglalink, one of the leading digital communications service providers in Bangladesh, has recently released a report titled “Digital Entrepreneurial Ecosystem in Bangladesh” with an ambition to help “creating a vibrant digital economy” in Bangladesh. You can learn more by downloading the entire whitepaper here.

The report, result of a collaborative effort of Banglalink, its holding company VEON and global management consulting firm A.T. Kearney, sheds light on a diverse set of interesting topics around and beyond what makes up the foundation of the digital entrepreneurial ecosystem in Bangladesh and offers a useful picture of the overall ecosystem.

Dhaka has a fast-growing digital ecosystem. An expanding consumer market fueled by a consistent economic growth, rising internet, and mobile phone penetration. A rapidly maturing support system for digital entrepreneurs and a young population with an open mindset towards technology hungry for growth.

It also explores challenges the ecosystem is facing such as a dearth of technology talents aka programmers. The absence of industry and academia collaboration that hurts talents and innovation. A challenging funding environment for the digital entrepreneurs that makes it difficult to build internet companies. A lack of local and global business knowledge hampering growth.

And finally offers useful observations on how Bangladesh can effectively deal with these challenges and build a world-class digital entrepreneurial ecosystem. Bangladesh’s economy has seen a fairly consistent growth over the last few decades. The report posits that now it’s essential for the country to shift its over-dependence on apparel and agriculture industry: “Bangladesh needs a vibrant digital ecosystem to diversify and strengthen its economy, boost exports, create jobs for its large population of young people, and improve public services, such as healthcare and education.”

Bangladesh’s technological development has a singular history, distinct from many other nations in the world. Particularly, development of Bangladesh’s consumer technology industry is basically a story of mobile and mobile-enabled innovations.

The 90s was the most important decade for the technology industry in Bangladesh, particularly concerning computer, connectivity, and mobile. The country first experienced dial-up internet in the early 90s. The Bangladesh Association of Software and Information Services (BASIS) was established in 1997 with 17 members. That was the first wave of technological evolution in Dhaka.

In the past few years, we have been seeing another wave of epochs of digital technology in Bangladesh. It is safe to say that the country is just getting started and the report agrees. It suggests “Bangladesh has considerable potential” of building a leading digital entrepreneurial ecosystem in Asia.

Jointly conducted by VEON, Banglalink’s parent company, and A.T. Kearney, the research report draws on insights from a diverse set of experts, academicians, startup founders, investors, and technology companies. It offers in-depth understanding of the state of digital ecosystem in Bangladesh and provides recommendations “for how Bangladesh can support its entrepreneurs and in doing so drive substantial socioeconomic benefits”.

Extracted from the report, here are 8 intriguing facts you should know about the digital entrepreneurial ecosystem in Bangladesh. You may download the full report from here.

1. About 200 digital startups launch each year in Bangladesh

Every year about 200 new startups enter the local business landscape in Bangladesh. There were about 1,000 digital startups by the end of 2016 when the survey for the report was still going on. [It is important to note here that, things have changed over the past one year. The number of startups launching every year has gone significantly up.]

A third of these startups are, in fact, small service providers doing business in consumer products, mobile applications, and e-commerce, ride-hailing, logistics, and web services. Many of the internet companies are trying to replicate business models that worked in some other parts of the world with local contextualization.

The number of product-oriented companies is relatively slim. And most companies do not possess sufficient resources to scale. Similarly, a lack of seed funding options, support network, limited local market potential, oversees scaling challenge hurt the progress of digital startups.

The key challenge for digital entrepreneurs in Bangladesh, the report indicates, is to create product companies and make them sustainable.

Banglalink's Digital Entrepreneurial Ecosystem In Bangladesh Report

Figure 03 | Banglalink’s Digital Entrepreneurial Ecosystem In Bangladesh Report

2. A growing support network meets consistent positive government actions

Over the past couple of years, we have seen a steep growth of support network for digital startups. A growing number of incubators, accelerators, and mentorship programs, are now available that provide meaningful support to digital entrepreneurs. Dhaka has also seen a meaningful growth in the number of co-working spaces.

Bangladesh Government’s ICT Division has also launched a handful of initiatives such a venture fund competitions and several programs to support startups.

There are over 10 annual competitions, conferences, and hackathons, which provide assistance in idea generation, networking, and public relations opportunities.

Banglalink has also launched a program in collaboration with the ICT Division of the government where startups receive a variety of supports starting from free workspace to mentorship to access to market facilities.

3. 80 percent of the digital startups target only domestic market

Many successful startup ecosystems in the world where local market opportunity is relatively small such as Estonia, Israel, Sweden have helped build startups that create products for the global market. The advantage: you have a huge ready market and sky’s the limit.

The scenario in Bangladesh, however, is different. According to the report, almost 80% of the digital startups that launch every year target domestic market which reduces their chance of success and scale.

There are solid reasons behind this reality. A large number of digital startups lack sustainable and innovative business model that can scale. The lack of seed funding and other support structure make it difficult for the companies to invest in product development and growth.

Digital entrepreneurs should focus more on building products and services that can solve critical local problems and also compete globally, the report suggests.

Figure 04| Banglalink's Digital Entrepreneurial Ecosystem In Bangladesh Report

Figure 04| Banglalink’s Digital Entrepreneurial Ecosystem In Bangladesh Report

4. Anemic academia-industry collaboration hurts everyone and higher education’s support to building a strong digital ecosystem is insufficient

Meaningful contribution from academia is an imperative for building a strong digital entrepreneurial ecosystem for several reasons: 1) academia supplies the talent that leads early-stage companies 2) many founders receive their foundational training for building companies from universities 3) similarly universities play an important role in creating knowledge and building theories that help entrepreneurs to find paths.

While Universities play a central role in entrepreneurial ecosystem in many parts of the world including the Silicon Valley, the scenario is relatively dismal in Bangladesh.

A significant percent of entrepreneurs participated in the study said that “universities do not support a spirit of collaboration and entrepreneurship. Furthermore, a lack of understanding of the business landscape and limited business acumen is holding back first-time entrepreneurs, who complain that universities do not provide efficient business courses or sufficient support for entrepreneurship.”

It also indicates that there is a shortage of faculties who can make a meaningful impact in the lives of students with regard to entrepreneurship.

Having said that, everything is not as bleak as it may sound. Positive changes are also happening. The Bangladesh Government has launched multiple initiatives around training teachers, and postgraduate students and creating lab facilities that can ensure better learning environment.

Figure 09 | Banglalink's Digital Entrepreneurial Ecosystem In Bangladesh Report

Figure 09 | Banglalink’s Digital Entrepreneurial Ecosystem In Bangladesh Report

5. Software developers are a scarce thing in Dhaka

One the criteria many leading incubator programs around the world use for deciding which market to enter is the availability of programming talents in those markets.

For instance, Y Combinator, the Silicon Valley-based prestigious startup incubator, takes the availability of technology talents before entering a market seriously. While YC routinely comes to India for scouting startups, it seldom pays attention to Dhaka. This applies to many other technology investors as well.

The report also suggests the same that limited availability of technology talents hurts the growth of digital entrepreneurial ecosystem in Bangladesh.

There is an intense competition for good technical talents in Dhaka. Often it is hard to find and the retain one. When you are talking about digital startup, technology talent is one of the most important resources. As mentioned in the earlier point, “there are only about 45,000 software developers in Bangladesh, meaning only three out of every 10,000 people are skilled in IT compared to 17 in India.”

Experts indicate that the outdated university curriculums and an absence of academia and industry collaboration contribute to this challenge.

It’s evident from recent statistics that there exists little collaboration between the tertiary education sector and business. This lack of affiliation, in turn, creates a huge gap between the quality of the graduates and industry expectations.

Only half of the 90 private universities and a few among the 70 public universities currently offer IT courses. And many of these courses suffer from an outmoded curriculum and a shortage of qualified instructors. As long as universities are crippled by these problems, they can’t be hoped to meet the industry expectations.

Redesigning business courses to better match the technological advancement of this time, increasing interaction between academia and business and promoting technology education are a couple of things that can help the industry.

6. Digital continues to gain momentum, thanks to mobile

Past few years have seen a tremendous growth in internet and mobile phone penetration in Bangladesh. Smartphone penetration has reached over 30%. It has given way to a host of new generations services. A growing number of people now receive their services digitally.

We have seen the growth of a host of digital services including ecommerce, ride-hailing, video streaming, digital media and many others on the back of internet and mobile.

The market has a huge potential going forward if you take facts like mobile and broadband penetration, economic growth, growing disposable income and so on.

Figure 07 | Banglalink's Digital Entrepreneurial Ecosystem In Bangladesh Report

Figure 07 | Banglalink’s Digital Entrepreneurial Ecosystem In Bangladesh Report | Click to learn more

7. Improving regulatory and legal environment supports the growth of the digital ecosystem

With the establishment of 30,000 e-learning labs and 5,275 Union Digital Centers in rural areas, and the introduction of 4G services, the government’s intention to promote ICT education is quite evident.

However, it has yet to address a number of regulatory and legal issues that deter investments, such as the ban on Bangladesh-based companies financing overseas subsidiaries.

It can boost the growth of the digital economy by formulating effective policies to tackle such issues and providing regulatory advantages (e.g.. tax benefits) to new companies.

8. Shortage of venture funding remains a defining challenge for startups

One of the biggest challenges for the local startups is limited access to investors. Internet startups require significant upfront investment to build the product and fuel growth. A total of 18 publicly disclosed venture capital investments have been made since 2012 that amount to US$68 million only (2016 Data).

Most of these funds were invested in e-retailing and e-finance startups. If the local private equity and VC firms focus more on seed funding, more startups can hope to gain access to investments.

The situation has improved a lot over the past few years. The Government has approved alternative investment policy. A handful of new venture capital firms launched in Dhaka. A growing number of international players are also taking Dhaka market seriously. However, early stage seed investment remains a challenge which venture capital firms and other ecosystem players should pay attention to.

While this article tries to cover some of the most interesting facts from the report, it remains an intellectually satisfying read in its entirety. It provides an in-depth analysis of the state of the digital entrepreneurial ecosystem in Bangladesh.

The report can be an excellent source for developing an understanding about the current state of the union in Bangladesh, albeit about the digital entrepreneurial ecosystem, while also helping you to see a path forward for the industry.

You may download the full report here.

Cover photo credit: Digital Entrepreneurial Ecosystem in Bangladesh here

(Disclosure: this is an editorially independent branded content prepared by Storylab, Future Startup’s in-house branded content studio, in collaboration with Banglalink Digital’s CR Team. FS editorial team did not take part in the process.)

Note: Words by Rahatil Ashekan and Shabiba Benta Habib and edited by Ruhul Kader

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