Sami Ahmed is the Managing Director of Startup Bangladesh Limited, a Government of Bangladesh-funded VC firm, actively backing local startups. Prior to joining Startup Bangladesh, Mr. Ahmed was the Policy Advisor of the Leveraging ICT for Growth and Employment of the IT-ITES Industry (LICT-2) Project of the Bangladesh Computer Council, ICT Division. Before that, he was the Executive Director of the Bangladesh Association for Software and Information Services (BASIS) and was instrumental in many policy reforms for the Industry and in organizing key ICT events in the country. Mr. Ahmed also worked at the a2i Project of the Prime Minister’s Office where he was part of many national initiatives under the Digital Bangladesh platform and played several roles including leading the Innovation team.
In this second part of our conversation with Mr. Ahmed (read part I here), we talk about how Startup Bangladesh picks startups to invest in, what he looks for in teams and founders, his decision-making framework, essential founder traits, Startup Bangladesh’s investment strategy, the state of startup and technology policy in Bangladesh, startup and VC ecosystem in Bangladesh, exciting sectors in Bangladesh, how lack of investment in R&D hampers growth, the biggest challenges for Bangladesh’s tech industry, fundraising tips for early-stage founders, how Startup Bangladesh works with its investee companies, the cost of complacency, critical necessity of continuous learning, the importance of delegation, and upsides of being a good person and much more.
This is the second and final part of our interview with Mr. Ahmed, you can read part one here.
Future Startup: Once you have the companies shortlisted, how do you make the investment decisions? Say, you have found these four companies that you think are interesting, what happens next? How does the decision to invest in a company get made?
Sami Ahmed: Although many companies might have gone through other ICT division programs, we encourage startups to apply to Startup Bangladesh. Applying is open for everyone and it doesn't matter which network you are coming from. You go to our website, there is an apply button, you fill up the form and you apply. Once you apply, it goes to the investment team, I get to see it. And It is a transparent process.
We have a tracking method to see the status of each application. If we reject an application, there has to be a reason for the rejection. In fact, it is often not a rejection. Instead, we tell the startups that they need to improve in these areas before we take a serious look into your business. You work on these areas and come back to us once you have made the progress. So it is not like we're not investing in your company. Rather we're not investing now.
We have a rigorous evaluation process for each investment. Once a company applies, our portfolio team does the initial screening and internal evaluation based on the data provided. They meet the startup, talk to them, and thoroughly verify the data for authenticity. After that, it goes to the investment advisory committee which I head, and where we have external experts including Mr. Arif Khan, Mr. Shawkat, Mr. Wahid Sharif, and several others who are familiar with the ecosystem. The committee interviews the founders, evaluates each of these applications, approves the ones we should move ahead with, and marks the ones we should re-evaluate and add feedback for.
The approved ones then move to a process of due diligence. Our external partners do the due diligence. Once the due diligence is done, the advisory committee once again reviews the companies, looks at the details and gives the go-ahead.
Then it goes to the board. We have a strong board with senior Government bureaucrats including the senior secretary of the ICT Division, who is the chairman of the board, the law secretary, the Cabinet Coordination Wing secretary, the additional secretary for finance, and the executive director of the Bangladesh Computer Council. I’m also on the board and we have an independent director from the private sector. The board does the final vetting. If they want further understanding, they seek further information.
After the final vetting, it goes to our legal team who does all the term-sheet and negotiation-related works, prepares the contracts, and we then declare the investments.
The whole process takes 3-4 months, partly because many of our startups take time to provide their internal documentation. But it is a good thing for the startups that their internal systems get established while going through our process.
The first thing we look at is the founders and team. We try to understand whether the founder can take the startup to the next level. Then we look at the idea and the traction. If someone comes up with an idea that has never been tested on the ground, it doesn't tell much. An idea is just a dream. You can have a dream which means you want to do something. But what have you done to achieve the dream, are there any results? Okay, there are some results. Does it look like you can grow but are you the right person to take it to the next level? We look at these things.
Future Startup: Do you think there are a set of skills or traits that are important for founders to have or develop to succeed?
Sami Ahmed: The first thing is the vision—where do you want to go and whether you have a plan to get there. Having a vision and a strategy to execute that vision is important. We look for whether the founders have a vision and strategies to achieve that vision, and have a track record that shows that they are doers and resourceful.
Then comes the willingness to take risks, experiment, and pivot when necessary. Founders generally have attachments to their ideas. They treat their ideas as their baby. But it is necessary to have a sense of reality, and an understanding of when to change plans and let go. There are certain personal qualities that you need to pay attention to such as willingness to learn, critical thinking, communication skill, etc.
Future Startup: Why do you invest in a batch? For example, in this round you have invested in 8 companies, is there any thesis behind it?
Sami Ahmed: When we started Startup Bangladesh Limited and ShotoBorshe Shoto Asha Campaign, we invested in a batch. When I came in, we had some backlog, we cleared the backlog and declared the next batch. But the question is, should we invest in batches going forward?
The plan is to do it in batches because of the media exposure and attention it receives. One of the goals of this campaign is to educate people about startups and build awareness. We think if we do it in batches, it serves that purpose better.
So right now, the plan is to do it in batches. Will we change it in the future? It may. But doing it in a batch is more like a celebration, which I think is the best approach.
The second reason is that startups are a long-tail game. When we invest in a group of companies it gives us upsides in so many ways when it comes to power law and building a network of companies. It is also good for the companies. It allows us to build potential networks between our portfolio companies.
Future Startup: Could you tell us about your experience of investing in early-stage companies in Bangladesh— challenges policy-wise and also working with early-stage founders in Dhaka?
Sami Ahmed: It depends on the founders. The early-stage founders who are resourceful enough to work with the system can take it to the next level. It requires some hand-holding and being with them but we have been able to do it. The late-stage founders are different. They eventually develop the skills or you can have an external CEO to run the organization, etc. But in the early stage founders really matter. The person who is running the company matters.
Our market, to be honest, has many challenges. How well a founder can navigate these challenges and move forward ultimately determines their success or failure.
The government is working on a startup policy. Our Honorable ICT Advisor to the honorable Prime Minister has advised us to prepare a startup policy in coordination with all the ministries so that we can identify all the policy limitations that need to be addressed.
We attended a meeting a couple of weeks back at the PMO chaired by our honorable law minister, the Private Sector Industry and Investment Adviser to the Honorable Prime Minister, and other important stakeholders. One big decision that came out of the meeting was that a lot of things that these young people are doing are creating employment opportunities and bringing in money. They are not doing anything wrong. They are doing it for the nation. But due to our policy limitations, it becomes illegal. Let's identify these regulations and change them. At Startup Bangladesh, we're working to identify these policies to help the Government change them.
The interesting fact is that many founders are resourceful. They take the risk despite the policy limitations. They take advantage and figure out ways to move forward while others might see it as a cul de sac. The former groups usually do better than the latter.
Future Startup: You hold an interesting position at the intersection of Government, policy, and private sector investment. You can see all these challenges founders and startups face in the market as you navigate them while working with these startups and also get to work on the policies.
Sami Ahmed: One of my major jobs is to identify these challenges and let the government know so that the government can address these challenges.
Future Startup: You have briefly touched on this question but I want to dig a little deeper. What do you think about the overall venture capital ecosystem in Bangladesh? I will give you a couple of points. While the angel investment scene has made meaningful progress in the country, local VC funds are yet to show a lot of activity. We have several funds with licenses but local investors appear to be struggling to raise money and the majority are inactive. As you mentioned earlier, why is the domestic share of the capital raised by Bangladeshi startups so low?
Sami Ahmed: There are a few things here. Many local investors don't really get how startup valuation works. They don't understand the risk and reward dynamics of startup investing. Once the ecosystem matures and people see some good examples of successful investments and exits, it will encourage more people, which is why we want to work with these local investors from Startup Bangladesh to develop the habit and practice of investing in startups. Once it is done and a few of these local investors profit from it, more will happen. When people understand how it works, and how the valuation is done, I think we will see more participation from the local investors.
Startup investing is not common in our culture. Traditionally, people are used to debt and bank loans when it comes to raising capital. And when it comes to investment, people are more oriented towards taking a 50% share/percentage of the company and so on. These models don't work for startups. So the way startup investments work is quite new to many people.
Startup Bangladesh looks to play an active role in building necessary awareness and education and building the habit in people. It is good that things are happening now. I have seen some angel networks happening in Bangladesh, and private sector investors can come through these networks as well. So it has started.
Every country has a growth cycle and trajectory. Bangladesh has started it. I think a few years from now this will change. This is a nascent industry. As we go along and as time passes, I think many of these things will happen. So it is about time. But since we want to leapfrog and have lost time in the past, we want to expedite some of these things. That's why Startup Bangladesh is here. we're not leaving it just to the market forces. we're trying to intervene and speed things up.
Future Startup: Many of the Bangladesh companies that have raised investment over the last few years are either registered in Singapore or the US. And I hear from people in the industry that there are policy challenges such as outward repatriation when it comes to attracting international investments. What is your take on that? What are the challenges in terms of attracting international funds? You have mentioned several initiatives that the government is working on. Nevertheless, any comment there?
Sami Ahmed: As I said before, there are some policy challenges. For example, outward repatriation has some challenges including higher taxes and so on. We have to take initiative to change these policies, which will take time. That is one thing. Some countries have worked on their regulatory environments such as India, Indonesia, etc and now a lot of VCs are directly going into India and Indonesia and investing in these countries.
Second, many VCs, even if we do all these things, would not be comfortable investing directly in Bangladesh. Because they are comfortable and have policies to invest in two or three locations. Investing in more countries means they will have to learn and understand the legal and policy environment of these markets, which can be costly for them. Globally, most investors prefer to invest out of two or three locations and rarely go out of them. In that case, for any investment they make, companies need to have a domicile company in their preferred location.
We have spoken with startups who have raised international investments. We have learned that investors have their preferences. Some prefer the US, Delaware, other Singapore, and other Canada. So there are some places where these investors have an advantage in terms of having a proper understanding of the legal environment and overall legal and financial processes. And these locations are globally accepted and systems are transparent and safe, which is why Singapore in this region is preferred by many investors. So even if you look at the big investments that come into India, you will see many of these companies are all domiciled in Singapore. So it is a demand of the VCs, you will have to domicile in Singapore or US or somewhere else. This is a big reason.
That leads us to two things. We have to change some of the regulations, which we're working on. Despite that many VCs would still prefer their own preferred locations. And that's why we have to be open to both options.
Future Startup: About the policies, you have mentioned technology hardware manufacturing policies and other initiatives. We can see the impact of policy reform in electronics product manufacturing. A lot of companies including international brands are now manufacturing locally. In terms of digital technology companies, what are some of the technology policy aspects that concern you the most?
Sami Ahmed: The biggest challenge is unfamiliarity. For the regulators and government, when something comes to disrupt the traditional practices they get scared. There are good reasons for that as well. There are many instances where people have been manipulated. So the regulators stay alert. When they see something that they don’t understand, they come and say I don't understand this and don't know if this can be manipulated or not.
To address this challenge, many countries have done regulatory Sandboxes. In Bangladesh, we also need proper regulatory sandbox guidelines. There are sandbox practices in Bangladesh. I will give you an example. When Uber first came into Bangladesh, the Government didn’t shut it down or didn’t say you can't do ridesharing in Bangladesh. Many countries did that but we didn't. We said okay you operate but we will observe you and in the meantime, we will make the policy and when the policy happens you can operate. That's exactly what happened. This is a sandbox.
We have small sandboxes like systems in place in different areas including the financial industry but all that is without the proper guidelines. We need proper regulatory sandbox systems with guidelines so that experimentations can happen in some monitored scope and we can learn whether a product or a company is good or not and operate within the legal boundaries before shutting it down.
I know that discussion about it has already started. We need more expertise and support to develop these systems. This regulatory sandbox is important for Bangladesh.
The second thing is that we're not seeing enough R&D. I'm not saying it in relation to startups alone. I'm talking about the overall state of research and development in the country. Startups can happen as the outcome of research and development. Companies and products can come out of technology research. It can result in patents, proprietary technologies, and processes. However, it is not happening enough in Bangladesh because we're far behind in research and development. Once it happens, we will have excellent startups in the pipeline.
Every country that has a fast-growing startup ecosystem, has a strong R&D ecosystem, which, unfortunately, is missing in Bangladesh. Without a strong R&D culture, we will see more e-commerce, and generic products and services ventures in the future and fewer companies in deep tech, and other critical verticals. If we have proprietary innovations and R&D, we will see more fascinating startups.
Government has an interest there. The ICT division has taken several initiatives. As these initiatives take effect, we will see even better startups.
Then we have these Bangladeshi startups raising money through Singapore and other countries after domiciling there. They are bringing money into the country and creating opportunities. We need to figure out how a Bangladeshi owner can legally own shares in the same company in Singapore. Currently, a Bangladeshi can’t legally own shares in a company abroad, without permission from the authorities. That's somewhere we need to change the policy.
We have many international companies in Bangladesh such as Grameenphone. They have foreign ownership. They declare profit and take the profit outside the country. The same thing Bangladeshi people can do in other countries where we can own shares and if that company makes a profit, it will increase our export earnings. It will bring money to the country and we will have the ownership of global companies. We need to address these challenges.
Future Startup: What some sectors/verticals are you bullish about? You have some priority sectors at Startup Bangladesh. Those are there. What are some of the sectors you think founders should explore if they want to build large businesses?
Sami Ahmed: If we look at our national interest, it gives out some obvious sectors. There is education, healthcare, and fintech, these are definitely major areas. Apart from these three, cyber security, artificial intelligence, microchip design, and robotics, are some of the sectors that offer huge opportunities. I would add e-commerce and logistics to that list. For emerging economies like us, the nationwide supply chain is a big area of investment.
At the same time, some of our national goals such as women empowerment, innovation for disabled people, and agriculture, are important verticals.
The national goals are where our priorities originate at Startup Bangladesh. Helping the government achieve the national goals is our job.
Future Startup: What are some of the most overlooked aspects of the Bangladesh tech industry right now?
Sami Ahmed: Intellectual property, obviously. As I said, unfamiliarity and lack of understanding are the reasons behind this. We don't know how to value IP. That is an area that's very much overlooked. We talk about it but we need to fix it.
Future Startup: This is an interesting point you mentioned about research and development. We see in India, that IITs and all kinds of institutions they have built in the 60s and 70s are now producing talents that are not only leading global companies across markets, they are also doing amazing work in the local market building companies and leading organizations. If you parallel that with Bangladesh, what do you see?
Sami Ahmed: We don't see that. If you dig deep enough, you will see that it is policies hindering this growth. I will give you an example. When a university student works on an R&D project, who owns the IP of that product. In other countries, you can have joint ownership, you can have royalty for your IP, and you can build a startup using the IP. Similar practices must be done in Bangladesh to ensure that students are encouraged to do more research & development in the University phase. So there are areas where we need policy changes to facilitate the system where people have more incentives to come in.
Future Startup: That's such a fascinating observation. Related to that, if you look around the world, almost all the major startup ecosystems, be it Silicon Valley or Bangalore, are built around major technology universities. Talent plays such an important role and you need to have that sort of backward linkage.
Sami Ahmed: It is not about talent. We have no dearth of talent in Bangladesh. Our students from BUET and other universities are leading research and development in the major conglomerates in the US and other markets. They are developing world-class innovation in those countries. Why can't they do the same in Bangladesh? That's a problem we really need to understand and solve.
Future Startup: So one problem you mentioned is IP. Since they can’t own the IPs in many instances, people don’t have enough incentive to innovate. That’s one. What other incentives that the government and institutions can design to address this challenge?
Sami Ahmed: You need funding for R&D. Government alone can't support all the R&D. Private sector needs to step in. The private sector, however, is not incentivized to do R&D. We have to look into that. We have given suggestions to the Government about how we can incentivize R&D. It is in the Government's plan as well.
We have mindset challenges as I mentioned earlier. Many people tend to suggest that R&D would not work in Bangladesh and that we don't have time to do that anymore. But I think we have to start somewhere. Then we will go somewhere from there. It is never too late to do something worthwhile.
This is where the pipeline question we discussed earlier comes in. If we really want the startup ecosystem to work and change the tech landscape in Bangladesh, we have to invest in R&D. Startups or companies do not necessarily need to do it themselves. They can finance it. It also opens new opportunities for companies to, for example, acquire small R&D-driven startups right out of universities. It can completely change the game for our tech ecosystem.
In Bangladesh, most companies want to do everything in-house. They don't want to collaborate. But you can't do it all alone. You have to collaborate at the ecosystem level.
For instance, we have been able to bring down taxes so that manufacturing happens in Bangladesh. we're now trying to build the backward linkage. In many countries, you have a factory and other companies supply you with the parts. There is a backward linkage. But this is not the case in Bangladesh. In Bangladesh, companies either try to do everything themselves or import the parts.
But what about the backward linkage? Again, there are policy and regulatory challenges. For example, I'm a manufacturing company. I need parts and I will import the parts. Import duty has been relaxed so I will probably have to pay import duty between 1% and 4%. I can import the parts and manufacture and sell them. I'm paying that 1% import duty. But if I buy it from the local market, I have to pay 15% vat. So the local market is more expensive for me. So why would there be a backward linkage because it doesn't make sense price-wise?
Future Startup: That's such an important point and almost painful to see. Industries are often built on the back of other industries. For instance, in the world of startups in our current ecosystem, logistics companies are built on the back of e-commerce companies. And it is the case with many other verticals. But due to regulatory and policy challenges, you can't build backward linkage industries in many high-impact verticals. Do you see that is going to change?
Sami Ahmed: Yes. That's what we're working on. That's why the government has brought people like me from the private sector and many other people to be this bridge to help develop understanding and make the changes happen.
Future Startup: What do you think are the biggest challenges facing Bangladesh tech right now?
Sami Ahmed: The challenges are there. We need regulatory support so that the ecosystem is open enough for these experiments to happen. That's one.
The second thing is the R&D capacity and all the things that we already have discussed.
But if I boil it down to one thing: it is our education system. The risk-taking entrepreneurship mindset or similar skills are not being taught in our education system. We need to figure out how we address this because everything begins there.
Going forward, our biggest challenge is our nation's branding in the global market. We have met many global investors from the ICT division to promote the industry, but the majority of the people we met don't even know where Bangladesh is. we're probably not aware of this challenge but globally people really don't know Bangladesh. In places where we have awareness, branding is weak and people know us for the wrong reasons. Thanks to our garments and cricket, many countries have started to know us as a garment and cricket destination. But it is not on a massive scale. We need to work on that.
Future Startup: What suggestions would you give to early-stage entrepreneurs looking to raise funding? What are some mistakes startups make while raising investment that they should avoid?
Sami Ahmed: Many early-stage founders want to raise money without giving away too much control of their company, which is fantastic. But at the same time, founders really need to be practical and be understanding of the market. They need to go out and get their hands dirty.
Founders should reflect on the question: would I pay the value I’m asking for my company. That is the biggest test. If you are not willing to pay, it is not good enough. Would you pay for your own service? That is the real test.
A lot of the difference I see between Bangladeshi startups and global startups is about mindset. Many people try to say that it is about funding. But I would disagree. Companies should begin with building a product that people want. You should start by focusing on the product and customer service whether my customers are happy and willing to pay for my product. If customers are willing to pay for your service and come back for it, you have something solid. So you have to go out to the market, get your hands dirty, get feedback and build accordingly.
Building a product that people want is a process. Don't be shy to pivot when necessary. That's really what early-stage companies need to do more.
Future Startup: How do you work with your investee companies?
Sami Ahmed: The current framework was: we invest in these companies and give them the money and when they face roadblocks and challenges they come to us and we help them.
We're changing that now and introducing a few more supports.
First, is the board-level mentoring. Having the right person on the board to guide them. It can be somebody who has experience in a similar business or somebody who can guide them through regulatory and other areas related to their business or help attract global investment, which we believe will be useful for our startups.
The second thing is coaching the founders. We will bring in international experts with proven track records of helping global founders to coach our founders.
The third is taking them to international roadshows and connecting them with global VCs and customers. We want to do it in the local market as well where they have more exposure and customers.
Finally, there are many opportunities in Government where we can connect our startups with the government for relevant solutions. For instance, recently the government has been working on a new initiative where one of our startups has already worked and done some excellent work. So we connected the company with the government. We can make these connections. These are some of the ways we plan to support our startups.
Future Startup: That was the last question related to startup and investment. I will now ask a few short questions. First, how do you make decisions?
Sami Ahmed: Being in my position, you have to make decisions. You can't hesitate and postpone decisions. And you have to take responsibility for your decisions. Even if my decision is wrong, I have to accept it as my decision and learn from it so that I don't make the same mistake twice.
To make sure that I make the right decisions, we have put checks and balances in place. When there are checks and balances it is easier to navigate and make decisions.
Then and again, I think it is also the individual capacity to weigh the pros and cons of a decision. You can't take too much time. You have to make it quick and do the calculation on the back of your head. And it comes from experience and practice. Definitely, experience helps.
In terms of investing in companies, we have these checks and balances in place. We try to make these decisions as objective as possible. Nothing is subjective. It is not like I like this person and that person, let’s invest in that company. It is objective and based on the information and facts we have.
Future Startup: What are the biggest lessons from your journey so far?
Sami Ahmed: Your target is never stationary. Your target is always moving. So you have to move. As an individual, you always have to improve yourself. Otherwise, you would not be able to make sustained progress. That's why we have ideas like lifelong learning. If you become complacent, you will become obsolete. You always have to learn and improve yourself. You have to budget some time for yourself to learn, reflect, and advance your skills.
Having a work-life balance is imperative. We have to manage time for our good health and our family. We sometimes forget how important it is for our productivity and long-term success. Without a balanced life, your success will always be short-lived. If you want to have long-term, sustainable success, you must have a balanced life.
Future Startup: What is your approach to learning? Do you have a framework for learning new things?
Sami Ahmed: It is quite easy nowadays because you have the internet which is equivalent to having the library of Alexandria in your pocket. Access to knowledge, and courses is super easy these days. All it takes is maybe 20/30 minutes a day.
You have to commit to reading a lot. I'm not saying you have to study hours. You don't have to. All you have to do is to read consistently.
We always underestimate the amount of free time we have that we can put to good use. For instance, traffic is terrible in Dhaka. It takes a while to get anywhere from anywhere. So you can have your reading time during a commute. It takes me 30/40 minutes to go from here to the Ministry. In the car, I can spend 30-40 minutes reading a book or listening to an audiobook.
There is always time. If you really want something, you can always make time for it. Read, listen to an audiobook, or do some online courses that are relevant to your field, continuous learning is the only competitive advantage we can rely on.
Future Startup: What does a typical day of yours look like?
Sami Ahmed: My regular morning routine is the same: I wake up, exercise for 20-30 minutes, and then go to the office. I think it is important to stay fit and healthy. It doesn't necessarily need to be the same type of exercise. I try different exercises. So that's important for me to get the day started.
After work, I make sure that I spend time with my family. I also try to manage time for my personal growth and development.
I make sure that I get at least six hours of sleep every night. Sleep is super important for me. Without a restful night, you can’t perform at your best.
I have a busy schedule. But I have also learned that we can do a lot of busywork with little result or we can work smart. I try to figure out the smartest way to work. One thing I have found useful is building a great team and delegating.
Delegation is a skill. Many people don't know how to do it. You have to trust your people that they will deliver. If they fail, it is fine. Let them fail several times so they learn. What we often do is that when we delegate we see someone is not being able to do certain things, we then stop delegating and instead do the task ourselves. That is a mistake. You have to teach your people, coach them. Many people think about what is my benefit in teaching other people. But it could be a game-changer for you and your organization.
Future Startup: One final question, how do you think about life given that life is short and transient?
Sami Ahmed: I'm always afraid of this type of question. They are the toughest no matter how simple they may sound.
I try to live in the present. Of course, you have to plan for the future. But at the same time, we must live life to the fullest and make sure that we don't have regrets.
And always try to be a good, decent person. If you are a good person, in the long run, it pays off. It has paid off for me. I have always tried to be honest and maintain my integrity. If you maintain that, life will reward you. It doesn't mean that you don't strive, you do. You can be smart and honest. That's not something opposite. Live your life as a good person. That's what I try to do.
I look at life in a positive way. Amidst all the challenges of life, there always is a positive side to it.
