Why A High-Growth Bangladeshi Startup Chose Singapore
This blog first appears in Accelerating Asia’s blog section and can be accessed using this link: https://acceleratingasia.com/latest-news/why-a-high-growth-bangladesh-startup-chose-singapore
Bangladesh Business Ecosystem Now
Let’s get the facts straight, Bangladesh is a hot topic right now, primarily because of these core figures: A population of 170M crammed within a geographical area of 147,570 km², 274B USD generated from GDP and an economy that is growing at 8% per year.
Here’s a piece from TheDailyStar.Net,
“According to the Agility Emerging Markets Logistics Index (AEMLI) 2018 of Kuwait-based Agility Global Integrated Logistics, Bangladesh recorded the third-highest improvement in the index score.
It made gains across all three facets of the index but the country’s most notable gains were in the market size and growth and compatibility sub-indices.
The report also said Bangladesh showed the biggest improvement in infrastructure, having manufacturing ambitions beyond the apparel sector. The country wants to grow its pharmaceutical, steel, shipbuilding and food processing industries.
According to the AEMLI, Bangladesh is considered one of the 45 major emerging markets in the world.”
These figures make Bangladesh a hot target for e-commerce focussed businesses, and when founders start eCommerce businesses, they find issues with the payment infrastructure. So another entrepreneur builds a fintech company. Then moving the products to the end customer becomes a challenge, out pops up a logistics company to tackle that issue. You get the rhythm. Companies such as Pathao and Shohoz have helped Bangladesh gain international recognition and shaped the early ecosystem. They also created an avenue for more local entrepreneurs to think outside the box.
Photo by Md. Golam Murshed on Unsplash
A Brief Theoretical History of Venture Capital In Bangladesh
With so much happening, one area of growth is still at its infancy, which is venture capital within Bangladesh. The reasons for such are unclear. But one may take a stab at it in an overly simplified way. So my grandpa was a land-owner and I have obtained such insights by observing his methods of investments. Historically investors in developing countries have been landowners or people who have acquired massive fortunes through real estate. The nature of landowners is such that they work immensely hard by themselves to save money and buy out land in acres. This is their investment and they own 100 percent of it. What follows is an act of leasing out the existing property to micro-entrepreneurs in return for dividends.
Perhaps such vantage point has transcended into the world of new investments which in turn is now labeled as venture capital. One may call it risk-averse but one cannot ignore the fact that this method worked for the landowners, the land lessees, and the economy in general, for centuries and decades.
However, rapid innovation is also very capital-intensive, and our approach to investing in ideas or people will have to change accordingly.
Photo by Chris Lawton on Unsplash
What Needs to Change
So despite all these exciting growth figures, notable and seasoned investors of the West are unaware of the hustle and bustle that goes on inside this tiny country right beside India. Perhaps it had something to do with the hyper-localization of existing startups. BTW hyperlocalization means exactly what it says. Also perhaps some bad PR here and there.
Bangladesh did become a victim of bad PR when the topic for lack of safety measures in Bangladeshi garment factories in the Rana Plaza incident caught the headlines of major publications back in 2013. This may have tarnished the little faith potential investors have had. However, a lot has been done since then to improve working conditions. For example, 220 foreign brands signed a binding agreement called Accord on Fire and Building Safety in Bangladesh, which is a monitoring and remediation system. I will perhaps detail those in a separate blog.
So, the viable businesses built by such persevering entrepreneurs, who are trying so hard to change the way we do things, should never go unnoticed. It becomes absolutely vital to instill investor confidence. So what needs to change is essentially the way we instill that confidence to reputed investors, by the size of the market, storytelling, unit economics of the opportunity and how easy it is to trust the banking system of a country they know nothing about.
When running your startup, these three ingredients, when handled effectively, vastly reduces your chances of failure:
- A strong product-market fit (This comes after months of work trying to figure out the Critical Business Insights in a particular field),
- A salesforce which does not take no for an answer and
- Liquidity — your ability to fund your business fluidly by attracting solid consecutive investments.
How Singapore Comes In The Picture
So it’s settled, you have probably established the first 2 but the 3rd option is a region-specific problem. And so we NEED to instill investor confidence. This is the 3rd most important engine for an early-stage startup: on-demand liquidity, which is the ability to fully fund your operations fluidly.
Now some facts about Singapore. Singapore is the 4th largest financial hub in the world. It was a former British colony and during their independence, it was agreed that the existing businesses which are already set up, will continue to run with minimal hiccups. Singapore is also an island that makes it one of the top destinations for strategic real estate investments.
Also, because of its geographical location, Singapore became a major trading port for the British Empire as well as a British naval base. Every type of financial services related to shipping activities, such as insurance, working capital financing, exchange rates, served as building blocks towards the origins of this financial industry. And this drove massive economic growth.
Moreover, the Singapore government’s support for innovation, such as building government databases for identity validation for anti-money laundering validation, helped build trust amongst international financial institutions.
Conclusion
Essentially, to cut to the chase, people and financial institutions trust Singaporean banks with their money. And so should the VCs. And hence it becomes really important for you to establish your HQ in a place such as Singapore.
Another major reason is that Singapore is extremely close to all the major South Asia and Southeast Asian markets. It’s like you’re equipped with a double-edged sword; You are targeting an incredibly savvy business opportunity in a country with a large population that people may not know about (Bangladesh) and also creating a safe haven for investments in a country people know and trust i.e. Singapore.
