Owing to the robust youth population of Bangladesh, new business prospects are always springing up and the start-up market is brimming with possibilities. Unfortunately, the country seems to be self-sabotaging the growth of its home-grown business landscape by allowing certain barriers to entry to exist.
A start-up can be defined as a company that is in its initial stages of development or operations. They introduce a product or service into the country based on its high demand. The product or service on offer goes through several trial-and-error runs in its research and development phases which also test out the start-up’s marketing and business model. As such, these start-ups require a lot of hefty funding which comes from different sources, primarily, angel investors. The businesses are called high-growth, high-risk ventures but in their initial stage, they are a high-cost-limited-revenue operation. A number of barriers plague startups as they try to enter the market. Some of the major barriers are heavy competition, lack of a supportive business ecosystem, paperwork, lack of skilled labour, immature consumer market, short-term profit mentality, and corruption.
COMPETITION
Records show at least 1200 start-ups have recently sprung up in Bangladesh heating up the ecosystem and they have collectively attracted USD 505 million in investments in 2021, and another USD 495 million only in the first half of 2022. Encouraged by the reports, the government has set out an ambitious target of having five local ‘unicorns’ or billion-dollar companies by 2025. So far, only bKash is enjoying this status. While this confidence from the government is gratifying and heartening, this also means that the market is getting more and more saturated. With much more competition between existing ventures, it is difficult for new ones to get an entry ticket, whether they are in their seed funding stage or their market cap generation.
MOST START-UPS CITE A LACK OF TRUSTED OPERATORS AND LACKING BUSINESS ECOSYSTEMS AS TWO OF THE MAJOR CHALLENGES FACED BY THEM, ESPECIALLY WHEN THEY SEEK FOREIGN INVESTMENT. FOREIGN INVESTORS ARE OFTEN UNSURE ABOUT WHO OPERATES AND REGULATES THE SYSTEM AND WHETHER IT IS TRUSTWORTHY OR NOT.
BUSINESS ECOSYSTEM
Most start-ups cite a lack of trusted operators and lacking business ecosystems as two of the major challenges faced by them, especially when they seek foreign investment. Foreign investors are often unsure about who operates and regulates the system and whether it is trustworthy or not. Tina Jabeen, CEO of Startup Bangladesh Limited, at the Sankalp Global Summit 2021 mentioned that Bangladesh is the best place to invest in a start-up thanks to its huge market. However, it is important for entrepreneurs to know their pros and cons before making a move as a start-up is not a ‘free to all’ business. At the same event, Ann Runnel, founder and CEO of Estonia-based Reverse Resource mentioned that she found the business environment in Bangladesh to be less conducive for start-ups than she found the markets of India or Singapore. “Bangladesh has a different market environment that pushes it back in attracting new foreign investments,” she said.
PAPERWORK, PAPERWORK AND MORE PAPERWORK
One of the biggest complaints businesses across the country have is the huge amount of paperwork that must be submitted to get themselves rolling, as well as the bureaucracy they must get through before their paperwork gets issued from government offices. The predicament is bigger for small businesses and start-ups as they do not have the additional money that is sometimes required to get the necessary documents out within time. The same woes are faced by investors, especially foreign ones. It is a usual requirement for investors to collect 42 signatures from several government offices to be able to set up a venture. Owing to this complexity, the start-ups of the country are often deprived of the foreign investment that is their due.
SKILLED LABOUR
It is ironic that a country that has such a gigantic youth population would lack skilled labour. Unfortunately, this is one of the biggest hindrances start-up businesses in Bangladesh face today. Job seekers might complain that there is huge unemployment in the market but businesses feel like they struggle to find the right candidates for the positions. The skills in question are not even that deep to begin with. Employers look for basic English, Math and MS Office skills, which they do not consider to be a big ask, considering that the job seekers’ CVs boast names of some big universities. Unfortunately, employees seem to fall short of these seemingly elementary skills. If start-ups have to spend time and money to train their hired people for skills they expect them to know already, it hinders their growth, wastes their time and dwindles down their resources, making them incapable of scaling up their businesses as fast as they would like to.
IMMATURE CONSUMER MARKET
Although the country is densely populated, Bangladesh’s consumer market is still a far cry from that of India or the US. The gigantic opportunity is a mere illusion. True ‘urbanites’ are still living inside the confines of Dhaka city and even if other cities like Chittagong and Sylhet are slowly developing, the development has not been fast enough or significant enough for these cities to be called metro cities. Unless a start-up is selling mass FMCG products the innovation does not receive a market that is serviceable enough to help it really take off. The size of the country’s GDP is lower than some of the US’s tiniest product markets and so, it is fairly obvious why giants such as Walmart and Costco have not made an appearance here yet. Even if the market is expected to mature at some point, (the country is undeniably growing at a faster pace), innovators, until then, must fight for pieces of a very small pie. Diversifying into other countries is not always budget-friendly either if enough income has not been generated at home.
SHORT-TERM PROFITS
While on the topic, let us not forget the short-term profit-making mentality that is shared by vendors in Bangladesh. This is a problem, both for those in their fledgling stage as well as those who are about to enter the market if they do their research correctly. It is common practice for vendors to give you the best samples and then when you finally trust them and place orders with them, try their best to lower as much of the product quality as possible to maximise their profits. Instead of going for a mutually rewarding long-term relationship, vendors go all out to fill their coffers from that very first interaction and leave you in the lurch. If a start-up wishes to hold on to any form of quality, it must keep looking for new vendors in the hopes that one might turn out to be ethical. Those wishing to step into the market might view this piece of information as a big deterrent.
IT IS A USUAL REQUIREMENT FOR INVESTORS TO COLLECT 42 SIGNATURES FROM SEVERAL GOVERNMENT OFFICES TO BE ABLE TO SET UP A VENTURE. OWING TO THIS COMPLEXITY, THE START-UPS OF THE COUNTRY ARE OFTEN DEPRIVED OF THE FOREIGN INVESTMENT THAT IS THEIR DUE.
CORRUPTION
Finally, there is that omnipresent problem of corruption. As inconspicuous as it may be, it is no less of a limiting factor for businesses. Grease money is often a budgeted expense but many start-ups do not have a lot of funding to begin with. Other forms of corruption such as the competition lowering their quality to make more profit are also not uncommon phenomena in the country. It is harsh and often punishing to see such dishonest practices win against basic ethics, but those start-ups that do not wish to lower their quality are driven out pretty fast.
Commonly cited problems such as infrastructural shortcomings, that make Bangladesh lag behind others in terms of setting up or doing business, seem to be nearing their end with bridges and the metro-rail project that is about to be wrapped up. The country is also on its way to becoming a developed nation in the next few decades. As the government gears up towards stable economic growth, it is up to those who are in the market to bring about some real shifts in mindsets, in order to do justice to the fast-paced changes the government is bringing about. It is not a task that can be accomplished in a day, for sure, but acknowledging the problems and working towards changing the scenario can be an encouraging first step. Building a solid roadmap for readying the masses for employment, providing them proper education and training and strengthening the moral compass of the players involved, would be a great start towards achieving this reality.
