New investments in local start-ups declined significantly in 2024 compared to the previous year mainly due to political turmoil, economic uncertainties, and changing global trends, according to a report.
The volume of new funding fell by around 43 per cent to $41.3 million last year from $72.0 million in 2023, said the report titled "Bangladesh Start-up Investments Report 2024: Year in Review" and published recently by management consulting firm LightCastle Partners.
The company compiled the data with inputs from all stakeholders, including the state-run venture capital company Startup Bangladesh Limited.
The report said global venture funding continued its downward trend in 2024 over hikes in interest rates, geopolitical uncertainties, and cautious sentiments of investors.
In tandem with the global investment trends, Southeast Asia reflected similar patterns, with a preference for late-stage funding and established start-ups, it said.
"Bangladesh's start-up ecosystem remained active despite funding challenges, securing a total of $41.3 million across 37 deals, demonstrating continued investor interest amid macroeconomic uncertainty," said the report.
Of the total investment, 98 per cent - $40.3 million - came from international investors.
"While local investment activity has grown, it still represents a smaller share of the total funding pool. The disparity highlights the ongoing reliance on foreign capital, although domestic investors have shown increasing participation in deal-making," noted the report.
The logistics and mobility-related companies received $13.5 million; financial services $7.7 million; travel and tourism $6.4 million; software, technology, and enterprise solutions $3.4 million; e-commerce and retail $3.2 million; education $2.7 million; and energy and climate $2.2 million.
Some of the companies that received investments are Pathao, ShareTrip, Shikho, ShopUp, Arogga, and Fashol.
Over 94 per cent of the funding - $39.0 million - came from venture capital firms, indicating their position as the driving force in the ecosystem, outweighing other funding channels.
Angel investors' contribution accounted for 2.6 per cent ($1.1 million) of the total funding.
Venture Capital (VC) funding usually comes from big organisations for high-growth start-ups in exchange for equity. On the other hand, angel investors are individuals who invest at the early stage of start-ups with flexible terms.
According to the report, 22 of the total deals got VC funding while angels supported only four. Other funding included contributions from corporates, impact investors, and accelerators or incubators.
The report said with the macroeconomic conditions stabilising and regulatory reforms taking shape, Bangladesh could regain investors' confidence and drive sustained growth in the coming years.
"Increasing local investment participation through regulatory incentives and institutional engagement is essential to reducing reliance on foreign capital," it also said.
Expanding funding channels, including blended finance, venture debt, and initial public offering (IPO), can enhance financial resilience, the report further noted. Moreover, prioritising high-growth sectors like fintech, logistics, and software-driven innovation would align Bangladesh with global investment trends, it added.
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