A cycle of boom and bust: What’s deepening Bangladesh’s startup winter

Illustration: TBS

The once-bright promise of Bangladesh's startup scene now flickers under the weight of deep structural flaws and an unforgiving economic climate. In 2025, the country's entrepreneurial ecosystem, once hailed as the next South Asian success story, finds itself at a crossroads—its early exuberance tempered by funding droughts, foreign dependency, and an evaporating base of local capital.   

Despite momentary bursts of activity, the underlying indicators suggest that the country's startup revival remains more illusion than reality.  

The latest figures lay bare the problem. In 2024, Bangladesh's startup funding collapsed to around $41 million, marking a 41% decline from the previous year and hitting a six-year low. Local participation nearly vanished—falling 95% year-on-year to barely $1.1 million, or just 2% of total funding. 

That gap has persisted into 2025: as of mid-year, local investors had deployed a paltry $625,000, while nearly all capital continued to flow from abroad. The numbers, as bleak as they are, underscore a fundamental weakness—Bangladesh's startup ecosystem remains almost entirely propped up by foreign capital, with negligible domestic backing to sustain it.

"In 2024, only about 2% of Bangladesh's startup funding came from local sources—a stark symptom of the ecosystem's core challenge," said Shah Sufian, Principal Product Manager at Shikho and Co-founder of Shuttle. 

"In 2023, local investors deployed roughly $19 million. By 2024, that figure plummeted to just $1.1 million—a 95% drop. Even in the first half of 2025, there's been no rebound, with local investments hovering at around $625,000. In contrast, neighbours like India and Vietnam benefit from local VCs and corporates anchoring early rounds, fuelling a virtuous cycle of more experiments, faster learning, and bigger exits. In Bangladesh, however, corporates, family offices, and business leaders are yet to fully engage."

This absence of domestic capital has left the ecosystem fragile and dependent, limiting the breadth and resilience of its innovation base. In India and Vietnam, local venture capital and corporate players serve as early anchors—absorbing risk and creating flywheel effects that encourage more founders, faster iteration, and healthier exits. Bangladesh, by contrast, remains a capital desert, where local investors often shy away from the venture model altogether.

In India, companies like Byju's are now on the brink of bankruptcy. Much of the buzz around such businesses turned out to be overhyped. Consequently, investors have started reducing their exposure in these sectors. What has compounded Bangladesh's woes is the global redirection of venture capital towards artificial intelligence and deep tech—domains where Bangladesh has little foothold. Countries like Bangladesh have not benefited from this surge

FAHIM MASHROOR, MD OF BDJOBS.COM AND FORMER BASIS PRESIDENT

Sufian identified a set of intertwined factors keeping local funds on the sidelines. A short-term profit mindset dominates, with many investors expecting six-to-twelve-month paybacks, failing to grasp venture's typical three-to-seven-year horizon. The absence of liquidity events—whether IPOs, mergers, or secondary exits—means early capital stays "stuck," dissuading repeat participation. 

Moreover, the lack of angel networks and ex-founders capable of reinvesting their own proceeds has prevented the emergence of a self-sustaining founder-to-founder investment cycle. "Without successful exits, it's hard to build investor confidence," he added, calling for tax reforms and financing tools such as venture debt and revenue-based models to "unlock local money" and widen the funding pipeline.

Meanwhile, 2025's apparent uptick in startup funding conceals a fragile reality. According to LightCastle Partners, Bangladeshi startups raised around $119.9 million in H1 2025, a figure that might seem promising after the nadir of 2024. But the vast majority of that—over $110 million—came from a single strategic M&A transaction between ShopUp and Sary, forming SILQ Group. 

Strip that out, and total deal flow remains anaemic, with almost no early-stage or Series A activity. Venture capitalists remain hesitant, and founders report that fundraising has rarely been this difficult.

"Venture capital isn't about Day 1 profitability—it's portfolio math," Sufian stressed. "Of ten bets, eight may fail, but one or two can return the entire fund. If investors only back 'safe' plays, they'll miss the outliers that truly shift the curve." Yet Bangladesh's investment culture, steeped in traditional profit expectations, continues to resist this logic.

The situation is compounded by macroeconomic fragility and political volatility. Inflation and high interest rates have squeezed liquidity, while the lingering aftershocks of the 2024 political upheaval—marked by street unrest, internet shutdowns, and the fall of a long-ruling regime—have left investors wary. 

"It is therefore not surprising that an unstable macroeconomic or political environment, as is the case currently, would further constrain investments into the sector," said Fahim Ahmed, MD and CEO of Pathao. He added that Bangladesh's "small addressable market, largely due to high internet costs for consumers," continues to limit startup scalability.

The structural weaknesses extend beyond capital flow. Bangladesh's tech and startup ecosystem remains thinly diversified, with most ventures serving small, fragmented markets. "The local startup ecosystem is still at a nascent stage, with no successful full exits that can improve investor confidence," Ahmed observed. "To date, no startups have had a major liquidity event—a complete sale or IPO providing a full and profitable exit. Pathao is one of the rare examples where shareholders achieved partial exits."

The lack of meaningful exits is both a symptom and a cause. Without examples of successful returns, investors hesitate to re-enter the market, keeping capital locked up and stalling the development of a robust pipeline. "In Bangladesh, examples are indeed rare where investors have managed successful exits," echoed Fahim Mashroor, MD of bdjobs.com and former BASIS president. "Without them, it's challenging to build investor confidence."

Mashroor pointed out that the problem isn't unique to Bangladesh. Across South Asia, once-hot sectors such as e-commerce, ed-tech, and fintech have cooled dramatically. "These types of startups didn't generate significant profits in the region," he said. 

"In India, companies like Byju's are now on the brink of bankruptcy. Much of the buzz around such businesses turned out to be overhyped, and the reality often didn't align with expectations. Consequently, investors have started reducing their exposure in these sectors."

What has compounded Bangladesh's woes, Mashroor noted, is the global redirection of venture capital towards artificial intelligence and deep tech—domains where Bangladesh has little foothold. "AI has generated significant enthusiasm, attracting a large portion of global investment," he said. 

"Funds that previously flowed into sectors like ours have now shifted towards AI. Unfortunately, these investments are largely concentrated in developed markets and, to some extent, in India. Countries like Bangladesh have not benefited from this surge."

The country's policy environment has done little to ease concerns. Despite the government's periodic announcements of startup equity funds, bureaucratic inertia and restrictive financial regulations—such as non-convertible capital accounts that complicate profit repatriation—continue to deter serious foreign interest. Many promising startups remain forced to register abroad to attract investors, depriving Bangladesh of potential tax revenue and ecosystem maturity.

The cumulative effect is an ecosystem running on external oxygen. Founders remain resourceful, but optimism is waning. "If we want a serious ecosystem, local money must show up—not just on panels, but on cap tables," Sufian warned. 

For now, however, the response from the domestic giants has been muted. Bangladesh's startup scene stands at an inflection point: without a revival of local capital, transparent exits, and stronger governance, its dream of becoming South Asia's next innovation hub may remain deferred. 

The exuberant rise that began in 2018—with promises of "Digital Bangladesh" and stories of global-class founders—has given way to an uneasy stillness in 2025, defined not by ambition but by apprehension.

The country's startup winter, as it seems, is far from over.