Given the early successes of microfinance and the recent, perhaps more meaningful, successes of bKash, I have always felt Bangladeshis have a love affair for financial products, however arcane they initially appear
I was a junior at Dartmouth College when I first encountered Facebook.
The beta version arrived to us from our friends at Harvard, not too long after it was birthed. I remember how we loved the minimal UI and usefulness of the website. You could create a nifty profile, fish for social approval, and most importantly, at that age, prospect romantic partners. Over the next couple of years, I bore witness, as did others, to one of history's fastest instances of virality. By 2006, all my students at a leading private university where I taught for a summer, had Facebook accounts.
I often wonder how it all happened: how we went from occasionally dabbling in social websites like Friendster to allowing Facebook to redefine our relationship with the Internet. I keep coming back to two things: timing and go-to-market strategy.
The two are interrelated as Facebook's go-to-market strategy of growing through university-based communities was fortuitously timed. Around that time, all college campuses had firmly embraced email and search. Therefore, when Facebook entered our lives, we were quite used to the brave new world of Google, in which we could find answers to every question, from the mundane to the arcane.
Google had us potty-trained for Facebook.
Fast-forwarding 17 years, startups are all the rage in Bangladesh. I do know people of otherwise great character who are unmoved by all this faddish chatter and consider startups to be a flavor of the day at best and a Silicon Valley Ponzi Scheme at worst.
However, for the rest of us, startups have not only touched our lives, but also given us cause for wonder and excitement.
So, what is the current state of health of the startup ecosystem in Bangladesh? Are we just at the tip of the iceberg in terms of fundraising success? Or will we run into the fate of one or two Asian countries in which early funding dollars have resulted in overvaluation of startups and a poor pipeline that have dissuaded investment?
The answer is not easy. But, more importantly, the future is not inevitable.
Let's start with the demographic and macroeconomic realities of Bangladesh. We are a country the size of Michigan with the seventh largest population in the world. Our youth population is also one of the largest in the world. The economy continues to grow, now at around 8% per year. However, private sector investment growth has slowed, and the private sector is unlikely to create enough jobs to absorb the hundreds of thousands of graduates we churn out, per year. Such are the perils of a demographic dividend. Meanwhile, perils of a density dividend translate to poor road traffic and very expensive real estate, be it for aspiring owners or renters.
So, what do our demographic, geographic and macroeconomic particularities imply for digital businesses in Bangladesh?
Even before 4G was announced, they said ridesharing would take off, because of poor public transportation and worse traffic. That happened, notwithstanding the sector's near and long-term challenges. On-demand food delivery took off, as predicted, and is likely to grow even more, and perhaps experience the much-talked about "hockey stick" growth curve. Co-working spaces have mushroomed, as startups need to be able to afford a table and mingle with other startups. Other digital businesses have also raised funds in sectors such as on-demand home services, video streaming, grocery delivery, retail tech, and so forth.
So much more is in the offing.
There are skill-sharing platforms being built for skilled labor, given the global trend of gigs and a local orientation towards gig economies. I see more and more university students doing part-time gigs as photographers, content creators, bloggers, or even third-party Facebook page administrators.
Health-tech is gaining traction, as with increasing income, people's spending on medical expenses go up; not to mention our rather poor showing in terms of doctors per capita, nationwide.
Ed-tech is another potentially exciting space, given how much time students spend online. A study ULAB conducted found that around a quarter of all university students spend upwards of six hours per day on the internet. I was surprised by this finding, until I realized how much time I spend online, particularly when I am in the office, but not in meetings. I could use a startup that provides a one-stop platform for outsourcing chores such as dry cleaning, grocery shopping, car servicing, running different errands, paying bills, and banking.
Coming to fintech, an area in which I take great interest, the most famous startup of Bangladesh, bKash, is a fintech company. Given the early successes of microfinance and the recent, perhaps more meaningful, successes of bKash, I have always felt Bangladeshis have a love affair for financial products, however arcane they initially appear. Not convinced? Did you know that in February 2010 alone, 200,000 Bangladeshis opened BO accounts to invest in the stock market, despite obviously low levels of financial and investor literacy? I am telling you: fintech is poised to become a fertile ground in Bangladesh.
In time, we will see digital lenders that process instantaneous loans using our call records, data on what apps we download, how much money we spend on calls and data, etc. We will see more mainstream blockchain applications from sectors as diverse as land registration to ready-made garments. Robo Banking will evolve beyond the rudimentary. e-KYC will be used by more and more banks, and microfinance will rely on alternative credit rating and apps, instead of large communities of loan officers.
It is a brave new world I speak of. But is this new world inevitable?
Certainly not. Forecasting is never completely accurate. Many of these predictions, and even the startups that are operational, are still only a little further along from the "idea stage," despite having raised funds. Success lies in relentless and continuous execution and herein lies the test for Bangladesh's startup stakeholders: its founders, mentors, investors, teachers, incubators, and users.
Flourishing startup ecosystems elsewhere bear out the case for a culture of objective research. Bangladesh needs more university and third-party research in the area of startups through its business schools and engineering/technology programs. STEM is an area that needs careful attention, as does the interstice between STEM and Business. For instance, Tech MBAs are all the rage now in the US.
We need a stronger culture of contract enforcement. Startup investors need to feel encouraged to invest and feel that their investments are protected.
We need to create precedents of successful exits. IPOs are difficult for startups even globally, to say nothing of the fictions of the Dhaka Stock Exchange. So, exits via trade sales are important for the current generation of startups. We need successful exits of investors through Series A, B, and beyond.
Ultimately, a lot depends on our startup founders. Beyond building founders who can tell a good story; understand the so-called "valuation game," or more legitimately, identify opportunities for internet-enabled disruptions in existing markets; we need founders who are good leaders, pure and simple. We need founders who are ethical with investor money and with their employees.
Startup leadership is emerging as a critical area of study and practice all over the world, as the fourth industrial revolution plays out, and many vaunted startups have been found out for undermining contractors, employees and investors. In Bangladesh, we need to talk about leadership much more, particularly, in the context of startups.
Another approach to ensuring good leadership would be to entice good leaders from myriad sectors to participate in the startup ecosystem. Because ultimately, it is not about AI or Blockchain. Technologies are as old as sticks and stones. It is, in the end, about solving a social problem, and providing a service to something that is larger than you, which, ultimately, is about leadership.
Sajid Amit is Associate Professor, ULAB, and Director, ULAB EMBA Program. He is a Richard Hofstadter Faculty Fellow at Columbia University, 2005-2007. He can be reached via LinkedIn, Facebook and Twitter at @sajidamit75