Challenges of the startup ecosystem

For developing nations around the world, one of the models of economic development that seems to have mostly worked was that of creating an ecosystem for the growth of startups. By ecosystem we mean creation of startup incubation organisations, startup pioneers, bringing in consultants and experts to aid, provide support and resources to startups, mentor development of a resource and idea sharing platform, and all other infrastructural support for any good startup idea to succeed. The logic behind promotion of a startup ecosystem behind economic growth is simple—when more and more innovative ideas are coming to fruition and new business ventures are being established, new jobs are being created, resulting in income for the unemployed and underemployed, further resulting in a healthier circular flow of economy.

The work to develop a startup ecosystem in Bangladesh effectively started five years back. It has received both criticism and international praise for moving with the global startup movement. However, as the bubble has started to burst in many parts of the world now, Bangladesh is in a state where it will either reach the peak of new success stories or be a part of the burst as well. As such, this article would be discussing some of the hurdles to the creation of a successful startup ecosystem, and the how to overcome them.

In the first few years, the growth of this ecosystem was through the efforts of startups themselves, and involved a lot of enthusiasts who assisted these pioneering entrepreneurs. Claiming themselves as mentors, most of these enthusiasts who helped and are helping the ideas succeed as ventures have been private firms or individual venture capitalists or angel investors. However, around the beginning of 2016, initiated by Ministry of Information and Communication Technologies, Bangladeshi startups could see the involvement of the government to promote and support the startup ecosystem.

To understand the position of the performance of the government initiative, we interviewed some of the participants of a startup incubator known as Connecting Startups Bangladesh. This organisation launched with the aim to connect startups to markets and investors by providing mentoring and incubation to potential startups. In addition to that, they also want to provide winners with free workspace, logistics support, training, opportunities and exposure to meet multiple venture capitalists and other funds. Currently, the selected startups are allotted space at the StartUp Incubator of Janata Tower STP (Software Technology Park) at the Bangladesh Hi-Tech Park completely free of cost for a year. The participants, some of whom have been around one or two years in the startup arena and are yet to make profits, were asked about the challenges they would want to be solved for better support and growth as startups.

Given the fact that not many of these startups were involved in other accelerators before, they believe that the platform helped them to get an office space under one roof with other startups, thereby providing them an opportunity to network with each other and gain more support.

When asked about the challenges they have been facing, one participant responded saying, "The programme was not very well organised, as it was the first time. The procedures and timeline were not well maintained and the same activities were repeated over and over again."

Another participant mentioned the matter of bureaucracy that slows down proper execution of support: "If I were to mention any one challenge, I would mention the inefficient process of execution. Any decision taken by the authority takes a lot of time to execute because of the bureaucratic difficulties."

We finally asked them about the infrastructural support the government needs to work on for making Connecting Startups more helpful. Some major recommendations were proposed by the participants. Of these regular and organised mentorship by the management of successful startups turned into ventures was one that popped up time and time again. These early stage startups expect the government to arrange specialised and experienced technical support through which they can measure the calculative risks to overcome and prepare the flow to build a plan that is sustainable. Integrating failure studies and the reason behind failures could also support early stage ideas to understand the market better and gain proper insights and feedback on their products and services.

We also collected some perspectives on the startup scenario of Bangladesh from these participating ventures. Considering the collected statements, some startups are doing excellent, but the overall scenario is ambivalent as the idea of startup has shifted a little towards being more of a trend rather than a problem-solving hub. Very few unique products have been introduced till now from these startups. However, there is huge potential to compete in global market. These need proper support to flourish. The gloomiest aspect of this ecosystem is that the survival time for most of startups is below three years.

Khan Tanjeel Ahmed, Co-founder and Chief Operating Officer of Techsetra, spoke out to us regarding his perception of the current ecosystem and the elements involved. "Though we have successful startups, we rarely have successful innovations. In Bangladesh, we are most likely following business models of successful startups outside the country. I think that without any real innovation, the success will not be sustainable. Besides, for startups, it is all about challenges. Our foremost mindset is to complain. We complain about 'not getting enough support'. We wait for funds before we even start. Firstly, we need to change this mindset. In my opinion, startups will have the opportunity to obtain success only if we start working on whatever problem we want to solve with or without funding. We lack passion and that is what we need to improve," he said.

Another critical issue faced by many startups is that of talent acquisition. Many of the startup networking events, mentoring events and incubations have fostered the growth of people with ideas to come up venture towards entrepreneurship. But, no matter how small, a company cannot be expected to strive only on the brilliance of the initiator. It needs good young talents to grow and succeed. Both the authors of this article have had experience in hunting for talent for startups. The problems are many. First, startups are not being able to offer attractive pay packages—as either they are not breaking even or they are not having enough revenue to disburse as a good pay package. But that is not all. There is a cultural factor of perceived prestige for working for big names. This has always been the case with popular business schools, not only in Bangladesh, but all around the world, but such a culture is a big hurdle for startups. Finally, due to the unstructured nature of jobs for any new venture, a lot of fresh graduates prefer jobs in established organisations, where job roles are clearly more defined. This talent accusation issue has been the case for many prominent members of the startup community.

In our study of overall effectiveness of the startup ecosystem, we could identify many other hurdles, but the three we discussed above stood out common among many startups—an effective ecosystem, a proactive government infrastructure, and a culture to attract capable candidates towards a startup. We believe that for the first two hurdles, the way to go forward is to cooperate in a holistic manner, instead of piecemeal work that is prevalent in the present market. Both incubators and government ministries (not only that of ICT ministry) need to sit together and cooperate on both short and long term plans with clear goals and measurable criteria. The plans need to consider all the active startup mentors, venture capitalists, angel investors, trainers, and infrastructure ministries involving representatives from transportation, telecommunication, revenue board, commerce, and information technology departments of the government. Collaboration on such a scale is very hard to establish without any doubt, and will take a good deal of time and energy of very busy people. But if we really want to reap the benefits of the startup ecosystem, and through the ecosystem, the benefits of a better economy, then such a coordination and investment are very much needed in the future. The benefits of such a synergy and resource sharing will outplay the initial time and cost involved.

Another suggestion to make the ecosystem more effective is to convert microlevel mentorship into a macro portal. Our experience with startups so far have showed us that most of the mentorship that goes into startups are either through the personal network of the startup of through the network of the incubator. But there are many such micro mentors who have been active and successful. So, possible initiative to leverage the value of mentorship can be to develop a portal which aggregates as many active mentors as possible and then make the portal accessible to as many startups as possible.

For the third hurdle mentioned, we need to change the culture and the aspirations of our graduates. And such an initiative needs to come from the very business schools from where the young talents are graduating. Educators need to be made aware of the benefits of their students to work for startups, which include but are not limited to qualities such as working in a challenging and ever changing climate, being flexible and adaptable, taking charge and leadership when and where necessary, etc. These skills will help graduates grow in their respective careers in the future. One interesting way can be for startups to approach educators and partner with them for their courses. Students in the classes can be given assignments based on problems faced by startups, where they can use the skills they learn in the class to solve these problems. This will make the students aware of the startup activity, but more importantly, give them a very good exposure to real life business problem solving. On the other hand, the startups can also impress upon the mind of the students the benefits for working with them. Such collaboration with academia can be on the educator level or on the institutional level. At present, many startup firms and incubators carry out fairs and seminars, but our experience shows that most of them are one-sided, and the learning and awareness is not sufficient to entice young talents to apply to startups. A more interactive approach involving shared assignments and projects can make this learning more effective. This will further help in crafting a culture where fresh graduates will consider startup jobs (although with marginally lesser salary) to be good career prospects.

As mentioned before, this article looks specifically at the major challenges for the success of a startup ecosystem. There are many more challenges, but the three discussed in the article are the ones that stood out in the short span of our study and based on our experience in the startup arena of Bangladesh. We believe that if these challenges are met constructively, and solved with combined effort from both the ecosystem and the government infrastructure, the startup boom would indeed spell success for future development, in terms of both the economy of Bangladesh and innovation.

KM Saqiful Alam is a lecturer of operations and risk management at the Department of Management, North South University. He is actively involved in the startup arena as a trainer and advisor to various startups. Sanjida Akter Tanny is a fresh graduate from BRAC University who founded the startups Contentier and Hiring. She has worked in startup accelerator hubs and content management.