Investor hurdles drag Bangladesh startup funding to 5-year low in Jan-Jun

Industry insiders attributed the slowdown to macroeconomic uncertainty, foreign-exchange pressures, regulatory complexity, limited exit opportunities, and weak domestic venture capital participation.

“Bangladesh’s macroeconomic fundamentals continue to signal strong long-term potential, but that potential has yet to translate into startup investment,” LightCastle said in its report.

Wasim Alim, CEO of Chaldal, said prolonged foreign-exchange volatility, dollar shortages and difficulties transferring funds had increased uncertainty among international investors.

Inflation, currency pressures and weaknesses in the financial sector are also making global funds more cautious about long-term, high-risk investments, he said.

Regulatory hurdles are adding to the challenge, with startup registration, foreign investment approvals, share transfers, company valuations, taxation and repatriation often requiring separate procedures involving multiple government agencies, Wasim said.

Funding structure

The report said the average deal size was around $1 million in H1 2026, with the three largest deals accounting for nearly 80% of total funding.

Venture capital remained the main funding source, contributing about $4 million, or 66% of the total, although its share fell from 98% a year earlier.

Notably, all startup funding came from global investors, with no domestic participation.

Around 90% of the funding, or $5.5 million, went to early-stage startups through grants, seed and pre-Series A rounds. Only about $625,000 went into a Series A deal, while late-stage funding was virtually absent.

Venture capital made up about 76% of investment, while early-stage financing accounted for around 85%.

The sectoral mix also shifted. Software and technology attracted $2.1 million, or 35% of total funding, followed by financial services at $1.7 million (29%) and healthcare at $1.6 million (26%). Logistics and mobility received the remaining $600,000.

The shift was notable as financial services accounted for 92% of startup funding in H1 2025.

Bangladesh falling behind in regional race

The sharp decline came despite a global investment boom, with AI startups alone accounting for 74% of global startup funding in H1 2026. 

China, India and Singapore were major beneficiaries of the Asian investment, with startup investment rising to $70 billion from $27 billion, largely driven by artificial intelligence deals.

Industry insiders said Bangladesh’s challenge is not a lack of potential, but an investment environment that makes it difficult to turn that potential into investable businesses.

Fahim Masroor, CEO of BDJobs, said Bangladesh still lacked a strong culture of risk-taking among local investors. Domestic investors continue to view land, real estate, the stock market, import-export businesses and established companies as safer investment, he said.

“Startup investment requires investors to wait for a long period, accept the possibility of business failure and deal with limited exit opportunities,” Masroor said.

The lack of a functioning exit market is particularly problematic for venture capital funds. Even when a startup succeeds, investors have limited opportunities to realise gains through share sales, mergers and acquisitions or stock-market listings, he said.

Foreign-exchange management is another concern for international investors, Masroor said.

“International funds don’t look only at a business’ potential when investing in a country. They also consider how easily capital can enter the country, how profits can be repatriated, how proceeds from share sales can be taken abroad and how they can eventually exit the investment,” he said.

A decade, $1b but still a fragile ecosystem

Since 2013, Bangladeshi startups have attracted around $1 billion through 485 deals, according to LightCastle. More than 92% came from overseas investors, with financial services accounting for around 62% of, followed by logistics and mobility and e-commerce.

Venture capital made up about 76% of investment, while early-stage financing accounted for around 85%.

On a per-capita basis, Bangladesh has attracted only about $0.30 in startup investment, underscoring the shallow depth of its venture ecosystem.

Shawkat Hossain, CEO of Bangladesh Venture Capital Limited, said raising $1 billion over more than a decade compared poorly with neighbouring countries.

“Over the past 12 years, this $1 billion investment is not much,” he said, noting that the figure would be considerably lower without major investments in bKash and ShopUp.

Bangladesh’s investment process remains slow and complicated, while many investors lack the mindset and expertise to understand the sector, Shawkat said.

Policy complications have also prompted many Bangladeshi startups to register in Singapore or Dubai, weakening the country’s position as an investment destination, he said, adding that India’s “startup-first” approach offers a useful lesson for Bangladesh.

“Bangladesh needs such an approach,” he said, calling for business-friendly policies, stronger links with global markets and greater promotion of the startup ecosystem. The ecosystem should also expand beyond Dhaka by encouraging startup development in other cities.