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Angel investing 101: Doing it right in Bangladesh

As interest in the Bangladeshi startup ecosystem has grown, so has the responsibility of angel investors and other early stage stakeholders to properly assist founders and startups in preparing for their next stages of growth and funding. At Anchorless Bangladesh, we’ve spent the last 18 months better understanding how to accelerate the ecosystem relative to regional peers. This included a wide sweep with our friends at LightCastle Partners into the amount, type, and sources of funding for startups. Of the roughly US$300 million invested in startups so far, under $25 million came from angels, of which less than a third were from local angels.

In our assessment, the lack of consistent and appropriately structured angel funding is one of the single biggest weaknesses that has limited the development of the ecosystem.  In comparison, our regional peers in India, Indonesia, and Vietnam have benefitted from angels playing a critical role in the early development and future funding of startups.  Not only does Bangladesh need more angel investors, but we need those who do become angels to invest more effectively and thoughtfully so founders can proceed to raise future rounds of funding abroad to scale their businesses.  Why does this matter?  Because startups and venture capitals can have a generational impact on the Bangladeshi economy, paving the pathway for our own Google, Facebook, and Microsoft.

The role of angels in the funding process

Angel investors give startups capital at very early stages — often even before the company has revenue, traction, or even a minimum viable product (MVP). While there are cases where angels invest in just an idea, especially for second or third-time founders with a track record, this is rare. A traditional startup’s life cycle is shown below: