Bangladesh’s economic foundation has been significantly shaped by its powerful conglomerates. Companies like ACI, PRAN-RFL, and Walton exemplify the resilience and longevity of these diversified business entities. The conglomerate structure has proven effective, offering advantages such as risk diversification across various sectors, accelerated organizational learning, and substantial financial capacity to manage market volatility.
However, this model, despite its numerous strengths, possesses an inherent limitation that is increasingly impacting both local conglomerates and Bangladesh’s wider entrepreneurial landscape.
A prevalent cultural tendency in Bangladesh is a preference for internal development. When a conglomerate identifies a new market opportunity, the typical response involves forming an internal team, developing capabilities from the ground up, and independently attempting to penetrate the market. This approach is often driven by a desire for self-reliance, control, and a perception of scarcity.
While this strategy can be effective in stable, well-defined industries with clear operational guidelines, it becomes both risky and inefficient when applied to emerging sectors. These new markets are often characterized by rapid technological disruption, unpredictable regulatory changes, and evolving consumer preferences.
Numerous sectors provide evidence of this challenge. In e-commerce, several well-funded conglomerate initiatives have struggled despite substantial investment. Similarly, bank-led mobile financial service providers have largely failed to achieve significant market penetration. This pattern of corporate initiatives failing in technology-driven ventures is evident across software and other verticals, indicating a systemic issue rather than isolated incidents.
The core problem lies in the innovator’s dilemma, a concept extensively explored by the late Harvard Professor Clayton Christensen. Established, successful companies often develop organizational structures, decision-making frameworks, and cultural norms that are perfectly suited for their current operations. However, these very strengths can become hindrances when attempting to innovate or build something fundamentally different, inadvertently leading to their downfall in new markets.
A typical conglomerate business unit functions with predefined revenue goals, established customer bases, and foreseeable growth paths. Integrating a startup into such a structure often results in a fundamental incompatibility that can prove detrimental to the new venture.
Startups thrive on experimentation, a high tolerance for failure, rapid iteration, and often require extended periods before achieving profitability. For large corporations, the relatively small initial opportunities in many emerging markets make long-term commitment challenging to justify against the required investment. Corporate settings typically prioritize quarterly results, risk reduction, and clear return on investment timelines. Investments must demonstrate immediate returns, making potential future gains from new ventures seem less appealing compared to current profitable operations.
The outcome is often predictable: the startup initiative is forced to conform to the parent organization’s existing framework. This leads to slower decision-making, reduced risk tolerance, and demoralized teams. Ultimately, the venture either quietly ceases to exist or continues as an inefficient entity, consuming resources without producing tangible results.
A more effective approach exists, one that is common in many developed markets but notably underutilized in Bangladesh. Corporate venture capital, strategic investments in startups, and authentic partnerships with entrepreneurial ventures provide an alternative method for market entry and innovation access. This involves identifying promising startups addressing real-world problems, making minority investments, and offering strategic support without suppressing their inherent entrepreneurial spirit, rather than developing everything internally.
The rationale for this approach is strong. Startups possess agility, focused drive, ambition, and the capacity to operate beyond traditional limitations—qualities often absent in larger corporations. Conversely, large companies offer essential resources to startups, including capital, extensive distribution channels, operational know-how, regulatory understanding, and established customer relationships. When these elements are properly combined, the synergy can be exceptionally potent. While the conglomerate model suits certain businesses, corporate venture capital is often a superior fit for others.
This explains why corporate venture capital, in its various forms, has become a vital growth engine for highly successful companies globally. For instance, Google Ventures’ portfolio features companies such as Uber and Slack, while Salesforce Ventures identified Zoom’s potential early, reaping significant benefits from its growth. These are not charitable acts but strategic investments that have yielded substantial returns and kept parent companies at the forefront of innovation.
In Bangladesh, there have been some instances of this strategy. The OnnoRokom Group initiated OnnoRokom Uddokta, an accelerator program for early-stage ventures. Bangladesh Venture Capital Limited and a few other entities have engaged in the ecosystem, yet these efforts are largely isolated and often limited in scope, not representing a widespread practice.
However, the general trend reveals a different picture. Most conglomerates continue to favor the internal development model, establishing new subsidiaries for sector expansion instead of investing in existing startups. This represents both a missed strategic opportunity and a vulnerability, while also hindering the development of the nation’s entrepreneurial ecosystem.
The practical advantages of adopting a corporate venture capital approach include:
- Risk distribution: Rather than committing significant resources to a single internal project, smaller investments can be made across multiple startups, diversifying exposure to new markets or technologies. The failure of one venture can be offset by the success of others.
- Access to innovation: Startups frequently operate at the forefront of technological and business model innovation. Investing in them provides insight into emerging trends and capabilities that would take considerable time to develop internally.
- Speed to market: Developing a new business from scratch is time-consuming. Collaborating with or investing in a startup that has already achieved product-market fit significantly accelerates entry into new sectors.
- Talent access: Startups attract a distinct type of talent compared to established corporations. Investing in these ventures offers indirect access to entrepreneurial skills and perspectives that can benefit the investing organization.
- Exit optionality: A successful startup in the portfolio that aligns strategically with the core business could be acquired later. If it does not fit, the investment can be exited, and capital reallocated.
Economically, this approach is also sound. Corporate venture capital has a track record of generating strong returns while fulfilling strategic goals. Research indicates that CVC investments now constitute almost a quarter of global venture capital activity and 45 percent of later-stage funding rounds, consistently demonstrating its effectiveness.
However, a crucial condition applies: for corporate venture capital to be successful, it is essential to resist the urge to demand controlling stakes and to be selective in investment choices.
This is a common pitfall for many Bangladeshi companies when they venture into startup investments. The inclination is often to acquire majority ownership, appoint internal management, and operate the startup as another subsidiary. This approach undermines the fundamental purpose of startup investment. Startups thrive when founders have a vested interest and maintain autonomy in decision-making. Taking a controlling stake removes the incentive structure that drives startup dynamism, transforming founders into employees and shifting the culture from ownership to mere execution. Consequently, the very qualities that made the startup appealing initially are lost.
Furthermore, integrating a startup directly into a corporate structure often reintroduces the innovator’s dilemma, which the external investment was intended to circumvent. The startup then operates under corporate limitations, leading to committee-driven decisions, risk aversion, and a focus on short-term quarterly results over long-term value creation.
A more intelligent strategy involves minority investments coupled with strategic support. This means providing capital, mentorship, market access, and operational guidance while allowing founders to retain control. Benefits are realized through the appreciation of the equity stake and strategic alignment with business objectives.
This approach necessitates a shift in mindset, requiring acceptance of less direct control, trust in external teams with capital, and tolerance for failures within a portfolio, knowing that other companies will succeed.
For many Bangladeshi business leaders accustomed to direct oversight, this constitutes a substantial cultural adjustment. However, it is a worthwhile change when a professional and judicious investment process is applied.
The prevailing strategy of internal development has resulted in numerous failures within rapidly evolving sectors. Conglomerates, despite significant resources and established brands, have struggled to compete with agile digital startups. Internal innovation efforts have often faltered due to corporate bureaucracy, and talented teams have departed because the corporate environment could not provide the necessary speed and autonomy.
Concurrently, Dhaka’s startup ecosystem, despite facing obstacles, continues to generate promising companies. Programs such as Accelerating Asia consistently support an increasing number of Bangladeshi ventures, sometimes matching or surpassing representation from more established ecosystems in funding rounds. Startups like Pickaboo, iFarmer, Pathao, and others have proven capable of developing significant businesses that address genuine societal needs.
These emerging companies require capital and strategic assistance to expand. Local conglomerates, possessing extensive market knowledge, robust distribution networks, and substantial financial resources, are well-positioned to offer this support, thereby gaining both strategic and financial advantages.
The key elements currently lacking are conviction and a structured framework.
Bangladeshi business leaders must acknowledge that attempting to manage every aspect internally is neither feasible nor advisable. They need to cultivate the expertise to assess startup investments, structure minority deals that appropriately align incentives, and offer strategic guidance without suppressing the entrepreneurial spirit.
This entails establishing dedicated corporate venture capital or similar investment divisions, staffed by individuals proficient in both startup dynamics and corporate strategy. It also involves formulating investment theses to pinpoint sectors and business models that align with long-term strategic interests, and committing capital with a realistic understanding that venture investing demands patience and a portfolio-based approach.
Furthermore, it necessitates a broader reevaluation of collaborative practices.
Bangladesh is often characterized by social scientists as a low-trust society. There is a reluctance to collaborate with individuals outside immediate networks and a tendency to view unfamiliar partners with skepticism. While this cultural trait may offer protection in some situations, it restricts the development of ecosystems essential for fostering innovation and growth.
Thriving startup ecosystems depend on collaboration that transcends institutional boundaries. This includes angel investors supporting companies they do not directly manage, corporations partnering with ventures they do not control, and mentors sharing expertise without seeking equity. Establishing this collaborative infrastructure requires cultivating greater institutional trust.
The economic justification for corporate involvement with startups goes beyond individual financial gains. When established companies invest in and collaborate with startups, they bolster the entire entrepreneurial ecosystem. They supply capital that facilitates the launch and expansion of new ventures, offer expertise to help founders circumvent common challenges, and generate exit opportunities that motivate more individuals to establish companies.
This development of the ecosystem is especially vital for Bangladesh at its current stage. Entrepreneurship needs to evolve into a primary career option for talented young individuals, rather than remaining an unconventional choice.
With approximately two million young people joining the workforce each year, traditional employment sectors cannot absorb this demographic. Consequently, entrepreneurship must assume a considerably more prominent role.
However, entrepreneurship cannot thrive without a supportive ecosystem, which in turn requires capital—especially growth-stage funding to help promising startups scale past initial success. Local conglomerates, with their substantial financial resources, are uniquely positioned to address this funding gap while simultaneously advancing their strategic interests.
The policy environment, though showing signs of improvement, still poses challenges. Regulatory frameworks for alternative investments are largely undeveloped, and tax incentives for angel investment, venture capital, or corporate venture capital formation are scarce.
Many startups opt for offshore structuring primarily due to domestic regulations that complicate local capital raising. These are systemic issues requiring policy-level solutions.
Nevertheless, even within existing constraints, local companies have the potential to do much more. They could establish dedicated funds for investing in startups that align with their strategic sectors, collaborate with accelerators for early access to promising ventures, develop venture studios to systematically launch and support new businesses, and create strategic partnership programs to integrate startup innovations into their current operations.
Some may contend that Bangladesh’s startup ecosystem is too nascent for substantial corporate involvement, and there is some validity to this argument. Dhaka’s startup landscape has not yet yielded numerous significant successes, and there is a need for more high-quality ventures and operators. However, it is also important to recognize that overall support and investment have been limited. Despite this, many companies, such as Pickaboo in e-commerce and iFarmer in agriculture, along with others across various sectors, have demonstrated remarkable capital efficiency. With adequate capital and support, these companies could achieve substantial progress, benefiting all stakeholders.
Crucially, ecosystems mature through active participation rather than passive observation. When corporations actively engage, they contribute to building the infrastructure, expertise, and proven track record necessary to attract further capital and talent. Conversely, if they remain disengaged, the ecosystem’s development will be slower.
The cost of inaction presents a significant opportunity loss. Each unsuccessful internal venture signifies capital that could have been allocated across a diversified portfolio of external investments. Every missed partnership with a promising startup means a potential competitive advantage foregone. Each year without a defined corporate investment strategy allows competitors in other markets to advance further.
It is important to clarify the requirements for this shift. Developing corporate venture capital capabilities is a complex undertaking, demanding distinct skills from those used in traditional business operations. It necessitates patience for longer investment horizons and an acceptance that some portfolio companies will not succeed. However, the alternative—persisting with internal development while startups consistently out-innovate corporate initiatives—is becoming increasingly unsustainable.
The future path is not a binary choice. Conglomerates should continue to develop businesses in sectors where they possess clear competitive advantages and where the conglomerate model remains strategically appropriate. However, in emerging, technology-driven sectors where speed and innovation are critical, strategic investment in and partnership with startups offers a more effective approach.
Bangladesh has successfully fostered notable companies using the conglomerate model. Now, this model needs to evolve to integrate collaboration with the wider entrepreneurship ecosystem. This does not imply abandoning successful practices but rather complementing internal capabilities with external innovation. It involves acknowledging that, in specific contexts, investing in and partnering with entrepreneurs is a more astute strategy than direct competition.
All the necessary components are present: conglomerates with substantial capital and market presence, a burgeoning pool of entrepreneurs creating innovative companies, and a gradually improving regulatory environment. The missing element is the institutional readiness to connect these spheres through strategic investment and authentic partnerships.
The efficacy of this approach is not in question; it has proven successful in markets both more mature and less developed than Bangladesh’s. The real question is whether Bangladeshi business leaders will adopt it. Should they do so, it is likely to yield strategic and financial benefits while significantly boosting the nation’s entrepreneurial landscape.
