Anchorless Bangladesh is an early stage venture investment fund focused on advancing the local startup ecosystem through access to global resources.

Bangladesh has the eighth largest population in the world: 165 million people living in an area the size of Iowa with an economy that’s been growing almost 10% a year nominally for the last decade. This growing consumer demand in a high-density market creates an industry worth over US$10 billion a year in truck freight alone.

At Anchorless Bangladesh, our goal is to identify early stage startups best-suited to take advantage of such large, unique opportunities in Bangladesh. Loop is a company on that exact mission, re-imagining the movement of commercial goods for next generation shippers and carriers. We are thrilled to announce a seed investment in Loop and look forward to working closely with this brilliant, passionate team in contributing to a better Bangladesh — and beyond.

The Starting Point

When we meet founders, we first try to understand their motivation and desire for doing what they do — and if the problem they’re trying to solve is something they’ve faced first-hand. In Loop’s case, co-founders Fahim Salam and Rajib Das both have experience: Fahim cut his teeth trading blankets via Alibaba which led him to discover the world of “broken freight.” Rajib, on the other hand, spent time at the Port of Vancouver and left with a desire to solve myriad inefficiencies — which multiplied tenfold when he came back home to Bangladesh to handle the supply chain aspect of his family’s business. But the team wasn’t complete until they brought in Chris Li, rounding out a trio that had collaborated together in some capacity for over 6 years. Chris built a clean, scalable tech back-end to execute their vision — and thus a company was born not for the sake of vanity but rather a need to tackle a large-scale local, regional and global problem.

The problem in question is a massive freight market operating without a centralized booking system, lacking transparency and tracking, with wasteful empty miles and without quality data to analyze and improve the ecosystem. Loop’s centralized platform provides an asset-light solution by digitizing the process for both shippers and carriers end-to-end, all while reducing freight costs and providing a better user experience.

Why It’s Working

So, how does Loop implement a digital solution in an industry notorious for doing things the old-fashioned way? With an innate understanding of their end users, Loop targets truck fleet owners as carriers rather than independent drivers, and they have secured business with both local and multinational corporations as shippers. By working closely with clients to transition users to digital, Loop has been able to successfully onboard new business at an accelerated pace. For instance, within a month, they were able to reduce the asset management cost of a feed mill client by 27% using reverse logistics. Consequently, they’ve already shown success with agriculture, ceramics and FMCG clientele.

Here’s how they’re making it happen:

1. Pricing is agreed upon and honored. No wasteful negotiating.
2. Logistics managers and suppliers no longer need to spend time on phone-heavy coordination with traditional transport brokers who may provide misinformation or put their own interests ahead of those of the client. Instead, in three clicks on Loop’s platform or with the help of a Loop account manager, shippers are directly connected with a national chain of vetted truckers.
3. A long chain of calls for location updates is replaced with transparent digital shipment tracking.
4. Truck owners can reduce deadhead costs, improve driver safety and transparency while getting paid faster.
5. Business owners can avoid sinking assets into their own fleet of trucks — currently numbering 200,000 plus nationwide — that often sit idle.
6. Shipping managers can utilize Loop’s enterprise software for real-time reporting, analytics and increased visibility — all contributing to better decision-making.

Loop is hyper-focused on executing according to the needs of its end-to-end users rather than pushing for solutions that require jarring behavioral changes. This approach has resulted in some of the best capital efficiency we’ve seen from any company in the country.

Beyond Bangladesh

A key tenet in our investment philosophy is the potential to expand beyond Bangladesh. With the country being positioned strategically as a gateway between India and China, two of the world’s largest economies, Loop has the ability to harness local Bangladeshi talent and resources to naturally engage in cross-border operations.

“Loop Freight is all set to improve the Logistics Performance Index of all manufacturing and distribution heavy countries in Asia, starting with Bangladesh. We can make it happen by having a lean and data-driven approach to moving commercial goods.”

— Fahim Salam, Co-Founder

Expansion eastwards to Myanmar allows Loop to engage in the East-West Economic Corridor, ending up in Vietnam and into the Pacific. Westward, India awaits. Considering Bangladesh’s import/export volume (over US$104 billion in 2018 according to the World Bank), this is not only natural but inevitable.

The logistics industry is surely having a moment. Seattle-based Convoy, with its asset-light approach, is arguably Loop’s closest operational peer. In emerging markets, Kobo360 of Nigeria has demonstrated the ability to expand across borders. Yet, in the bigger scheme of things, the world still remains as fragmented and undigitized as ever. Even San Francisco-based Flexport (with US$1.3 billion raised) has barely scratched the surface in a market that generates trillions in transaction value every year. An industry as old as any, logistics is at the precipice of a global digital transformation — and the ongoing pandemic looks to serve as the driving catalyst in getting it over the edge.

For the Next Decade

As venture investors, we understand that our relationship with companies may last five years, even a decade. We also know that the money we invest today is just the beginning, with hopefully more rounds to come. Knowing this, we ask ourselves: “Do we want to work with these founders for that long?” and “Would we work for these founders ourselves?”

With Loop, the answer is a resounding yes to both.

At the end of the day, our belief at Anchorless is not only in Bangladesh, the country and its potential, but also in Bangladeshis, the people and their abilities — about how access to expertise and capital can empower them to build companies that solve global problems.

With Loop, the Bangladeshi star shines bright for the future of logistics.

Ways to contact Loop and Anchorless Bangladesh:

Loop Freight: Web · Email · LinkedIn · Facebook · Twitter
Anchorless Bangladesh: Web · Email · LinkedIn · Facebook · Twitter

Introducing Loop: The Future of Logistics in Bangladesh and Beyond was originally published in Anchorless Bangladesh on Medium, where people are continuing the conversation by highlighting and responding to this story.

Though this article is focused on the Bangladeshi ecosystem, most of it is relevant to companies and founders all around the world. If you don’t understand all the terminology or situations in here, please ask in the comments and/or leave thoughts on what you’d like to see future articles on.

Majority of the “startups” I’ve met in Bangladesh are not startups. They’re small-to-medium enterprises (SMEs) — and that is perfectly fine.

There’s no glamour in being a startup. Don’t feed into it. It’s not easy, your chances of success are low and you’ll go through hell before it gets better. More importantly, you can build a fantastic business without being one. Then why does it matter if you call yourself one but aren’t? Because it sets wildly different expectations for how your company should operate, which investors it should pursue and how you should think about the future.

So, whether you’re already a startup or are an SME that wants to transition into one, get to know the ground rules — you’ll be better prepared to raise money while having a clearer idea of what’s required.

What is expected of a startup

If there’s one word to sum up what a startup should be able to do, it’s scale. In fact, not only should it scale, but it should scale exponentially. Every additional dollar put into the business should grow the business more than the previous dollar did. For instance, if the first $1 got you 5 users, the second $1 should get you 7 and the third ought to get you 9. If your unit economics see an improvement in the process, it usually indicates the company has a technology or tech-enabled system in place to grow at an accelerated pace with incremental capital. It effectively validates that you’re solving a real problem with a relatively large market.

Why is this important? Because it leads to our next point:

Startups are expected to at least attempt to win the market. If your company’s vision isn’t to be the market leader in what you’re trying to do (even if it’s in a niche), then you’re not a startup. Again, you may be a very good business — and arguably more profitable than a startup!— but you are not a startup.

In addition, simply utilizing technology (e.g., a website or app) does not make you a startup. On the flipside, you can be in a traditional industry and still be startup. For example, Zilingo has raised over US$300 million because it built a tech-enabled solution for garment manufacturers and fashion retailers to operate more efficiently.

Understanding the role of investors

An investor should only allocate a small percentage of their money to startups. Why? Because they should be willing to lose all of it.

Investing in startups is all about risk allocation. Investors want to spread their risk across 10 companies, for instance, with the hope that two or three give them an “oversized” return while the remainder go to zero.

Example: If 8 of 10 companies go to zero but the other two return 20x their initial investment, the investor’s portfolio actually has a 400% overall return. This is why investors want you to scale and go for the win.

In contrast, if all of these companies just tried to operate conservatively and were able to return 25% each, then the whole portfolio only has a 25% return. If that’s the case, isn’t the investor better off putting their money in something much less risky? For Bangladesh, this is especially important: Why would a foreign venture investor come all the way here if they could get similar returns at home without all the trouble?

There’s a longer conversation to be had here regarding specific roles of angel, seed and venture investors — but that’s a whole other article.

Just remember this: When you take money from an investor, make sure that they themselves want you to be a startup and not just an SME. If it’s the latter, and you’re fine being one (which you should be), then that works too. A simple way of getting to the bottom of it is letting them know, “We may make you a ton of money, but we may also go to zero.” If they’re fine with that, they’re fine with investing in a startup.

Funding, profitability and dividends

An SME will take initial funding and use it judiciously, focusing on the age old mantra of “sales minus costs equals profit.” They can take the profit, re-invest and grow as needed or they can choose to return the profits to shareholders in the form of cash dividends.

A startup will not only require initial funding but also follow-on rounds (Series A, B and beyond) if they are successful. Why? Because being the best in Mirpur isn’t enough. Being the best in Dhaka isn’t enough. And for some, being the best in Bangladesh isn’t enough.

For this to happen, every last bit of capital generated should be plowed back into the company for future growth. Startups do not pay dividends. If a prospective investor is asking for dividends, they should look to invest elsewhere.

And while a startup can aim to be profitable in the long-term, its shorter-term goal is a value creation while keeping in mind the need for an eventual exit. A higher valuation can be dependent on a multitude of metrics, most of which are fundamentally driven: annual recurring revenue (ARR) and customer lifetime value (LTV) are a couple of examples. Actual market valuations are complex and depend on the country, the industry, the product and a slew of other factors, but having strong fundamentals already puts you on the right path.

So, what are some of the ways startups can find an exit?

Endgame for investors and founders

One of the biggest distinctions in how startups and SMEs operate is exit strategy. Most SMEs will simply want to be a continuing business while growing a little every month, every year. If an investor wants to sell shares, they may even sell it to the founder once they have enough money.

A startup, on the other hand, needs a clear strategy for an exit. There are generally three options for investors and founders:

1. Acquisition: Someone buys the company, including the shares of investors and founders. This can happen at relatively early stages if the company shows enough value, especially on a strategic basis. For instance, when Amazon bought Twitch for US$970 million in 2014, the company was barely three years old. However, anticipating the growth of esports and knowing how much Amazon could cut costs because of internal AWS efficiencies, Amazon acquired them for nearly a billion right after a mere US$30 million Series C raise.
2. IPO: The company lists on a public stock exchange. Google (currently valued at US$925 billion) raised roughly US$25 million in venture funding before deciding to IPO — where it was valued at around US$23 billion. Investors and founders were able to sell their shares in the market at that point.
3. Secondary Sale: Gojek — the Indonesian unicorn and investor in Pathao — recently raised a Series F at a valuation of around US$10 billion. Along the way, investors who came in at an earlier stage (such as Series A or B) were able to sell their shares to the new investors. Founders themselves don’t always have the option to sell in these scenarios, but it varies cases by case.

There is no “best” exit option for a company, but at every step of a startup’s life cycle, it’s important to know what the best exit strategies are. For instance, Uber got so big that an IPO was a much easier option than finding an acquirer, since only a few companies globally could “afford” a company of Uber’s size. In short, keep in mind that an exit is necessary as a way for both the investor and you, the founder, to get money back into your pockets. However, there’s no better outcome than to have such an amazing business that everyone will want to buy shares even at increasing prices.

One final note on this front is that it’s also important to know when to recognize that it’s not working. I recently discussed this in light of COVID-19, and I’ll contextualize it a bit more here: If you don’t see a reasonable path to scaling, stop stressing yourself, your employees and your investors unnecessarily. You can either turn your startup into a “lifestyle” company — which is to say you stop chasing future fundraising and exits and instead focus on stabilizing the business — or wind it down instead of burning additional cash that has a minimal to negative return.

Differentiating startups and SMEs

Here are some rough ideas of what separates startups and SMEs:

SME: A digital agency
Startup: A platform to connect designers to clients

SME: A small garments factory
Startup: Enterprise resource planning software for RMG manufacturing

SME: An ecommerce website that sells a company’s inventory online
Startup: An ecommerce platform that creates logistics efficiencies through various supply chains and clientele

Notice that in each example, the startup variation is able to scale exponentially because of a technology-enabled system. Simply using something “tech” is not enough.

What we look for at Anchorless Bangladesh

At Anchorless Bangladesh, we primarily focus on Seed to Series B venture investments. Some of the key things we look for in our companies:

1. A scaleable technology back-end that allows the company to grow at an accelerated pace per incremental dollar invested.
2. Companies that have the ability to not only win the domestic market in Bangladesh, but also expand regionally and globally.
3. Identifiable pathways to future fundraising and exits.
4. Collaboration potential with our existing portfolio companies.

Unsurprisingly, much of what separates startups from SMEs are key tenets of venture investing. The rewards have to match the risk.

So, are you a startup?

Because if you’re not, that’s okay. The only reason it realistically matters is so that you, as a founder, are matched up with the proper expectations and investors for your business.

But if you are a startup or are an SME that wants to take that journey, make sure you check all the boxes above —

And let’s reach for the stars.

#UnstoppableBangladesh

You’re Probably Not a Startup — And That’s Okay was originally published in Anchorless Bangladesh on Medium, where people are continuing the conversation by highlighting and responding to this story.

This time around, consumer behaviour may never be the same again. Will people eat out as often? Will Zoom become the norm for workplaces? Will Hollywood release blockbusters on Netflix on day one? The post-pandemic world will see a shift in profit centers — and that may mean a business that worked yesterday will no longer make sense, and a business that doesn’t yet exist will be the next unicorn.

As founders, decisions have to be made — for your employees, your investors and yourself. How do you move forward in a time of such uncertainty?

There are four key questions to ask when deciding how to proceed:

1. Will COVID-19 fundamentally change your business? If so, is it for the better or worse? For instance, if you’re Zoom, the answer is obvious. Companies across the world have figured out that some simply operate better remotely — and they’ll be sticking to that even after lockdowns are lifted. However, what kind of impact will it have on theme parks or movie theatres if people suddenly prefer a virtual reality instead? People may structurally become wary of crowded places or refuse to travel unless absolutely necessary.
2. What kind of runway do you have? If you need to raise money immediately to just survive, chances are you would have hit a wall even without COVID-19. However, if you have a large amount of cash in your bank account, you could cut all unnecessary costs and hibernate until there’s greater clarity. (I wouldn’t recommend that, but it’s an option.)
3. Do you have the necessary resources to pivot? Depending on your product and/or industry, a pivot — whether short-term or long-term — could make a lot of sense. However, if you don’t have the personnel or resources to do so, it may be impractical.
4. Are your existing investors able to help? This can make or break quite a few companies, especially if the runway is short. Incidentally, this is also why high quality angel and seed investors are so important to startups.

The flowchart above is a rough guide on how to come to a decision. By no means are these rigid guidelines but rather a foundation to help you, the founder, navigate through these uncertain times.

Some of the primary takeaways from this:

1. If you pivot, make sure it’s in-line with your company’s long-term vision. For instance, don’t suddenly deliver groceries if it doesn’t benefit your core technology or product. If you’re collecting data that you can convert into future users, that’s a possible way to justify such a decision, but —
2. Remember that investors will ask what you did during the pandemic. If your revenues fell, they’ll understand. What they won’t understand is if you burned investor cash to run a business that didn’t help the company’s long-term plans and valuation.
3. Cutting all unnecessary costs doesn’t mean the company can’t be improved upon. Improve your code. Redo your app. Call potential clients and line them up for business for when all this is all over. The absolute worst thing a company can do is nothing at all. It’s arguably worse than a bad pivot.
4. Take advantage of your ecosystem. Odds are other founders are also experiencing similar issues as you. Barter services, collaborate or build partnerships that would have been unlikely before thew pandemic. Exchange engineers for CFOs and share strategies with your former enemies. Lack of money doesn’t keep you from improving.
5. Communicate! Talk to your investors, talk to people who didn’t give you money. Talk to your employees, your customers. Let them know what you’re doing and how they can help. If nobody knows what you’re going through and thinking, how can they be part of the solution?

The two most critical decisions founders need to make in such an environment:

If the stars align, get aggressive.

If your company is able to operate successfully through COVID-19 — meaning you have flat to increasing demand and 12–18 months of runway or are able to raise immediately — then take advantage of this uncertainty to gain market share today and hire the best talent available (including many who will unfortunately be laid off) to prepare for tomorrow.

If Murphy’s Law strikes, it’s okay to say it’s over.

If you: 1) don’t have a large market share, 2) have been unable to build a competitive advantage, 3) have serious competitors with proper financial backing, 4) have a product/service that’s significantly impacted by COVID-19 or, most importantly, 5) believe your product/service will see a structural decline in demand after things settle down — take a deep breath here! — there’s no shame in winding it all down.

Finding a soft landing is a respectable option. Talk to your investors, mentors and competitors. Figure out what your most valuable assets are and find a buyer. Or find your employees a home through an acquihire. Your and your employees’ mental health is important. How you treat them as well as yourself will be part of your legacy beyond a single startup.

And here’s the thing: A lot of investors like second-time founders, even if their first startup failed. They’ve gone through hell and know how to get back up. They know the pitfalls and have a greater sense of self-awareness. Most importantly, they know not to drag employees, investors and themselves through a never-ending descent without the sight of light at the end of the tunnel.

Make the hard decision. These folks did.

Hard Decisions for Uncertain Times: A Founder’s Guide was originally published in Anchorless Bangladesh on Medium, where people are continuing the conversation by highlighting and responding to this story.