The first time I sat across from an investor who actually wanted to hear my pitch, I was so nervous I forgot to mention Bangladesh.
I was in an office building near Raffles Place in Singapore. The man across from me managed a fund that deployed across Southeast Asia. He had investments in Indonesia, Vietnam, the Philippines. He had been to Bangkok three times that year. I had spent most of 2016 convincing Dhaka’s garments exporters that a startup existed in their city. We were operating in different universes.
He leaned forward and said, “Tell me about the opportunity.”
I did. I talked about Pathao, about motorbikes and logistics and a population of 170 million people crammed into a country the size of Iowa. He nodded politely for twelve minutes. Then he said something I would hear in different forms for the next two years: “We don’t have a mandate for Bangladesh.”
No mandate. The money existed. The interest in emerging markets existed. But Bangladesh sat below the threshold where mandates are written, below the line where capital gets organized and deployed. That gap, between where money pools and where real opportunities sit, is what this chapter is about.
Where Money Lives
Imagine capital as water. It pools at the highest ground first, the most liquid, most transparent, most regulated markets on earth. The S&P 500. The Nasdaq. The FTSE. The Nikkei. These are the reservoirs. Institutional investors, pension funds, university endowments, sovereign wealth funds, sit their primary allocations here because the ground rules are clear, the exits are visible, and the downside is bounded.
Yale University’s endowment is the most discussed example of how a sophisticated institutional investor thinks about asset allocation. They hold roughly 4 percent in US domestic equities, far below the average university endowment, because their view is simple: if you can measure a market precisely, you can probably also predict its ceiling. Yale put 16 percent in venture capital, a class most endowments barely touch. Over 20 years, that bet returned close to 77 percent annually.
The logic is counterintuitive but consistent. The less efficiently a market is priced, the more room there is for asymmetric returns. The information is more expensive to gather, the exits are murkier, and most competitors won’t go there. Which means the ones who do can earn a premium.
So capital moves down a hierarchy. From public equities to bonds. From bonds to hedge funds. From hedge funds to buyout funds. From buyout funds to venture capital. At each step, the asset class gets less liquid, less transparent, and more demanding of active management. And at each step, the potential for alpha, the excess return over a benchmark, grows.
In 2017, US venture capital deployed roughly $84 billion. The global buyout industry moved $450 billion. The hedge fund industry managed $3 trillion. And all of venture capital, the entire industry, was a rounding error on the US GDP. A loud, influential, brand-name-generating rounding error, but still.
What this means for a founder in Dhaka is not immediately obvious. But it explains almost everything.
The Cascade Problem
By the time capital trickles from the public markets down to private equity, and from private equity down to venture capital, and from venture capital down to early-stage emerging market companies, you are not dealing with the same dollars anymore. You are dealing with what’s left after every institutional preference filter has run.
Most large limited partners, the institutions that actually fund venture capital firms, have formal mandates. A mandate says: we invest in these geographies, these stages, these sectors. It’s not prejudice, exactly. It’s accountability. A pension fund manager deploying retirees’ savings can’t tell their board they put 3 percent in a Bangladeshi motorcycle app because it felt right. They need a thesis, a category, a precedent. They need something that maps to a known asset class in a known market.
When I was raising for Pathao, the known markets were the US, China, India, and, increasingly, Southeast Asia. Indonesia, Vietnam, even the Philippines had enough deal volume, enough fund activity, enough exits, to qualify as investable territory. Bangladesh had exactly one startup that had raised venture capital. Us.
Two Russian investors flew to Dhaka in 2018. I remember the energy in our conference room when they arrived. They were curious in the way that rare visitors are curious, like they were seeing something nobody had filed a report on yet. They asked good questions. They understood the unit economics. They got it. And then they went home and, I imagine, sat across their own LPs and tried to explain Bangladesh, and the mandate problem reasserted itself. Capital wants a map. We were still being drawn.
Why Anyone Comes at All
There is a reason people invest in emerging markets despite all of this. The answer is deceptively simple: every market that now has a mandate was once mapless. Indonesia 2010 looked a lot like Bangladesh 2016. Vietnam was considered speculative until it wasn’t. The investors who moved early into what became obvious later, those are the people telling the stories now.
The thesis has a name even if nobody calls it that cleanly. Investors who understand the cascade look for the gap between where money is currently allocated and where economic activity is actually growing. A country’s GDP per capita climbing from $1,000 to $2,500 does something specific to consumer behavior. People get smartphones. They get bank accounts, or reasonable substitutes for them. They start buying things online and expecting them to arrive. The whole infrastructure layer of economic life gets rebuilt, and whoever builds it earns the compounding returns that come from being early to an expanding base.
Bangladesh in 2016 had 170 million people, a $250 billion GDP growing at 7 percent annually, one of the youngest demographic profiles in Asia, and almost no formal digital infrastructure for commerce or mobility. The gap between the economic activity that existed and the digital layer that should serve it was, if you were willing to look, enormous.
A French billionaire put it to me over breakfast in Singapore more directly than most. “Of those 170 million people,” he said, “how many earn more than $10,000 a year?” I did the math. Maybe 5 million. He nodded. “Those are your customers. That’s your market.” He wasn’t wrong. He was also explaining precisely why his fund didn’t have a Bangladesh mandate.
The people who invest in early-stage emerging markets are making a bet that the addressable market will expand faster than the capital cycle. That the 5 million who can afford the product today will become 15 million before the fund needs to exit. They are buying the trajectory, not the snapshot.
The Stack Nobody Talks About
Here is what Pathao’s fundraising actually looked like from the inside, which is different from what it looks like in a press release.
The first layer was Fahim. Not a fund, not a mandate, not a term sheet. A man who had made real money on a prank-calling app and decided a joke website about hartals in Dhaka was worth a conversation. He was the seed below the seed, the kind of capital that doesn’t appear in any database because it precedes the category. When he said yes, Bangladesh didn’t have a startup ecosystem. It barely had the word. His bet wasn’t on a market. It was on a person. That is a different calculation entirely, and most institutional capital is structurally incapable of making it.
The second layer was David. He was not a formal VC. He had his own capital, his own thesis, his own way of reading a room. When we got turned down in Singapore, the rejection landed harder on him than it did on me. Hian had called us “cute.” David had heard something else in that word. We drove back to his bungalow on Nassim Road, thought it over, and wired $600,000. No committee, no fund cycle, no LP approval process. Just a man who had seen enough of the world to know that “we don’t have a mandate” was not the same as “this won’t work.”
What David provided that Fahim’s early money couldn’t was staying power. He was at every board meeting. He flew to Dhaka when the company nearly ran out of cash. He made calls to other investors, argued the case, put in his own money again when nobody else would. He was an expert without the institutional wrapper, which meant he moved on instinct and relationships rather than fund mandates, and that made him both faster and more loyal than most formal investors we ever encountered.
The third layer was a proper VC like NSI. A proper fund, a formal mandate, a term sheet. They came in tentatively at first, then firmed up once Gojek validated the market. They were the signal the rest of the market needed. Once a recognizable institutional name was on the cap table, the VCs who had been avoiding Bangladesh had something to anchor to. A comparable. A category. A reason to get on a plane to Dhaka.
That is the actual stack: founder conviction, then expert capital without formal structure, then institutional validation. Most funding advice skips the middle layer entirely. It jumps from “get an angel” to “raise a Series A” as if those two things sit next to each other on a straight road. They don’t. In a frontier market, there is a long and difficult middle period where the company is too big for pure angel money and too unproven for a formal fund mandate. The people who fill that gap, the Davids of the world, are doing something that has no clean name in the venture playbook. But without them, most frontier market companies never make it to the institutional round.
The lesson was not about finding better investors. It was about understanding which kind of investor your company actually needs at each stage, and being honest about which stage you are in. Fahim could see a person. David could see a company. NSI could see a market. Each one required a different story, a different ask, and a different kind of trust.
What the Rejection Actually Means
I sat across from dozens of investors between 2015 and 2021. The ones who passed on Bangladesh were not stupid. Many of them had sharper analytical frameworks than the ones who said yes. The problem was not analysis. It was mandate.
A mandate says: I can only deploy here, in these sectors, at these stages, with this level of liquidity risk. Bangladesh didn’t fit. The VC fund life cycle is typically ten years. A fund deployed in 2016 needs exits by 2026. In an emerging market with no established IPO culture, no deep M&A infrastructure, and no clear public market path, that timeline is genuinely uncertain. You can believe in the opportunity and still not be able to hold the position.
This is the structural reality that almost no one explains to founders in markets like Bangladesh. The investors who passed weren’t saying your company isn’t good. They were saying: my fund structure isn’t built for your market’s time horizon. The ones who said yes were either building that infrastructure for the first time, or were operating from a longer-term mandate, or had something to prove about frontier markets in general.
We eventually found our investors in the second and third categories. The ones who came to Dhaka were the ones who wanted to be first, who had a thesis about South Asia that went beyond the obvious India story, who were willing to build the playbook because nobody had written it yet.
The Bargaining Power of Being Unmapped
There is an upside to being outside the mandate zone, though nobody tells you this when you’re sitting in your third rejection meeting in a row.
When a market is on every fund’s radar, valuations rise. When Uber raised its Series A, the negotiation was fierce because half of Sand Hill Road wanted the deal. When Pathao raised, we were one of a handful of options for any investor who wanted a piece of Bangladesh at all. That sounds like a disadvantage. It was also leverage we didn’t fully understand how to use.
The investors who took the risk of being early to a frontier market expect a return premium. But they also have fewer options, fewer competitive term sheets, fewer data points to anchor a valuation to. The founder who understands this, who knows that the lack of mandate means the lack of comparable deals, can sometimes negotiate from a position that founders in well-mapped markets cannot.
The other upside: the investors who come despite the mandate constraint tend to come with more than capital. They come with a specific thesis. They come having done the work to convince their own LPs to allow the exception. They are, by definition, more committed to the outcome than a generalist fund that deployed into your market as a small allocation in a diversified portfolio.
David flew to Dhaka during a cash crisis and put in his own money because he had a reason to see us succeed that went beyond return multiples. That is what committed capital looks like. It looks like a person on a plane.
In every market that eventually generates headline-making companies, there is a period before the mandate existed. Someone has to be the deal that writes the playbook. Someone has to be the company that makes the next company’s fundraise easier, because now there is a precedent, a comparable, a story to tell to a skeptical LP.
We were that company for Bangladesh. It was expensive, it was slow, and it was worth it.