How is Bangladesh’s First Venture Capitalist Firm Startup Bangladesh Doing?

Source: Entrepreneur


B U S I N E S S – B A N G L A D E S H


Rabab Rayan


Startup Bangladesh is a government-run venture capital company that seeks to fund high-growth tech-based startups based in the country.

Startups are companies created by one or more entrepreneurs who want to create a product or service they believe are in demand. In general, these businesses start at high costs and low revenues and are therefore looking for funding from various outside sources, such as risk capitalists.

This is where venture capitalists come in.

A venture capitalist (VC) is a private equity investor who offers funding to new businesses with a high potential for growth in return for equities (stocks). They are prepared to risk investing in such companies because, if these ventures succeed, they will gain a significant return on their investment. 

However, in contrast to the public stock market investors, VCs have high failure rates—almost three-quarters of the start-ups they invest in fail. So VCs need to make sure that those that do succeed generate enough revenue to cover up for the losses. 

To decrease the risk, VCs typically don’t finance startups from the very beginning. Instead, they aim at businesses that are on the stage of selling their concepts. And so investors can buy stakes in promising companies at a low premium and nurture the business into growth until they can achieve a substantial return on investment. 

Startups have become synonymous with new businesses nowadays with the rise in popularity of Uber, Airbnb, Grab, Coupang, etc. However, they are different from your everyday business in terms of growth intent, scalability, business goals, and levels of funding they have access to. A small business’ success is dependent on being profitable in the long run. But startups try to generate value by growing their user base. Their main objective is to grow quickly and to have an impact on the current market by generating revenue and increasing their user count each year. These companies are usually created to solve an existing problem in the market with tech or tech-enabled projects. They have become insanely popular among consumers and, as a result, have enjoyed huge success. Countries worldwide have been investing heavily to grow a startup ecosystem and this has seen the rise in the number of VC firms whose funds allow these startups to develop. 

Bangladesh joined the list in March 2020 by opening Startup Bangladesh, a state-run VC firm,  which seeks tech-based startups that are still in their early stages of activity and demonstrating great potential for success.

It was created to generate a sustainable startup ecosystem in Bangladesh and develop and enable promising entrepreneurs to shine and mark their mark on the global stage. Bangladesh-based startups that need capital to rapidly launch and scale their services will apply to it for seed capital and growth rounds. Funding applications are processed clearly and straightforwardly. With 3-5 years of service, the company hopes to make a return on its investments.

Startup BD initially reported Tk 15 crore, or $1.75 million, in the first series of investments to seven start-ups. They aim to invest up to Tk 500 crore to help new entrepreneurs faster innovate, build new jobs, grow technological know-how and achieve the current Awami League-led governments Digital Bangladesh vision. According to ICT Minister Zunaid Ahmed Palak, this could help Bangladesh reach the Sustainable Development Goals by 2030:

“Startup Bangladesh Ltd could bridge the gap between the startups and their potential with required capital financing. The tech-solutions provided by startups could support the nation achieve Sustainable Development Goals by 2030.”

Startup Bangladesh not only provides funds to its portfolio of startups, but they are also willing to give them access to mentoring services from a team of experts, academic programs, and access to legal support in case of any issues with stakeholders or outside personnel. Not to mention the co-working spaces they provide to allow startups to begin their operations. 

Despite being a VC firm, it is ready to act as a hybrid accelerator whose aim is to provide companies with mentoring, consulting and tools to help start-ups succeed, including a demo day, where founders can pitch their ideas to investors in the hope of securing investments.

And being state-run allows it to invest not only in high-return ventures but also in ones that may benefit the society. 

Bangladesh’s economy is quite dependent on the RMG sector for growth, and foreign experts have long been advising for diversification. Initially, pharmaceutical, leather, ship-building industries were thought of only for economic development. Still, the new breed of startups growing each year can play an essential role in Bangladesh’s economic growth and provide a sustainable way for job creation for the significant number of young people entering the job market each year. And startups in tech can help the government achieve its Digital Bangladesh Vision as well, and, as a result, the government should take steps to make the path to success more accessible to the companies. 

And it is through Startup Bangladesh, the government can make the business environment more conducive to these startups. 

Startup Bangladesh can play an important role in the future of Bangladeshi startups and ensure their success and help them grow at the same time if the funds flow and the organisation works properly, setting long-term goals and not operating with only short term gains in mind.

 


Rabab Rayan is a Business undergrad trying to excel academically but failing spectacularly.

 

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