Investing in innovation: Venture Capital and Start-Up Financing in Bangladesh
Bangladesh is enriched with all the features to be recognized as a great macroeconomic story. However, we are yet to utilize our story compellingly. If we consider our regional peers, we will observe that they have carefully nurtured their startup ecosystem to the point that they are reaping the benefits now and writing success stories like Gojek, Tokopedia, Meesho, CRED, and so on.
In Bangladesh, banks can specifically finance a new business to the extent that there are collaterals against which the debt can be secured but in today’s information-based economy most of the startups do not have collateral. Thus, Venture Capital (VC) exists to the rescue. The main idea of VC is to invest in a startup’s growth until it reaches a sufficient size and credibility so that it can be sold to a corporation, or institutional public-equity markets can step in and provide liquidity.
Bangladesh’s startup ecosystem has shown great breakthrough over the past decade, companies such as Bkash, Chaldal, Pathao, Shohoj, and Bdjobs are some prominent names who ventured into this space earlier in the decade. Moreover, during the pandemic, the startups of Bangladesh have stepped with their technology-enabled solution, and have solved multivariate problems.
Currently, the ecosystem is seeing an increasing number of startup-ups but not enough funding available locally. Fundraising in Bangladesh has always been relatively tough for the aspiring founders in the early stages even with considerable traction and proof of concepts.
Appreciatively, this is where the ecosystem got attention from foreign investors and the acceleration took place in specific sectors such as ridesharing, e-commerce, delivery solutions, consumer services, and payments. However, the government of Bangladesh also initiated its own public startup support wing, Startup Bangladesh with a 100 crore BDT (U$ 11.5Mn) fund to catalyze investments. To supercharge the startup ecosystem, they have conducted multiple competitions and boot camps as well. Startup Bangladesh has been actively investing in the ecosystem with 100+ startups receiving seed funds over U$ 1.5Mn+ over the past few years.
Mutual cooperation among different stakeholders is the ultimate way forward for the further development of this ecosystem. Entrepreneurs need to come up with innovative solutions to solve real problems with large market addressable markets. On the other hand, local angel investors and institutional investors also need to understand deeply how does a startup operate in order to achieve its goal of winning the market but not profitability. Finally, working closely with the government is essential in order to unlock foreign venture funds.
Bonnishikha Chowdhury
Executive Officer
IDLC Finance Limited