State-owned venture capital firm Startup Bangladesh sets sail
For Bangladesh’s start-up ecosystem, this year could very well be an inflection point: Startup Bangladesh, the state-owned venture capital firm, on Wednesday announced its plan to invest Tk 100 crore in 50 start-ups in 2021.
In simple terms, a start-up is a young company founded by one or more entrepreneurs to develop a unique product or service and bring it to market.The business model has to be repeatable and scalable and at a pace that has a major impact in the market.
It is different from a small- and medium-sized enterprise in that it does not generate revenue from the first day of opening and is not sustainable off the bat.
Early-stage funding is a challenge for start-ups anywhere and more so in Bangladesh, so the initiative from the government is a blessing for the up-and-coming industry here.
As much as 94.3 per cent of the funding managed by Bangladeshi start-ups over the past decade came from abroad, according to a recent report styled ‘Bangladesh Startup Ecosystem: Funding Landscape' by LightCastle Partners -- indicating the deficiency of a conducive system in the country for fledgeling entrepreneurs.
Of the $317 million received since 2010, only $18 million was from local sources, the report said.
“We want to develop and foster a tech-based ecosystem in Bangladesh as it will develop and support the Digital Bangladesh narrative,” Tina F Jabeen, managing director and chief executive officer of Startup Bangladesh, told Dhaka Tribune yesterday.
Investment in start-ups will generate more jobs than in a manufacturing company, she said.
Startup Bangladesh plans to invest in tech-based start-ups working in logistics, edutech, fintech, frontier tech and agri-tech.
In line with that goal, the company put in Tk 15 crore in seven pathbreaking start-ups and social enterprises: Pathao, Dhaka Cast, Moner Bondhu, Chaldal, Eduhive, Sheba.xyz and Intelligent Machines.
The companies received the funding to scale up their production, improve the quality of goods and services, and develop the supply chain and marketing strategies.
“We want to invest in areas where you have national development goals,” Jabeen said, adding that Startup Bangladesh will provide from Tk 50 lakh to Tk 5 crore.
Startup Bangladesh will provide early-seed funding as well as successive funding as the start-ups scale up.
The firm is already in talks with different stakeholders for investment in another 43 start-ups this year.
The start-ups would be chosen from the pool vetted by players active in the ecosystem such as UNDP Accelerator Labs, R-Ventures, GP Accelerator 2.0, Startup Dhaka, Anchorless Bangladesh, IDLC Venture Capital Fund and Bangladesh Angels Network.
“These have a ready list of start-ups and they have already done their due diligence. We will curate from this ecosystem.”
The application will go through a rigorous process by a full-scale portfolio team, an investment team, a legal team and finally the Startup Bangladesh board.
“With start-ups, there is a disproportionate return on investment. If you put in $100 million, you can get up to $1 billion,” she added.
Startup Bangladesh, under the ICT Division, has one key advantage that allows it to take a different approach to venture capitalism: as a state-owned firm, it can invest not only in companies that will give the highest returns, but also those that will provide social benefits to the nation.
“Venture capital firms are usually accused of helping those companies that are already doing well,” said Mohibul Hasan Chowdhury, the deputy education minister, at the event yesterday to announce Startup Bangladesh’s first series on investments in the seven start-ups.
“But giving funds to established firms will not help us achieve Bangabandhu’s ideal of leaving nobody behind,” he added.
Furthermore, unlike usual government grants, these investments will not be loans but equity investments, said Zunaid Ahmed Palak, state minister for ICT Division.
Through the initiative, the government has created a national entrepreneurship platform.
"Startup Bangladesh could bridge the gap between the start-ups and their potential with required capital financing. The tech-solutions provided by start-ups could support the nation achieve the Sustainable Development Goals by 2030.".
For pre-seed start-ups, grants will be given through other programmes of the government such as the Bangabandhu Innovation Grant (BIG), to develop them for future funding.
For the start-ups that will be given funds this year, a performance monitoring committee will decide if they will get more funds in the future worth up to Tk 5 crore, Palak added.
“Among all the frontier markets, Bangladesh holds the most promising opportunity for venture capital and private equity investments. The country’s English-speaking, tech-savvy young population is ready for deployment,” Jabeen said.
With its focus on financial inclusion, social equity, and equal access to technology, Bangladesh is positioned to become a stellar performer in achieving sustainable development goals by leveraging disruptive technologies and innovative solutions, she further said.
Ki-Hak Sung, chairman and CEO at Youngone Corp, also spoke on the occasion as a guest speaker.
Christopher Burry, the Co-CEO of US Market Access, also shared his excitement and wished Startup Bangladesh all the success in the coming days.
He believes that Bangladesh has already made good progress in developing the start-up ecosystem and vowed to support the ecosystem through strategic coaching and networking.
Mustafa Usman Turan, the Turkish ambassador to Bangladesh, shared that he and his country Bangladesh see massive potential for collaboration in IT and innovation between these two countries and are keen to develop partnerships in the information technology (IT) and e-commerce sectors.
Senior Secretary of the ICT Division and Chairman of the board of directors of Startup Bangladesh NM Zeaul Alam also attended the event.