Good days for venture funding

Positive growth reports coming from the startups sector should make us believe in the potential of this sector despite the Covid-19 pandemic. It is true that the deadly virus has left its ugly marks on life and living, yet it could not break the morale of the entrepreneurs of the country. With steady investment, intelligent planning and aggressive marketing, venture funding for the country’s startups has seen robust growth during the Jan-Aug period of the current year.

And now with the pandemic slowing down it is hoped that the startups will be able to raise more investments and grow further in the coming years.   

According to research data, the number of active startups in Bangladesh is around 1200 with nearly 200 new ventures coming up every year. These startups created about 1.5 million direct and indirect employment so far. Bangladeshi startups received $111.6 million in investment during the January-August period of 2021.

It is said that foreign investors invested about $109.4 million, which is about 98 per cent of the total amount, and the rest $2.2 million came from local investors. Research reports show that in the last five years Bangladeshi startups attracted $272 million in investment and over $300 million in the last decade.

In the first half of 2021, more than $35.6 million was invested by the local and global capital institutions along with the support of the government-backed venture capital (VC), Startup Bangladesh Limited.

It is worth mentioning that during the January-August period of 2021, ShopUp, a one-stop solution for SMEs in the country, raised $75 million fund, the highest as a single startup. Besides, Paperfly received $11.80 million, Frontier Nutrition Inc $6 million, Praava Health $5.6 million, Truck Lagbe $3 million, Databird $3 million, Maya $2.16 million, alice $5,00,000, Intelligent Machine $4,70,000, Shuttle $4,00,000, Arogga $2,00,000, Shikho $1,00,000 and UPSKIL $11,00,000 in investment.

Sector experts say that Fintech, ride-sharing and logistics are the most promising sectors to invest in. Experts also stress the fact that funds are important for startups because entrepreneurs usually start a business with small savings or collecting funds from family members and friends. Therefore, seed funding or venture capital is crucial for business expansion or to run day-to-day operations smoothly.

If we look at the global scene we see that the frame of the global economy is evolving. Business people are focusing on production segmentation. As a result, a company does not need to be large or produce all the things.

Market players are of the opinion that now, it is a shared economy where a small innovation is turning into a giant. That is why big investors are funding startups. However, collecting or raising funds is not a goal of a startup. The goal is to reach the target they set in the first place and the necessity for funds emerges when a startup wants to take its work to the next level.  As such, an entrepreneur looks for funds when he or she cannot meet the expenses with the revenue earned or they start to get more orders than what they can handle. So when they plan to expand they need funds. In plain words, when the volume of delivery orders goes up and they need to expand, the issue of funds comes up as a natural consequence. With the new investment, entrepreneurs expand their network with all facilities to deliver orders anywhere in the country regardless of size. This is true that investors will look for innovativeness of the business ideas, business prospects and legal aspects before agreeing to invest.

There is no denying that Bangladesh is far behind in tapping opportunities to attract global funds for startups. On the other hand, many other South Asian countries are well ahead of us. One of the reasons that experts point at is the fact that in Bangladesh, investors are still giving importance to money than innovation and talent of an entrepreneur.

Also, the network or connection with the investors of Bangladeshi entrepreneurs is weak. Entrepreneurs feel that to be able to attract more seed funds and venture capital, the government should continue with the policy of tax exemption and waiver of   duty.