The status of venture Capital in Bangladesh

Introduction

New businesses with a possibility to develop need of a specific measure of venture. Big investors like to
put their capital in such organizations with a long term growth development point of view. This capital is
mainly known as Venture Capital and the financial investors are called capitalist. Such speculations or
investments are hazardous as they are illiquid, yet are fit for giving noteworthy returns whenever
resources are put into the correct endeavor or venture. The profits to the financial investors rely on the
development of the organization. Financial investors or venture capitalists have the ability to impact
significant choices of the organizations they are putting resources into; as it is their cash in stake. The
main importance of it is that it generates high interest returns at very early stages and at a growing
pace. Because we all know; the higher the risk, the higher the return.

History of Venture Capital in Bangladesh

In respect to Bangladesh, venture capital financing institutions are fundamentally enlisted with the
Registrar of Joint Stock Companies (RJSC) as limited companies under the Companies Act 1994. In this
way, these companies are required to get partitioned registration from the Bangladesh Securities and
Exchange Commission (BSEC) for setting up the fund as per the Bangladesh Securities and Trade
Commission (Alternative Investment) Rules, 2015. As per the rules, alternative venture funds must
designate fund supervisors and trustees. The previously mentioned BSEC rules are applicable not as it
were for the enrollment and direction of alternative investment funds but moreover for fund
supervisors and trustees of such funds.

Function of Venture Capital

Venture capital is growingly getting to be well known in several parts of the world since of the crucial
part it plays in fostering industrial advancement by exploiting tremendous and undiscovered possibilities
and overcoming dangers. Venture capital gives us fund as well as abilities to new undertakings and
modern ventures of existing ones based on high technological developments. It provides seed capital to
finance innovations indeed within the pre-start stage. In the advancement stage that takes after the
conceptual stage, venture capitalist creates a business plan (in association with the business visionary)
which can detail the market opportunity, the item, the improvement and financial needs. In this vital
stage, the venture capitalist needs to survey the natural merits of the technological development,
guarantee that the innovation is coordinated at a clearly characterized market opportunity and fulfills
himself that the management group at the steerage of undertakings is competent enough to achieve the
targets of the business plan. Hence, venture capitalist helps the firm to move to the exploitation stage,
i.e., launching of the innovation. Whereas launching the innovation the venture capitalist will look for to
set up a time outline for accomplishing the foreordained advancement marketing, sales and profit
targets.

How many VC company in Bangladesh?

All venture capital financing companies, especially those which wish to appreciate government declared
tax advantages and other benefits for such companies, must work within the rules issued by BSEC. These
rules have been in constrain since June 22, 2015. As of January 31, 2018, a total of 11 companies got
enlistment as alternative investment fund beneath the BSEC rules. In spite of the fact that 11 companies
got enrollment, many are however to begin their operation in full swing. Nearly all the venture capital
financing companies are moderately new and yet to begin their business. Only one finance has so far
enlisted and a few reserves are within the process of registration. A couple of companies have begun
venture financing from their own capital. As the companies are new in this field, it is troublesome to
measure their monetary performance. Apart from these, a few companies which are however to be
enlisted with BSEC, are too giving venture capital. Essentially, a few of these companies have created
several success stories (for case, Popular Pharma by Brummer & Partners Asset Management); and have
moreover demonstrated workable environment for the venture funds within the country.

Venture Capitalist Investment in Bangladesh

Venture capital is continuously spreading its roots all over the world encouraging new businesses. In
spite of the fact that in Bangladesh these days, we do discover a number such endeavors, the advance is
rather moderate in this sector. In 2019, around US$ 15 million were contributed in a few start-ups
within the country which is much lower than past year's (2018) US$ 27 million. On a positive note,
however, in 2018 as it were US$ 2 million came from local sources and the rest from abroad, though in
2019 US$ 6 million came from local sources which appears 200 per cent growth. The ICT ministry
provided grant to around 40 ideas and startups. Chaldaal, grocery e-commerce Company, raised US$ 5.5
dollars from IFC and IDLC finance. Typically a great sign as more financial institutions may come forward
to back begin up in case it succeeds. Aavishkaar, Impact Fund from India contributed US$ 4.2 million in
Sindabad, a B2B e-commerce. BD Venture contributed in 4 start-ups to be specific Handy Mama, C-work,
Gaze and Beatles. They contributed second round in Esoshikhi, an edu tech, in conjunction with other
Angel Investors. The government has apportioned BDT 1 billion within the budget for startups. Be that
as it may, modalities of utilize of that finance are however to be clarified. ICT Ministry's effort to make a
venture capital company has recently got the gesture of the cabinet.

Bangladesh Securities & Exchange commission (BSEC) enlisted two new Alternative Investment Fund
supervisors (AIFM), to be specific CAML and Constellation. Total number of AIFM got to be 17 out of
which few will concentrate on private equity or impact fund. Two Elective Investment Fund Directors,
specifically BD wander and Lanka Bangla, propelled their venture capital funds of Tk 500 million and 450
million respectively.

Advantage & Disadvantage

Venture capital financing make the opportunity to contribute the potential for huge returns on
investment. It is the way to grow business volume. It’s another advantage is that it is the way to set up
newline of business by giving capital to the as seed financing to early-stage, high-potential development
companies. In a number of basic zones, counting legal, tax and personnel things, a Venture Capital firm
can give dynamic support, all the more critical at a key stage within the development of a youthful
company. Venture capital financing is the way to minimize risk by sharing value capital and management
duty.

Instability is the most negative mark of venture Capital Financing. It uses the finance to the unproven
trade where profitability is time expending and questionable. Another disadvantage is that Venture
capital incorporates several proprietor of the business firm that will spill the mystery of business
decisions. The main disadvantage is that Venture Capital financing is high risky due to start up seed
financing and problematic line of business.

Conclusion

Venture Capital financing is the potential area of financing for modern idea, new innovation and new
unproven line of business with vulnerability of profit. It could be a stage to investigate capability and
new line of business likelihood. Legitimate direction and legitimate government co-operation can make
it the overwhelming and dominant segment of economy of Bangladesh.