The VC Market in Bangladesh
Venture capital investments are one of the most flexible forms of funding for many innovative businesses today. Venture capitalists such as Efraim Landa offer funding for startups and emerging businesses as an investment, not a loan. It is a form of risk capital since the venture capitalist is taking a risk by investing in the business in return for equity of the company once it matures. In order for a business to enjoy the benefits of funding by a VC firm, they must demonstrate that they have the potential of high growth. The investor remains active with the business and offers both monetary worth and mentorship since their success lies in the success of the business. The venture capital sector has been well established in developed countries for many years and is just now beginning to be a viable option in other regions of the world.
History of the VC Market in Bangladesh
Bangladesh has continued to have a relatively strong sector of small and medium enterprises. Even though they have provided a strong base for generating employment they have struggled in terms of obtaining sufficient capital to provide for growth and development. In 2003 nearly 60 percent of the businesses lacked investment funds and over one third were short on operating funds in Bangladesh. In 2003, one of the primary businesses funding the small business sector was the Readymade Garment businesses but they were only receiving working capital provided by the banks but a large portion of them did not receive any financial support or venture capital funding for growth or expansion. This lack spawned an interest in attempting to obtain adequate financing, namely venture capital funding. To try and make up for this lack, the government formulated laws to help regulate the venture capital sector and attempted to raise VC funding in the region as well as creating tax laws in a way to make the taxes less of a burden to the VC sector. Although there is growth in the venture capital sector in Bangladesh it remains very slow to progress until there is a more stable economic environment which is conducive to the venture capitalist market.
Future of VC Market in Bangladesh
There are two things that must be addressed in order to assure that there is a profitable future in the VC sector of Bangladesh. The two situations that Bangladesh faces is the lack of minority rights and no viable exit strategy. An exit strategy is how a venture capitalist will make a profitable venture. Per the western model when a venture capital funded company becomes successful it will go public, sell out to a larger company. Either way the VC investor will realize a profit. The trouble in Bangladesh is that neither of these is an option. The stock market is not conducive for a public offering of shares and the practice of buying out is nonexistent. There are many businessmen in Bangladesh which are sitting on lots of money which would allow them to offer venture capital funding which could foster great economic growth in the region. The next few years are formative for the economy which will need to make some major structural changes in order for the venture capital sector to be successful. The venture capital sector could help spawn a thriving economy by providing higher values for goods and services and help the IT business increase. Structural changes need to be made from a governmental standpoint to encourage an environment which is conducive to the venture capitalist. With the few VC firms in Bangladesh it is likely to continue to help improve the overall economy of the region but it will continue to be limited unless changes are made.
Posted on August 16, 2013, in Business Financing, Effi Enterprise, History of Venture Capital, VC Firm, Venture Capital, Venture Capital Markets and tagged VC Market, Venture capital investments, venture capitalist. Bookmark the permalink. Leave a comment.