New source of funds for start-ups on cards
A platform through which start-ups and small and medium enterprises will be able to raise funds is in the works, a commissioner of the stock market regulator said yesterday.
“We are preparing a law for it,” said Arif Khan, commissioner of the Bangladesh Securities and Exchange Commission.
Khan's comments came while presenting a keynote on 'policies and opportunities for alternative investment (venture capital and private equity)' at a session on the second day of Bangladesh Investment and Policy Summit.
The Board of Investment, the Prime Minister's Office and the Business Initiative Leading Development jointly organised the two-day event, which ended yesterday, at the capital's Radisson Blu Hotel.
Khan said venture capital was important in the economic development of the US. Venture capital is the money provided to seed early-stage and emerging companies.
Venture-backed companies in the US created 12.1 million jobs, the number being 11 percent of its entire private sector employment.
The companies also generate $2.9 trillion in revenue, which is 21 percent of the US's gross domestic product, he said, while naming some successful venture- and private equity-backed companies such as Intel, Genentech, Facebook, Microsoft, Starbucks and FedEx.
Data also revealed that job growth and revenue growth are higher in venture capital and private equity backed companies.
Khan cited information technology, biotechnology, medical devices, online retailing, social media and clean technology as the common sectors for venture capital and private equity investment.
Last year, the BSEC formulated “alternative investment rules” for private equity and venture capital firms so that they can pool funds and make equity investment in non-listed companies.
Venture capital firms provide funds to start-up companies at the time of formation or at a very early stage by taking an equity position in the company.
The venture capitalists are patient and long-term investors who are willing to take entrepreneurial risks alongside the founders.
Private equity firms are partnerships, limited liability companies or corporations that pool private investment from individuals, pension funds and endowments and then use that cash to invest in or wholly buy companies.
They also provide valuable guidance all the way to convert the company into a sound and profitable ones.
Moderating the session, Bangladesh Bank Governor Atiur Rahman said the implementation of a business plan is the major challenge.
“It's not the question of funding or availability of fund. The market has enough liquidity and individuals too have funds.”
“The problem is implementation and it's the number one challenge for us. We need to really live up to our expectations and we should really implement these,” he said.
Adam Sack, principal of IFC Asset Management Company, Singapore, said they are interested in investing in Bangladesh through venture capital and private equity, as they have seen the potential in many sectors such as manufacturing, pharmaceuticals, infrastructure, information technology and social media.
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