Private equity and venture capital ecosystem needs expansion: DCCI president

Building a knowledge-driven economy is vital for Bangladesh’s future, and new ventures need a supporting ecosystem to thrive, the president of the Dhaka Chamber of Commerce & Industry (DCCI) said at an event. 

Funding, in the form of patient equity from venture capital firms, is critical for success. Financing of innovation is not within the expertise of Banks, the traditional sources of financing, he said. 

Banks depend on the valuation of physical assets to secure their lending, which should not be the focus of businesses creating IP.

DCCI president Ashraf Ahmed said these at a focus group discussion on “Connecting Innovative SMEs and Startups with Private Equity & Venture Capital Firms for Bridging Financing Gap” organized by the chamber recently, according to a media release. 

"As entrepreneurs, both as investors in growth and raising funding for innovation, we should focus on overcoming our challenges ourselves, within existing regulatory constraints. Private Equity (PE) and Venture Capital (VE) need to be popularized in Bangladesh to small enterprises."

"While the demand and innovation is happening, somehow we don’t see enough match-making between the PE & VC Funds and entrepreneurs", he said. 

Professor Mohammad Abdul Momen, Former Director, Institute of Business Administration (IBA), University of Dhaka said that the sector needs a conducive policy regime to grow.

He said, "Many innovative startups are coming out which is a good sign and we need to nurture them to sustain from the very beginning for the sake of country’s overall economy."

He also called upon the young innovators of Bangladesh to patent their innovations for the future.  

Mohammad Ashraf Hossain, Head of Compliance and Company Secretary, Maslin Capital Limited, Shawkat Hossain, CEO, Bangladesh Venture Capital Limited, Jasim Mohammad Miah, Investment Manager, X Angel Limited and M MEhsanNizamee, CEO, FinagerFintech also spoke on the occasion from the venture capital and equity funding firms’ perspective.

Speakers said that for access to finance, there are shortages of caterers and hurdles in proper process of valuation of assets.

Moreover, secured investment and return of revenue are critical in this sector.

They also said that venture capital and private equity investors can be the best option of alternative financing other than banks for the potential SMEs and startups.

Tech companies are facing difficulties in the valuation audit process due to having their assets in intellectual form. So packaging a valuation is a critical for a tech company to get the finance from global financers.

Finding Limited Partners (LP) and raising funds are still a challenge for venture capital firms, they added.

"We need to make our startups attractive globally to get outside funding. There is a lack of qualified talents in this market", said an entrepreneur.

They also stressed focusing on policy reforms, setting up a logical exit plan for startups, fund-raising especially from outside, valuation methods etc.

A total of 8 representatives from private equity (PE) and venture capital (VC) firms participated in the event.

Additionally, 14 startup companies and 26 SME companies took part in the event as well.

Members of the Board of Directors among others were present during the meeting, the release adds.