Why Are VC Investments In Short Supply In Bangladesh?
BD Venture Limited founding Managing Director Shawkat Hossain explains why we don’t see that many VC investments happening in Dhaka.
The main reason for that lies in the number of active VC firms in the country. There hasn’t been a significant number of investments recently because there simply aren’t enough active local players.
At present, 11 organizations have the license as VC firms. But if you look at the industry, very few of them are actually active. That’s one.
There are other reasons as well. VC’s usually invest in the later stage of a company. For companies to go from one stage to another, you need to have a vibrant angel investment ecosystem that can support startups in the early stage which eventually makes it easier for VC to take part in the later stage funding. That’s not happening enough.
Now, why not enough angel as well VC investments are not happening, it is a good question to explore.
Investment readiness of the potential companies is a concern.
For instance, recently we have been contemplating to invest in an enterprise that has an excellent performance record. They have also successfully integrated state-of-the-art technology in their business. But the problem was that they do not have proper account books.
As a result, we can’t readily invest in the business and have to wait until they pitch again with proper records. This is not a unique problem.
We have also discussed the problems with valuation earlier. Since the market is still in an embryonic stage, the expectation gap between the investors and the entrepreneurs persists.
Add to that, there is an absence of effective instruments as well. For example, we could make investments more conveniently and accurately if we could transact convertible bonds. In that way, it’d be easier to meet the interests of both parties. But due to the lack of regulatory frameworks, it is not possible. Once we have these flexibilities, it should not be a problem.
Read our interview with Mr. Shawkat Hossian on the future of venture capital in Bangladesh here.