'Congenial ecosystem needed for startups to thrive'

Startups are doing relatively well in Bangladesh but their success rate is not quite satisfactory owing to problems from a lack of access to finance to age-old valuation process to a dearth of private equity and incubation, said speakers and industry people today.

"A startup-friendly ecosystem in the country has not been substantially equipped, but startups can be a great economic enabler for Bangladesh," said Rizwan Rahman, president of the Dhaka Chamber of Commerce & Industry (DCCI).

He spoke at a seminar styled "Journey of CMSMEs from startup to scale up: prospects & challenges" organised by the chamber. 
In Bangladesh, there are more than 1,200 active startups and around 200 new startups join the industry every year.

Startups made around $800 million in investment and created 15 lakh formal and informal jobs in the last decade, according to a press release of the DCCI.

Still, in the Global Startup Ecosystem Index 2022, Bangladesh ranked 93rd out of 100 countries.

A dearth of financing and policy support are root causes of weak startup growth in developing economies, including Bangladesh, said Rahman, citing the global publication.

The government has taken initiatives to strengthen the startup ecosystem. They include establishing a venture capital firm, 28 high-tech parks, and a number of data centres.

The Bangladesh Securities and Exchange Commission (BSEC) has also drafted rules for small-cap companies.

"Taking the urgency of a smooth ecosystem into account, we need to create international standard startup incubation centres, startup pioneers, expert consultation and mentors. We need to organise exhibitions and arrange low-cost financing," said Rahman.

"Reforms are needed in the area of industrial, export, fiscal and SME policies as well as foreign exchange regulations."

Zeaul Alam, senior secretary of the ICT Division, said that cottage, micro, small and micro-enterprises and startups directly or indirectly create a large number of employments.

"The government is working to create a startup ecosystem in the country through various initiatives."

Technical centres are being established at the upazila level where startups will get space to work, he said. "In the hi-tech parks, there will be ample opportunities for startups."

According to the senior secretary, the government has taken an initiative to frame a startup policy and a payment gateway platform named "Binimoy" will be launched soon.

"Data protection is also an important element for an effective ecosystem of startups."

Shaikh Shamsuddin Ahmed, a commissioner of the BSEC, said that SMEs and startups had received much priority in the latest industrial policy.

"But we need to enhance the regulatory collaboration among all the agencies at the operational level. Based on reality, a few changes are coming into effect, but we need to improve the valuation system for the startups."

The more the country heads towards the Fifth Industrial Revolution, the more it needs an easy valuation process, according to Ahmed.

"We have established the IT framework. Now we need to implement it. For that, regulators need to be more supportive of startups or new ventures."

He said private equity, venture capital and angel investors can play a vital role and mitigate financing problems if the risks can be rationalised in this sector.

Ambareen Reza, chief executive officer of Foodpanda Bangladesh, said the success stories of startups would ensure trust and trust would attract others to come to the sector.

For angels to grow, access to finance is a great challenge, she added. "We need investment in the fintech and logistic areas."

Nirjhor Rahman, CEO of Bangladesh Angels, said liquidity is the key thing. "We have to ensure investment and working capital for new startups."

While presenting the keynote paper, Fahim Ahmed, CEO of Pathao, said that startups are enabling the digital transformation of Bangladesh and helping SMEs by creating market access, accelerating fintech, adopting technology and enabling mobility.

He listed regulatory framework, policies, limited human capital, technology, finance and access to the international market as some of the challenges facing the startup sector.

Tanveer Rashid, director for finance at Chaldal Ltd, described the government's Startup Bangladesh as a good initiative.

He called for making the valuation process simplified to draw more investment.

He admitted that most startups make losses in the early stages and this is a barrier to securing finance.

"So, banks are reluctant to finance startups," he said, requesting the regulators to look into the issue.