Bridging the startup funding gap

An enabling environment for young businesses is vital to any economy seeking sustainable growth. When entrepreneurs are given access to capital and institutional backing, they can turn ideas into initiatives that generate jobs and innovation. As such, the forthcoming public company for start-up investment is a forward-looking step that fills a crucial gap in financing for early-stage enterprises. The proposed company, to be called Bangladesh Startup Investment Company PLC, will be formed with an authorised capital of Tk 20 billion and paid-up capital of Tk 6.5 billion. It will be owned by 52 commercial banks represented through eight shareholders that includes four banks and four independent directors. The Bangladesh Bank is reported to be facilitating its formation. This direct institutional action is undoubtedly welcome news for the country's start-ups, as it will address the long-standing funding challenges they are facing due to their unconventional business models and limited collateral. What makes this intervention even more critical is the socio-economic environment it seeks to transform. Here, a significant share of educated youth is traditionally oriented towards secure employment in the BCS, government services or established corporate roles, leaving the fertile ground of entrepreneurship untilled. By providing a tangible financial pathway, this company can shift this risk-averse mindset and cultivate a more vibrant entrepreneurial culture.

The timing of this initiative coincides with a growing demand for venture capital in Bangladesh's expanding digital and service-based economy. The success of companies like bKash, Pathao and Chaldal shows that local innovation can grow rapidly when the right ecosystem is in place. Yet government refinance schemes and donor-backed programmes, though helpful to some extent, have fallen short of meeting the needs of a generation of entrepreneurs looking to scale. In this context, this new fund emerges as a potential catalyst for private innovation. Its real test, however, will lie how effectively it is implemented. Commercial banks by nature are oriented towards short-term returns and risk-averse lending practices, whereas start-up investment demands patience, sectoral insight and the willingness to absorb early losses. Given this inherent conflict, if banks attempt to manage these funds directly, the initiative may fail to deliver its intended impact. There is a palpable risk that a traditional banking approach could mire the fund in conventional, cautious decision-making, thereby defeating its very purpose and leaving the most promising ventures unfunded.

Therefore, the critical imperative is to ensure that operational control is vested in seasoned professionals rather than the shareholder banks. The proposal to appoint foreign consultants is a partial solution, but a more robust approach would be to formally adopt a model where the banks act as passive limited partners, providing the capital, while the investment decisions are delegated to an independent team of general partners with proven expertise in venture capital. This structure would insulate the funding process from traditional banking biases and bring in the necessary expertise to identify and nurture promising ventures, ensuring that the capital is deployed effectively and strategically. Apart from financial support, the company should also build linkages with incubators, accelerators and private venture funds to strengthen the broader entrepreneurial ecosystem.

The launch of this company is a commendable leap of faith. For it to truly succeed, it must consciously break from the mould of its banking origins and embrace the distinct ethos of venture capital. If managed wisely, this initiative could well be the spark that inspires a new generation to embrace entrepreneurship and, in doing so, propel Bangladesh toward a knowledge-based and self-sustaining economy.