The government is creating a venture capital firm to nurture start-up entrepreneurs as the country is still at a nascent stage of tech-based business innovation.
The Bangladesh Start-up Company with Tk 1.0 billion in paid-up capital and Tk 5.0 billion in authorised capital as per the Companies Act 1994 is now awaiting vetting of the law ministry.
The authorities are now looking into the legal framework of the company to make sure venture fund investments do not land in a few sectors only and that the funds are distributed equitably among the genuine entrepreneurs.
"We may get vetting within a few weeks, then it will go to the cabinet for its final approval," said Mojibul Hoq, an official entrusted with the job of forming the company, while talking to the FE.
A tech start-up is a company the purpose of which is to bring technology-based products or services to the market. These companies deliver new tech products or services or bring the existing tech-based products or services in a new way.
But they do not get loans from banks as they cannot offer any collateral. The venture capital company in the making will fund such start-ups.
Mr Hoq said the government would provide loans to the "seed level" and "pre-seed level" venture firms.
The pre-seed funding stage generally refers to the time period in which a start-up is getting their operations off the ground.
The seed money, sometimes known as seed funding or seed capital, is a form of securities offering in which an investor invests capital in a start-up in exchange for an equity stake in it.
Mr Hoq said at the government level this is completely new and different from those in the private sector. Bangladesh has now 16 venture capital firms in the private sector. Of them, four are operational.
Venture firms invest in the equities of high-growth companies to earn hefty returns.
The government has targeted to set the ball rolling for about 1,000 start-ups.
About 36 employees will be appointed for the venture capital company that will have a government-appointed board led by the secretary of the ICT Division, according to the company proposals.
However, a senior executive at a venture capital firm told the FE that the government should not get involved in the business. The government earlier had formed the Equity Entrepreneurship Fund that failed.
He said the government should rather inject funds into other venture capital firms with clear-cut directives.
The ICT Division took the initiative to found this company under its Innovation Design and Entrepreneur Academy to nurture start-ups.
The global start-up economy continues to grow, creating US$2.8 trillion in value between 2016 and 2018, according to the Start-up Genome, a global platform aiding start-ups' success enhancement.
The figure accounted for an increase of 20.6 per cent from the previous period and more than double the amount recorded just five years ago.
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