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IDLC launches VC fund

Growth of tech-based startups in Bangladesh

FE Report | March 04, 2020 00:00:00

State Minister for Information and Communications Technology (ICT) Division Zunaid Ahmed Palak and Managing Director and CEO of IDLC Arif Khan seen in the event on Tuesday.

IDLC Finance Limited on Tuesday launched its first 'Venture Capital Fund' worth of Tk 450 million to invest in early stage tech based start-ups in the country.

The non-banking financial institution (NBFI), through this fund, plans to make investments in local companies that provide technology-enabled solutions to the consumers and businesses.

The announcement was made at a programme arranged by IDLC Finance Ltd held at a hotel in the city.

State Minister for Information and Communications Technology (ICT) Division Zunaid Ahmed Palak addressed the programme as the chief guest while Managing Director and CEO of IDLC Arif Khan also spoke on the occasion.

Delivering his speech, Mr Palak said the venture capital fund will help developing entrepreneurial culture in the country which will spur further growth in future.

The government has launched start-up fund four years back that invested in 10 start-ups out of total 350 applicants, he said adding: at least several of these companies now valued over Tk 1.0 billion.

"The start-ups have received only Tk 1.0 million to Tk 2.5 million as seed money which they used to make their position stable in the market within only two to three years," he said.

Where traditional SMEs take about 10 to 15 years to establish business, start-ups usually don't take more than five years, Palak said.

He also said entrepreneurs can grow substantially in the country with easy access to finance, tech adaptation, regulatory and policy support, and good business model.

Mr Khan said top five valuable tech companies in the world -- Microsoft, Apple, Amazon, Alphabet and Facebook scaled-up their respective businesses by raising funds through venture capital, not with the finance from traditional banks.

The future of tech-based start-ups is very bright in the country as over 60 per cent of the population in the country is aged below 30 years while internet penetration has reached 55 per cent in 2018.

IDLC will target companies with business models that are simple scalable and easy to understand, he said.

The fund will focus on certain sectors such as financial technology, entertainment and lifestyle, enterprise solutions, travel and logistics, core technologies, education technologies, food technologies, agricultural technologies, and internet devices, IDLC CEO said.

The fund is governed by Bangladesh Securities and Exchange Commission (Alternative Investment) Rules, 2015, and is open to eligible investors.

The objective of IDLC Venture Capital Fund is to provide investors with risk-adjusted returns through investing in, nurturing, and then exiting from early stage companies.

As the sponsor of the fund, IDLC will provide Tk 50 million to the fund while the rest will be raised from individual and institutional investors.

"We believe that this will be a great opportunity for the investor community to participate in along with IDLC Finance Limited to boost this sector as well as generate substantial return for all stakeholders," Mr Khan said.

Individual investors can invest with a minimum ticket size of Tk 5.0 million, and institutional investors can invest with a minimum ticket size of Tk 20 million.

The fund tenure will be seven years with an extendable period of two years.

The venture capital fund will be managed by IDLC Asset Management Limited which is a subsidiary of IDLC Finance Limited.

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