Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
Investment Readiness of the Startups: The Case of Dhaka
M Murshed Haider* and Masrura Mariam Oishi**
The market for startup investment is relatively new in Bangladesh and hence lacks in
centralized guidance, policy support, collaboration, inclusive infrastructure and
knowledge base. The startup investment market is growing with diversification of its
sources; however, there exists a significant gap between the investors and startups in
understanding and evaluation of investment readiness. A survey was conducted for a
period of five months covering experiences of 60 startups located in Dhaka, in raising
business investment. Interviews of Central Bank officials, commercial banks, investors,
investment intermediaries, training services and activists were conducted, with a focus
on assessing common patterns in startups failed and successful in generating funding,
level of awareness about investment readiness, preferred sources of funding, needs for
growth and scalability, impact of information asymmetry, effect of training and
mentorship and unique challenges faced. The survey followed a snowball sampling
method. Data was collected in terms of age, education level, experience, amount of
funding received, time required in due diligence, factors influencing success/failure, role
played in achieving investment readiness, acquisition of training opportunities etc. The
paper highlights the existing mismatches in views, prevalent across important
stakeholders of startups on issues of investment readiness. Findings conclude an acute
gap in understanding of investment readiness, patterns in cases of success and failure,
significant subjectivity in role playing of investors, unique market challenges etc. The
paper denotes policy suggestions in terms of access to finance for the startups and
recommendations from the stakeholders in fostering the investment readiness of the
startups for advancement towards sustainable business.
JEL Classification Codes: M13, G21 and G24
Keywords: startup, investment banking, venture capital, investment readiness
Field of Research: Banking
1. Introduction:
In the latter half of the last decade, entrepreneurship has transformed as a popular
career choice, redefining its demand beyond just an economic necessity. The startup
ecosystem of Dhaka, has witnessed the launch of business incubation services,
collaboration with Silicon Valley, and introduction of local and foreign Venture Capital
firms, training boot camps and pitching competitions. The focus on the supply side of
the fund market has neglected the problem on the demand end, as a result, startups
failed to generate funding hypothesizing insufficient funds in the market. The
research tests this hypothesis, by investigating whether the fund seeking startups
are acquiring sufficient skills to achieve readiness, and evaluates the challenges
associated.
The startup ecosystem has been locally recognized as an active entity in the very
recent history of the entrepreneurship market in Dhaka and is growing at a steady
rate. Support infrastructure consists of both public and private sector efforts, and is
highly polarized and applies to different uncorrelated set of startup stakeholders.
* Mr. M Murshed Haider, Executive Director, Invesco Global Ltd., Mail: House-14, Road-3/A, Nikunja-
1, Khilkhet, Dhaka-1229, Email: murshed.haider@invescoglobal.com, Contact No.:+8801917 251 966
Track: Finance
**Miss Masrura Mariam Oishi, Undergraduate Student, Department Of Economics, School of
Business and Economics, North South University, Mail: House-265, Road-03, Mirpur DOHS, Dhaka1216, Email: masrura_mariam@hotmail.com, Contact No.: +8801676 286 340, Track: Economics
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
However, competitive pressure triggers aggressive strategies by private sector
entities to promote startup market to the youth, which often includes a biased
reflection of market realities, ignoring the struggle associated with achieving
investment readiness in a premature startup ecosystem like Dhaka. Entrepreneurs
under the current statuesque tend to take impulsive approaches in founding new
companies, which generate unrealistically optimistic considerations of investment
readiness among the owners and often result in failure to generate funding,
contributing towards frequent death of companies. Therefore; research is required to
investigate subjective perceptions about investment readiness among stakeholders,
to determine intersecting points between criteria popularized through outreach
activities and criteria used in reality. A qualitative study can evaluate the individual
challenges faced and recommendations suggested by the complete set of
stakeholders of the startup ecosystem of Dhaka.
The study aims to shed light on such subjectivity and gaps in perception of
investment readiness, in order to enhance the possibility of creating awareness in
terms of strategies designed on micro level within startup firms, to use of macro level
policy instruments. The research demonstrates common trends and patterns in the
success and failure stories of the startups in Dhaka, highlighting exclusive cases of
achieving investment readiness. The sample showed a gap in perception among
the investors and startups and hence, recommendations from the startup
activists and other stakeholders on mitigating such gaps, stimulating the growth
of startups through investment readiness and availability of finance are also
proposed.
2. Findings from Literature:
The role of venture capitalists in assisting startups to be investment ready has been
found significant in early literatures (Admati & Pfleiderer, 1994). However recent
researches found variation in this role playing across different stages of funding
(Gupta, et al., 2003) which can influence internal decision making process and may
result in resignation of CEOs and growth constraints (Hellmann & Puri, 2000) Similar
incidences should be more likely in unregulated and inexperienced ecosystems like
Dhaka. The startups which tend to have assistance in the form of mentorship or help
(excluding ownership) are more likely to succeed in generating investment (Kotha &
George, 2012). Observations from US data conclude experienced startup owners
significantly tend not to take such mentorship; however the study shows significant
greater impact of mentorship with inexperienced start up owner over experienced
startup owner without mentorship, in successfully generating funding. (Kotha &
George, 2012) Studies have focused on network ties between entrepreneurs and
their financiers (Shane & Cable, 2002) (Zheng, et al., 2010) to explain capital
investment generation from professional investors.
Literature finds correlation between availability of capital in a market and tendency to
invest in a particular type of business, denoting risk aversion of lenders in markets
with lower capital and experience (Nanda & Rhodes-Kropf, 2015). (Douglas &
Shepherd, 2000) conclude in their research that entrepreneurs rate their start-ups
higher compared to the venture capitalists. Steve
Blank developed Investment Readiness Level in an attempt to find a common
language between entrepreneur and investor. No correlation between successful
pitching or presentation of ideas and success of business was found in the US data
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
(Blank, 2014) The cross-sectional difference in time taken in adoption of well
structured budget to be investment ready has been found to be correlated with the
agency costs, perceived benefits and costs, complexity of the firm, presence of
venture capital in the eco-system, CEO experience, firm size, and the culture of the
organization.(Davila & Foster, 2004)Personal and task oriented skills determine
managerial leadership, which is an inherent part of investment readiness among
organizations (Martin & Staines, 1994) dictating importance of time taken by
entrepreneur to become investment ready.
International evidences show equity financiers value systematic execution of
business plans (Preferably via Management Control System -MCS) in startups more
than debt financiers (Davila, et al., 2014). This implies that startups which are
controlled under formal operative structures are more likely to be preferred by
investors. Saskatchewan Economic Development Association (SEDA) has
emphasized on community preparedness in addition to investment preparedness for
stimulating balanced growth of community specific startups. (Saskatchewan
Economic Development Association, 2013)
3. Methodology
Following a snowball sampling method, a survey on startups operating in Dhaka has
been conducted for a period of five months. Startups which are looking for
investment but have yet not actively applied for it have been excluded from the
sample and total sample of 30 successful firms and 30 unsuccessful firms have been
tested. From the survey, 15 startups have been contacted for detailed interview from
which selective exclusive case studies have been presented to capture individual
experiences and journey towards investment readiness. Central Bank directors and
officials, Head of SMEs of leading Commercial Banks, Venture Capital firms and
startup activists have been interviewed to investigate subjective usage of criteria
beyond formal mentions, and include their perspective of the problem, suggestions
and recommendations etc.
4. Limitations
There is no formal database containing growth data of startups in Dhaka to test for
investment readiness, hence the research had to rely on qualitative data provided by
startup owners. In many cases the data is either inaccessible for confidentiality or
unavailable due to lack of usage of formal accounting models.
5. Findings
The survey findings conclude significant difference in knowledge, experience and
strategy used among startups successful and unsuccessful in obtaining finance. The
startups successful spent more time in achieving investment readiness and had not
only confined to training services or word of mouth. Findings also include that the
higher the age and professional experience of an entrepreneur, the higher the
success rate, the higher the amount of personal investment and size of teams, the
higher the chances of success, which is in conformity with the literature. We found
that in terms of number of investments the banks provide highest capital, however in
terms of size of funds, venture capital firms significantly has greater impact. Both
successful and unsuccessful cases relied on word of mouth, but the difference has
been drawn from level of relevant professional networking.
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
An interesting finding is that the successful startups, when approached by VC or
angel investor, carefully negotiated the terms and rejected many proposals despite in
need of urgent capital, to prevent additional risk burden for the company. Significant
number (56.66%) of owners who failed to generate investment still does not have
clear idea about why they were rejected. Failure led to demotivation which result in
death (23.3%) of the startups for reasons like high operating cost, family pressure,
and internal conflict. We also conclude that having an office, along with online
existence, is part of being investment ready. Formal (Cheque) transactions and
transparent transaction records are another significant finding among the successful
startups which in many cases were proactive in keeping records.
6.
Common Trends and Patterns Among Startups Successful
and Unsuccessful in Generating Investment
Table 6.1: Startups Successful in Raising Investment: Trends and Patterns
Category
30% E-commerce, 12% Social, 45%Tech,
1.6% Health, 1.6% Media
Average amount of funding received
Involvement of Personal Investment
Average amount of personal investment
Average Age
Previous Work Experience
Previous Experience of Founding Startups
26,00,000; Min: 5,00,000 Max: 3,00,00,000
100%
BDT.35,00,000
32.5 (Median Value: 35)
83.3 % (25)
96%(29)
Previous Experience of Working in Startups
33%(10)
Average Time Taken in Raising Investment
Medium of Transaction Used
Source of Funding
according to number of successful contracts
1.5 years
Cheque 87%, Cash 3%, Both 10%
Crowd funding .05%
Local VC 6.67%
Foreign VC .05%
Bank Loan 58.33%
Angel Investor 11.6%
Local VC 67%
Foreign VC 14.05%
Crowd funding 8.95%
Bank Loan 9.7%
Angel Investor .3%
Source of Funding
according to amount contributed
Preferred Information Source
Word of Mouth 65%
Social Media 20%
Google Search 5%
Startup Networking Events 10%
Team Size: Average
Team Size: Median Value
Proficiency in English
Existence of Office Space
Online Existence (Website/Social Media)
Participation in training events
10 (Full Time)
12 (Full Time)
High
66.67%(20)
86.6%(26)
Regularly 53.33 Often 36.66% Never 10%
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
Table 6.2: Startups Failed to Generate Investment: Trends and Patterns
Category
Average amount of funding/loan demanded
Involvement of Personal Investment
Average amount of personal investment
Average Age
Previous Work Experience
Previous Experience of Founding Startups
Previous Experience of Working in Startups
Average Time taken in applying for investment
Average Time gap (Application to Rejection)
Medium of Transaction Used
Source of Funding Preferred
Use of Information Source
Team Size: Average
Team Size: Median Value
Proficiency in English
Existence of Office Space
Online Existence (Website/Social Media)
Participation in training events
48% Ecommerce
3.34% Social
13.3%Tech
11.6% Health
15.1% Media
4.76% Service
3.9% Other
BDT. 5,00,000;
Min: 25,00,000 Max: 5,00,00,000
43.3%
BDT.5,00,000
24.5 (Median Value: 28)
43.3% (13)
36.6% (11)
70% (21)
1 year
1 year
Cheque 13.33%, (4)
Cash 53.33%, (16)
Both 33.33% (10)
Local VC 60%
Crowd funding 0%
Foreign VC 3.33%
Bank Loan 26.67%
Angel Investor 6.7%
Personal Loan 3.3
Word of Mouth 68%
Social Media 19%
Google Search 0%
Startup Networking Events 13%
5 (Full Time)
3 (Full Time)
Average
43.3% (13)
80% (24)
Regularly 70% Often 26.67% Never 3.33%
7. Evaluation of Investment Criteria
The common criteria used by investors include: Trade License, Bank account,
Sustainable and Tested Product/Service, Business Plan, Financial Statement,
Expense budget forecasting, Marketing Policy, record of employees, amount of
personal investment, size of team, number of owners, dedication of owners,
background of owners, relevant experience of owners etc. There are additional
formal documents and information proof required for different businesses in
Bangladesh (Kader, 2015). However, the interviews conclude, all of these criteria are
used for primary selection of startups; whereas, the final decision comprises of a
series of subjective evaluation, depending on the type of product/service, business
model, characteristics of the owner, business relationships etc. The bank officials,
angel investors and venture capital firms interviewed, refused to put a ranking on the
criteria since each has subjective weight depending on the others.
The angel investors invest completely based on the personality of the entrepreneurs
or the business model over the process, offer mentoring. Banks and venture capital
firms differ in their preference of business models and ideas. All the investors
interviewed allotted more emphasis on the subjective criteria and concluded
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
relationship among the investor and investee as the key determining factor at this
stage. We conclude that networking is an extremely important criterion once the
basic criteria of investment have been met.
An important consideration for investors is formal transaction records, which is often
difficult to manage for startups, which require swift cash transactions for business
survival and speedy operation, however signals farsightedness and commitment of
the entrepreneurs, as the investors conclude. This criterion has been subjectively
less important for 3.33% of the startups interviewed where the entrepreneurs were
able to convince the investors through alternative proofs of financial transparency.
The banks seem not to offer any flexibility on this criterion since cheque transactions
are more time and cost saving when it comes to evaluating a large number of
startups.
Other notable criteria include: the professional compatibility and personal
relationship among the owners, the tenure of operation, full time commitment, ability
to resolve disputes, ability to respond in time, ability to manage legal support,
professional relevance of owners/CEO, personal experience of leading businesses,
number of employees, individual professional/personal connections of the owners
etc.
8. Role of Public Sector in fostering Investment Readiness
In Denmark, market based technological institutes have been formed to extend
technical advice to startups. Besides, research sector is also exclusively public
funded. Managerial support is facilitated by angel investors and venture capital firms.
Denmark has a public venture capital fund, formed in 1992, and called “Danish
Growth Fund”, which plays the role of a common platform covering diverse set of
entrepreneurial activities and support. Public sector, therefore, can play a crucial role
in investment creation for startups through venture capital or banks (KEUSCHNIGG
& NIELSEN, 2003)
Government initiatives in United States of America is carried out as part of national
innovation strategy and include provisioning of funding and public-private
partnership, to assist startups in achieving investment readiness. Leaders in the
private-sector are working on many of these same ideas through the Startup
America Partnership, an independent alliance of entrepreneurs, corporations,
universities and foundations working to fuel high-growth startup companies (US
Small Business Administration, 2012)
Bangladesh Bank had initiated the provision of separate funds for entrepreneurs
titled Equity and Entrepreneurship Fund (EEF) in 2001. The website for EEF has
been constructed in local language (Bangla) as part of an integrated approach to
ensure diverse access to finance. The fund is accessible by businesses in Software,
Agro or Food Processing sector. (Investment Corporation of Bangladesh, n.d.)
In August, 2015, Bangladesh Bank had launched a loan with lower interest rates,
available for startups that lack in collateral. However no government fund has been
created to facilitate achievement of investment readiness in Bangladesh. (The Daily
Star, 2015)
The public sector initiative in Bangladesh mostly encompasses conventional
approaches to entrepreneurship, targeting conventional entrepreneurs with limited
exposure to education and international platforms, and mostly engaged in specific
sectors (agro, software etc.); however, in context of the provisioning of collateral free
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
loan, public sector is also targeting the educated passion driven youth of Dhaka and
in the process by engaging in similar activities as carried out by the private sector.
Considering importance of regulating the unaccounted control of venture capital
firms over startups, which empirically has been found to be as an impediment for
growth under imperfect market conditions, (Danham, 2015) government should allow
provisions for ensuring monitoring by creating simple contract terms, equipping
lawyers with necessary training.
9. Perspective of Commercial Banks
Commercial Banks reported lack of understanding about investment readiness
among the startups which result in requisition of unrealistic loan amounts by the
company, signaling unprofessional attitude in most of the unsuccessful cases. Banks
report underutilization of fund available, due to lack of investment readiness.
To disburse the same amount of loan, banks have to incur more cost and workload
for startups (in terms of man power, time taken in investigating risk, evaluating and
monitoring). The bank officials are not provided with trainings to understand the
unique differences of startups; hence they are not motivated to work with the
startups on field level, as often it encompasses higher professional risk and burden
for them. The government should train and incentivize the bank officials to assist
startups in achieving investment readiness throughout the procedure of loan
processing, to ensure minimum learning for startups from unsuccessful contracts as
well.
10. Role of Venture Capitalists in generating Investment Readiness
In June, 2015, Bangladesh Securities and Exchange Commission (BSEC) unveiled
the guidelines called the “Bangladesh Securities and Exchange Commission
(Alternative Investment) Rules, 2015” to govern the venture capital firms (Sohel,
2015). However, there is no source available that indicates the total number of
Venture Capitalists (VC) operating in Dhaka. 3 leading VCs have been interviewed
which reported less than 3% success rate in generating investment partnership with
Startups in 2015 and mentioned severe underutilization of funds due to lack of
investment readiness among startups.
The VCs mentioned both being approached by startups and approaching startups for
investment partnerships, common platform of interaction being the training events.
They mentioned evaluating beyond the criteria stated in websites or startup events.
Once the basic criteria are met, all of the VCs concluded giving additional priorities to
the personality of an entrepreneur which influences their leadership trait,
commitment, ethical standard etc. Relevant experience in carrying out the project in
larger scale is the second common criteria that the VCs emphasized highly on,
followed by compatibility and combination of skill among owners, previous work
experience. None mentioned giving any priority to Education. All of the VCs refused
to provide ranking to the advanced criteria as each cases require unique evaluation
methods which the VCs reported to have designed as they earn their own
experience with startups.
The VCs report in all cases there are certain reasons for rejection that are kept
confidential from the startup owner. Hence it can be concluded that startups rejected
do not have access to complete causes of failure, which justifies the information
asymmetry observed in the owners of startups which failed to generate funding.
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
The primary reason for using subjective criteria, as reported by the VCs, is their lack
of experience in operating in the market, where startup investment through venture
capital demands frequent involvement of non traditional role playing of VCs. All the
VCs mentioned assisting promising startups throughout the phases of assessment,
in achieving investment readiness in order to ensure successful partnership. All the
startups which were successful in generating Venture Capital received some form of
support from the VCs in achieving investment readiness.
Training services available are reported as helpful by the VCs in generating
readiness among the VCs themselves as well as facilitating readiness among
startups. The VCs also reported forming an association to overcome unique
challenges of operating in an inexperienced market and generate greater market
based knowledge.
Therefore it can be argued that such subjectivity in measuring readiness of the
startups instigate confusion and Venture Capitals face unique challenges because of
the inexperience of the market to provide sufficient infrastructural support required to
absorb investment in the form of venture capital. The VCs mention assuming
additional risk in the context of Dhaka since they perceive lower ethical standards.
None of the associated market structure required as reported by the VCs, in terms of
national regulatory acts, legal support, experience of lawyers, audit firms,
consultancy, and risk mitigation by government is available in the current market.
11. Perspectives of Startup Activists
The activists interviewed mention that common platform should be formed in Dhaka
ensuring public private collaboration in generating investment readiness. Lessons
should be learnt from other governments in shaping private sector activities
(mentioned ecosystems include Singapore, Malaysia, Delaware, and Mauritius). All
the activists felt the need to have a National Roadmap designed to help the investors
and training initiatives plan accordingly. Competition among training organizations is
a problem only until the time when innovation can surpass problems of redundancy,
and with time, specialized sector specific training can be formed, which is highly
required to maximize disbursement of smaller loans. Majority of the training
programs are in English, constitute of specific vocabulary that constrain access of a
diverse set of entrepreneurs. Entrepreneurial Resource is scarce and even scarcer
for Non English speakers; curriculum is available for one particular training, rest
move on without supervision since market craze generates enough respondent for
any event concerning issues of investment readiness. Dedicated and skilled mentors
are not available and hence mentorship is sufficient in terms of quantity however
suffers excruciatingly in terms of quality. All the activists emphasize equally on
Investor training, however mention the difficulty in doing so under locally available
skill, hence recommended inclusion of foreign skills and training.
12 Case Studies
a. Case Study 1
Category: Traditional Business
Investment Source: Bank and VC
Current Status: Meets 60% of national demand
The entrepreneur had started his first company during university and witnessed
failure and decided to learn with professional experience and start all over again.
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
After acquiring two decades worth experience in Banking, he decided to found his
own company. Despite working in the banking sector the entrepreneur had
decided to grow slowly and earn as much as knowledge from the startup training
activities and took a year off to understand how the entrepreneurs act. He learnt
from others experience and started his company from personal hand loan. He
started approaching banks and noticed his networking gave him a certain
privilege but not enough to match his desired scalability of the business. He had
refused 3 loans from banks and started looking for alternatives when he was
introduced to a new venture capital firm in Bangladesh. The partnership was
successful, from the third meeting, involving more funding than he had initially
wanted, and the business scaled up faster than forecasted. The entrepreneur
believes his business was chosen for the tested idea, scalability, his relevant
experience, personality, commitment, ability to troubleshoot and relationship with
the VC (Mentioned in order of priority) Afterwards he had been able to receive
bigger loans from the bank for business expansion.
b. Case Study 2
Category: Health Enterprise
Investment Source: Venture Capital Firm
The owner had started a tech company in his university years but failed and
joined full time with a vision to start the company again someday. After acquiring
25 years of working experience in Multinationals, the owner had stopped and
started a full time health enterprise in the country. The owner was introduced to a
new venture capital firm by a friend and had started attending startup networking
events in Dhaka. In 6 months he had signed an initial contract, remodeled the
business plan, hired full time employees and invested more than 50 million
capitals personally. The entrepreneur faced immense difficulty in operating under
current market conditions and had to assist and be assisted by the VC in many of
the times. The company with its equity investor grew in terms of arranging legal
and auditory support, business consultancy and over the process developed a
strong relationship which resulted in increased allocation of funds for the
business.
c. Case Study 3
Category: Ecommerce
The owner hails from a highly educated and privileged background. He attended
one startup event one day with a friend and was highly inspired to become an
entrepreneur. From then on, he started being a regular at several of those events
and gathered knowledge. However, he was never told to gather professional
experience or take more time before going into operation. He along with two
other friends had founded their Ecommerce company, featured and appreciated
in the local ecosystem. He participated in 3 of the national level competitions and
made a successful journey. The company was approached by venture capital
firms and angel investors, however, it could never generate a successful
partnership as the investors repeatedly provided terms and conditions which was
difficult to deliver in time, and often interrupted the original vision of the company.
After two years of operation, the company was shut down and the owners
decided to join the formal workforce, learn more about the market and then return
with a similar vision for entrepreneurship. They mention being unrealistically
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
optimistic for the startup case and not being warned about the pitfalls by the
training events.
13. Conclusion and Recommendation
Due to increased private sector outreach activities to create awareness about the
entrepreneurial culture, diversity has been observed among the socio-economic and
cultural background of the entrepreneurs, which raises demand for collaborative and
centralized efforts. Consensus with regards to the definition of investment readiness
could potentially lead to better investment proposals and trainings. In order to
enhance the role of venture capitalists, government can act as a mitigator of
unaccounted risk faced by the few venture capital firms which can help triggering an
investment friendly atmosphere for both local and foreign venture capital firms.
Individual sector specific association among startups, investors and venture
capitalists should be formed for broadened outreach, enhanced discourse and
strengthened opportunities for negotiations and lobbying. The recommendations
include:
1. Cohort of banks and financing institutions can be arranged following models
of Vienna (Investment Ready Programme), Austria (NAB) and UK (ICRF) to
ensure more funding for diverse sectors and type of startups.
2. Sector specific funds can be assigned by governments for startups,
recognizing their difference in terms of type of business, infrastructure
available, scalability and risk from other enterprises.
3. Startups can be trained through investment readiness programs under public
private partnership, following the current model in the US.
4. Provision of rejection letter in cases of unsuccessful contracts is of crucial
importance to the entrepreneurs. The letter should state the reasons for
rejection, to make the process more accountable for the bank and educative
for the entrepreneurs.
5. Government should recognize Startups as a different entity than Small and
Medium Enterprises and launch central initiatives to foster researches,
encourage discourse and create an inclusive approach towards achieving
sustainable knowledge & skill based environment for investment.
6. Government should act as a mitigator for risk in an unprepared equity
investment infrastructure like Dhaka where the venture capital firms and angel
investors need legal support, consultancy and speedy processing.
7. For optimal distribution of risk in seed level startup financing and ensuring
comprehensive inclusion of expertise from several stakeholders, a specific
Consortium of Banks and Financial institutions can be formed. This would
facilitate a collaboration of knowledge and experiences earned by different
banks and financial institutions in working with different startups and ensure
allocative efficiency by assigning each seed level investment projects to the
best fitted financial institution, as followed in the UK (Finance For Enterprise,
2010)
Proceedings of 13th Asian Business Research Conference
26 - 27 December, 2015, BIAM Foundation, Dhaka, Bangladesh, ISBN: 978-1-922069-93-1
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