Capital market prepares to facilitate startups

Startups and technology firms that have long been facing challenges in local financing while their investors have been suffering due to fewer exit options amid no listing of lossmaking startups are going to see opportunities in the local capital market.

"The securities regulator is going to allow them to go public," said Professor Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), at a conference titled "Capital Market of Bangladesh: Prospects and Opportunities for Tech Startups and Growth Stage Companies,".

Only a few startups such as bKash, Pathao, Chaldal, and Shopup succeed in their business, but they pay back investors and the society so much that it more than compensates for the failed startup investments, said State Minister for ICT Zunaid Ahmed Palak at the event jointly organised by the Dhaka Stock Exchange (DSE) and Startup Bangladesh Ltd, a state-run venture capital firm.

He added that the government is going to make Tk500 crore funding to local startups by 2025.

As the global funding ecosystem is getting tougher, startups now must adopt sustainable operations to run at least two years without fresh capital, unlike their known style of subsidised customer acquisition through burning venture capital funds, said tech entrepreneur and venture capitalist Sonia Bashir Kabir.

In a panel discussion moderated by DSE Managing Director Tarique Amin Bhuiyan, Chaldal Co-founder Waseem Alim said it is important that the local capital market ecosystem is going to facilitate startups, which needs listing opportunity and financing before enjoying profits.

Startups, by definition, are technology-based scalable businesses which solve any unsolved problems in the economy and society and they need to prefer growth for scale before profitability.

Tech entrepreneur AKM Fahim Mashroor, the founder of Bdjobs, Ajkerdeal, and Delivery Tiger, said the BSEC should give a clear guideline on which startup firms can be listed alongside removing the valuation method barriers during technology initial public offerings (IPO).

The pricing benchmark for startups' primary shares should follow that of their regional peers as there are no local listed startups in Bangladesh, he suggested.  

Rahat Ahmed, founding partner and chief executive officer (CEO) of New York-based Bangladesh-focused venture capital fund Anchorless Bangladesh, suggested a startup exchange-traded fund (ETF) after the planned listing on the bourses so that global investors invest through the ETF.

"We have to fit ourselves into the shoes of international investors so that they find an attractive risk-reward ratio in investing in local startups," he added.

DSE Managing Director Tarique Amin said his bourse would ask for a sustainable business model for the startups interested to raise capital from investors.

BSEC Commissioner Shaikh Shamsuddin Ahmed said more changes in policies and regulatory environment is possible to help startups and technology firms flourish.

A large number of local and international investors, technology entrepreneurs and experts attended the programme with DSE Chairman Md Eunusur Rahman in the chair.

NM Zeaul Alam, senior secretary to the ICT Division and chairperson of Startup Bangladesh, was a special guest at the event.