Private Equity Financing in Bangladesh

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You sell a portion of your company’s ownership for cash when you use equity financing. Investors assume all risk, which means that if the company goes bankrupt, investors lose everything. However, if your Bangladesh company setup is successful, investors typically get higher returns than those offered by interest rates. Unlike loan funding, private equity financing is substantially more expensive if your company succeeds but far less expensive if it fails.


Simplified Private Equity Financing for You

Being an entrepreneur is difficult enough on its own. In a country like Bangladesh, where the Doing Business ranking was 176th out of 190 countries in 2017, being an entrepreneur is likely to be more difficult. In addition to a lack of supportive infrastructures/policies, Bangladeshi entrepreneurs face severe funding/financing/capital-raising/ Private Equity financing challenges when it comes to expanding or even beginning a business. As a result, this effort to provide a thorough reference for the average Bangladeshi entrepreneur on possible funding sources in Bangladesh. But, first and foremost, we must remember the old funding adage: You raise money only when you don’t need it. As strange as it may seem, our personal and professional experience has shown customers that this proverb holds true in practice.


Simply described, “equity” capital is money that is pumped into a corporation without the requirement of repaying interest or principal. Debt capital, as the name implies, necessitates the return of both the interest and the principle on a loan. These are often the two most important sources of capital for a company. A third option is ‘mezzanine financing,’ which is uncommon.


So, aside from injecting their own money into the firm, what choices does a typical Bangladeshi entrepreneur have for acquiring funding/capital?


Explained preference for dealing with this issue in order of highest to lowest priority.


Family and friends: If you’re one of the lucky startup entrepreneurs, these three will almost certainly be the first to invest in your wild idea (for example, the next huge social networking platform that will almost certainly never be big enough). They’ll probably contribute between BDT 20,000 and BDT 2,00,000, and they’re unlikely to desire a stake in your company.


Angel Investors: Angel investors are typically high-net-worth individuals who make direct investments in early-stage companies. They frequently provide not just money, but also their expertise, network of contacts, and technical and/or management knowledge. They reserve the right to oversee the company’s management procedures in exchange for risking their money at such an early stage (when your startup is likely merely an idea or at best a prototype). In practice, this usually entails a seat on the board of directors as well as assurances of transparency.


When it comes to investing, what do they seek for? Definitely how large the business’s potential market demand may grow. Then there’s the team: it’s important to have the correct blend of passion, dedication, commitment, technical expertise, and domain experience. Finally, an understanding of how effectively the team is prepared in terms of the roadmap for the coming year, three years, and possibly five years., SmartKompare, Handymama, Jetechao,, and are some of the angel-funded firms in Bangladesh.


VC/PE: Venture Capital: It is a specialized form of equity investment in potentially high-growth enterprises with some traction or company history. These are typically institutional investments made after extensive due diligence by in-house investment analyst teams at VC/PE firms such as BD Venture, Athena Ventures and Equity Limited, Razor Capital, Maslin Capital, BVCL, ipe Capital, Brummer and Partners, DEFTA Partners, Fenox Venture Capital, The Osiris Group, and others.


It’s crucial to keep in mind that VC/PE investment isn’t right for everyone. Companies with higher-than-normal growth potential are more likely to attract funding from VC/PE investors, who are searching for an abnormally high Internal Rate of Return (IRR). Technology-driven enterprises and sectors, such as information technology, communications, consumer-focused products, and biotechnology, have been at the forefront of receiving VC/PE capital in accordance with this trend.


VC/PE investments are typically screened in the same way that angel investments are. When compared to angel investments, the level of due diligence in VC/PE acquisitions is significantly more strong and stringent.


Public Market/IPO/RPO: Although it is a relatively unexplored method for capital raising for Bangladesh’s startup community in particular and private/family-owned businesses in general, Network BD like this option a lot and believe that if an entrepreneur truly wants to go big (regionally or globally), the public market can be very helpful. Companies with established and lucrative business histories can explore the public market for capital if they meet the listing requirements. The minimum paid-up capital requirement is slightly larger than that of the normal privately-held corporation in our country, however, because it entails taking money from the public.


Bank Loans: This is the debt capital mentioned earlier. Banks and non-bank financial institutions (NBFIs) are the two main types of firms that issue loans based on the entrepreneur’s qualitative and quantitative research. Qualitative factors such as character, capacity, collateral, consideration, and creditworthiness are used by the bank’s credit risk management department to determine whether or not it is a good idea to provide a loan to someone. Because capacity is likely the most important criterion in establishing a loan applicant’s trustworthiness, it appears that only large enterprises with sufficient capacity and collateral may obtain loans in Bangladesh. However, things may not be as bad as they appear, as banks and non-bank financial institutions (NBFIs) like as Brac Bank and IDLC Finance have established lending programs aimed at startups and early-stage enterprises in Bangladesh.

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Private investors are increasingly focusing their attention on Asia-Pacific, where they are investing funds, shifting offices, and completing transactions. With Bangladesh aiming to become Asia’s entrepreneurial hotspot, a growing number of private equity investors are flocking to the country to take advantage of growth rates and opportunities that are now unavailable in more developed economies.

FAQ for Private Equity Financing Service

1. What happens when a private equity firm buys a company?

In exchange for an ownership stake – also known as equity – in a mature business in a traditional industry, private equity firms invest money. Private equity firms invest in companies with the intention of increasing their value over time and eventually selling them.

2. What is the life expectancy of a private equity fund?

The majority of private equity funds are limited partnerships with a 10-year term (often with annual extensions). Institutional investors make an unfunded commitment to the limited partnership at its inception, which is then drawn over the fund’s term.

3. Is there a mechanism in place to protect foreign investment?

Ans: The Foreign Private Investment (Promotion and Protection) Act of 1980 ensures that foreign private investment is treated fairly and equally in Bangladesh, with full protection and security.

4. Is there a prospectus for private equity funds?

Private equity funds frequently raise capital through private placements, and the Prospectus is the primary disclosure document used when approaching investors. Please contact us at any time if your company is considering raising capital and requires a private equity fund prospectus for investment purposes.

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