Startups in pandemic days: a tale of despair and dreams
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Fund flows have continued to stay dried out.
Khan, also a partner of IDLC VC Fund One, said some businesses would be unable to survive while prospects for some sectors would open.
“This is a new reality,” he said, adding that investment would come to those sectors where investors see prospects.
A Tk 45 crore private venture capital fund, IDLC VC Fund One was launched in March this year and have raised half of the amount so far. “We are planning to invest in a startup within a few months,” said Khan.
Upskill, an education tech startup that he founded, raised nearly Tk 1 crore recently from three female investors representing SBK Ventures, English Essence and law firm The Legal Circle.
The funding round will help support product development, strategic hiring and further investment in scaling up current business.
Not all could secure funding to survive and scale-up businesses, despite having potential to prosper as the pandemic-related uncertainties eroded investors’ confidence.
LightCastle Partners said the number of startup investment deals worldwide per month have dropped by half since the pre-Covid era in November 2019 due to recession kindled by the pandemic.
Till date this year, Bangladesh’s startups received $14 million in investments. They attracted investments of $87 million in 2019, data from the LightCastle showed.
The highest amount of investment came in financial technology-based startup ventures followed by logistics and e-commerce.
“Investors have gone in a wait and see mode. They are less bullish now in doing fresh investments,” said Islam of LightCastle.
He said startups face difficulties in getting support from the government declared Tk 20,000 crore stimulus for SMEs in absence of a clear definition of startups. They neither fall fully under the SMEs nor ICT firms. A definition is needed for proper classification, he said.
Shameem Ahsan, chairman of the Venture Capital and Private Equity Association of Bangladesh (VCPEAB), said startups had contributed a lot to keep the economy up and afloat.
“They played an important role in keeping the economy running, providing essential services to people and saving lives. Unfortunately they did not get due attention,” he said demanding low cost and collateral free loans for startups.
Ahsan said since the government was making a lot of digital content focusing social aspect such as online classrooms and education, health and entertainment, local startups should be hired for ideas and content generation.
Priority should be given to startups in government activities so that they can stay operational and expand, he said.
Insiders said the Covid-19 related crisis would slow proliferation of startups and those ventures which began with low capital might face difficulties to survive as consumer demand was likely to remain weak.
Syed Mojibul Huq, project director of the Innovation Design and Entrepreneur Academy (iDEA), a project under the government’s ICT Division, could not be reached for comment over phone regarding iDEA’s responses to support for the pandemic-hit startups.
Tina Jabeen, managing director and chief executive of state-owned venture capital company Startup Bangladesh, said a proposal has been placed before the government by Bangladesh Startup Consortium to support startups affected by Covid-19.
She said iDEA also funded 135 projects so far with each getting a maximum of Tk 10 lakh as grant.
And the government has earmarked Tk 500 crore for Startup Bangladesh, which began its journey in March 2020. For the first year, there is an allocation of Tk 100 crore for investments in the startups.
“We have identified certain startups and doing due-diligence. We plan to invest in a number of startups in seed and growth stage this year,” said Jabeen.
She said the pandemic created a crisis for startups. At the same time, this has opened some opportunities.
“Many of us were not used to with the digital technology. Now people have got a taste of convenience, a lot of people are doing meetings virtually,” said Jabeen.
“The market for working from home is going to stay. Telemedicine services will also stay. We have made a lot of strides in building the Digital Bangladesh for which we were striving,” she said.
Dhaka Cast Founder Dr Hannan also has the same belief.
“It was tough for us to make people appreciate the benefits of using technology, particularly for healthcare. People would not understand how it is possible to consult a doctor without being present physically.”
“Now, the coronavirus outbreak has made our job easier. Now doctors are going round their chambers. Even after that people are contacting us for healthcare services.”