‘Crowdfunding better than bank loans for startups’

Crowdfunding is a better alternative instead of bank loans for startups as it is difficult to bear the burden of interest for a new venture, said speakers at a webinar.

It is tough for a business to survive with both loans and challenges on its back from the very beginning, they also said at the event titled "Startup Investment in Bangladesh" arranged by Digital Finance Forum Bangladesh Saturday.

Md Beyazid Sarker, deputy general manager of the Bangladesh Bank's Foreign Exchange Policy Department, Shawkat Hossain, general secretary of Venture Capital and Private Equity Association of Bangladesh (VCPEAB), Afeef Zubaer Zaman, co-founder and chief executive officer (CEO) of ShopUp, and Rahat Ahmed, founder partner and CEO of Anchorless Bangladesh, participated at the webinar as panellists.

Shawkat Hossain said various types of experiments have to be done at the beginning of the startup. During this time, most startups incur losses. Yet, investment in business expansion has to be continued.

Then, if the entrepreneur takes a bank loan, he/she has to face an additional stress about paying the interest. That is why most organisations cannot focus on business growth, causing the startup to stop at one point, he explained.

In this situation, crowdfunding is a better option as many individuals and organisations will be interested in new investments, he continued.

"But due to lack of policy benefits, the issue has not yet found an institutional basis in Bangladesh. It is important to create a crowdfunding framework in the country now," Shawkat added.

Md Beyazid Sarker said the central bank is friendlier now in terms of loans and policy facilities for startups.

Since a startup grows with a lot of potentials, there is a chance to generate good revenue from the sector. So, policy should be adopted to promote startups, he opined.

Sustainable investment is needed to prevent the shutdown of potential companies. Now, many are looking to investing abroad. Permission of the parties concerned, including the Bangladesh Bank, is required there, Beyazid also said.

In addition, new companies face various problems in filing taxes. If these sorts of harassments could be stopped, they will be encouraged to do better, he added.

Speaking on investment and challenges in startups, Afeef Zubaer Zaman said, "It is very logical that new challenges, along with new possibilities, will emerge in the coming days. So, a startup should know its relevance in the market. It is also important to know the long-term investment potential there."

If an organisation wants to survive, it must bring in new investments which must be friendly for it. Investing in startups and in traditional businesses is not the same thing, he added.

Rahat Ahmed said many people also invest in more than one organisation. While this idea is not new, it is not well-known for startups. There are challenges, but the risk is relatively low.

Soft skills and communication competencies are also required to do well in startups. In addition, sustainable domestic and foreign investments open the door to other opportunities, including technology exchange for startups, he added.

The webinar was conducted by Md Nafeez Al-Tarik.