Venture Capital is a powerful and effective way for doing big and interesting things in cutting-edge technologies. VC enables entrepreneurs to pursue their dreams by providing funds for their projects in exchange for a share of the business they are creating. VC have enabled many success stories in Silicon Valley (eg, Sun, Google, Cisco) as well as in other parts of the world.
A VC investment is not a loan. If you are an investor, risks in funding a VC project are very high. If the venture fails - happens 90% of the time - you lose your investment. But gains are also high, with 100x returns not uncommo in a successful venture.
The other day I was talking to someone from the British govt who has worked in Bd for several years on promoting different types of businesses. When I found out that he had an investment banking background, I asked him what were the barriers to creating a Venture Capital friendly environment here.
He mentioned two top items: no "exit strategy", and the lack of minority rights.
"Exit strategy" is how a VC investor realizes their gains in a successful venture. In the West, when a VC-funded company turns into a successful business, it is either floated (IPO) in the share market (in which case the investor makes a ton of money from selling their share of the company), or it is sold to a bigger company (in which case usually the investor's share also becomes a lot of money.) In Bangladesh, this person pointed out, neither is a viable option. The stock market is not vibrant, and there is no practice of buying out companies.
Minority rights was unfamiliar to me. So he explained it. VC investors are usually minority shareholders in a company (ie, they own < 50%). In the West, with this much ownership, they still have lots of rights and power within the company. However, in Bd, in a company boardroom, the majority shareholder has much greater power over the rights of the minority shareholder.
I plan to dig in more. I have heard lots of businessmen in Bd are sitting on tons of money, and we need to enable them to profitably put this equity back into the economy. A VC culture would be a boon to our IT business and help create an economy based on higher value goods and services.