Four ICT and internet based brands are among the five most valuable brands in the world currently,according to a Forbes list topped by Apple.
These four brands featured in the list, i.e. Apple, Google, Microsoft and Facebook are estimated to be worth around a minimum of 53 billion dollars to a maximum of 154 billion dollars.
To start with, Apple Inc., formerly Apple Computer started when innovation guru Steve Jobs and his brainy partner Steve Wozniak were only 21 and 26 years old respectively. They started their company by selling their own minibus and programmable calculator. They were looking for proper investment to bring their ideas into reality.After a while in 1976, Angel investor Michael Markkula bought a-third of Apple’s shares, joined the company as a third employee and convinced the venture capital company Sequoia to invest in Apple. In 1978, Sequoia’s Don Valentine invested hugely in Apple. And in just two years’ time, the venture capital company took them into IPO.
As for Google, their journey started with two Stanford doctoral program students, Larry Page and Sergey Bring in 1998, after only a year as a private company, they received investments from Sequoia Capital and KPCB. These two companies introduced Eric Schmidt to Google, who later became the CEO of the company. Subsequently just after 3 years later, Sequoia Capital, KPCB and Eric Schmidt collectively, took Google to IPO.
This story isn’t just limited to Apple or Google. Venture Capital or other investment companies have and still are contributing heavily to the successes of thousands of companies including Facebook, Intel, Starbucks, Amazon and many more. These brands have enjoyed hundredfold returns after receiving investments from these companies, as well as getting their golden ticket to the share market.
The Important Role of Venture Capital Companies
The purpose of venture capital is to help new innovators or small businesses gain investment. Some people might have excellent ideas and innovations in their heads, but are lacking the proper funds or capital. This is where venture capital companies come in. In half the cases, innovators invest their ideas, wishes and brains, while the venture capital company invests funds over three stages: the main idea stage, growth stage and expansion stage. Venture capital companies are different from banks and leasing companies, however, in the sense that they don’t provide loans. Instead, they take the risk of investing in the company while receiving a little share of ownership.
In half the cases, venture capital companies come about with non-government partnerships. And in other cases, many sources such as donations from wealthy persons, government/non-government pensions, charitable funds, foreign investments or collective funds from corporations usually bring about venture companies.
Silicon Valley is based on venture capital industry
Silicon Valley is the Meccaof technology world, where companies like Google and Yahoo were born. And the creation of Silicon Valley is owed a lot to venture capital companies.
Venture capital companies are seen to have the most effect in the USA. President Barack Obama has acknowledged the importance of venture capital, and in 2011, opened an initiative named Start-up America. This led to the country’s start-up ecosystem seeing direct government collaboration. And undeniably, the United States is one of the top countries when it comes to technologyand innovation.
The Importance of Venture Capital In Bangladesh
The Bangladeshi government envisions to turn the country into an ICT-centric middle income country by 2021, and a developed country within 2041. And for the realisation of this vision, venture capital companies can have a significant role. It has become extremely important for our Government to see and realize the necessity of such firms for the industry, and also to create a supportive environment for the venture capital firms to flourish.
Venture Capital can really speedup a country’s economic development. Firstly, they are largely the reason why acompany with investment sees profit and exit at the end of the tunnel. A company gains traction thanks to economic improvements, which in turn leads to more income. According to a survey by Boston Consulting Group, more than two-thirds of venture capital companies have been able to help invested brands raise their yearly revenue by at least 20%. Besides, almost half of these companies have been able to raise their revenue by 50%. And not only raising the standards of their concerns, venture capital companies have also helped many innovative projects come to life.
Venture Capital and Private Equity firms bring new opportunities, create new jobs and provide government tons of tax revenues. However, a strong and supportive venture capital ecosystem is yet to grow in an emerging market like Bangladesh.
Creating billion dollar companies from Bangladesh
Most countries incentivize Venture Capital firms with Tax Holidays encouraging them to invest. Alternatively in Bangladesh, as per the current policy, fund managers of venture capital companies will have to pay at least 35% tax on its dividends. It is important to provide tax holidays at least for the first 5 years for venture capital companies in the similar way how mutual funds are enjoying TAX holidays.As per current TAX structure,Investee companies, fund managers and investors, all have to pay taxes in three stages. This three stage taxing is a majorroadblock tothis industry and for this same reason we are not getting enough investments.The VCsmust be given tax holidays till 2021 for these industries to flourish.
In many countries including UK, USA and India, Government gives equal matching fund to venture capital companies so that they can minimize their risk and nurture a bigger number of startups. The same sort matching fund should be in place in Bangladesh to attract global venture capital companies. Industrialists and corporate houses in Bangladesh should be encouraged to invest in this sector so that local companies can avail these high return of investments. We also suggest implementation of a small cap stock exchange so that small companies can secure funding through IPOs. Recently Bangladesh Security and Exchange Commission (SEC)has approved the Alternative Investment Rules. In this policy, VC funds, private equity funds andImpact funds are termed as Alternative InvestmentFunds which is certainly a good news.
If we look at the ICT industry and our top companies, it goes without saying, in order to achieve the next unicorn, there is no alternative but to get support from VCs. We have already seen some local companies likePriyo.com, BAGDOOM.com,Shohoz.com, Chaldal.com, Ajkerdeal.com, Chalo etc. that were able to secure funding from international VCs. Silicon Valley based Fenox Venture Capital has made some investments and they do plan to continue investing. There are few other VCs operating in Bangladesh. If we find any revolutionary idea and a proper investment environment, then surely some day we will see companies or products like Angry birds or Snapchat growing in Bangladesh. Venture capitals companies are game changers all over the world and can also become game changers in Bangladesh if we create proper regulatory environment for them.
Written by – Shammem Ahsan,the general partner of the Fenox Venture Capital and the President of Venture Capital and Private Equity Association of Bangladesh (VCPEAB). He is a Director of FBCCI, the Apex trade body in Bangladesh. He is the Chairman of eGeneration, one of the leadingICT consulting company and BAGDOOM.com, the most popular ecommerce portal.
Source: Ittefaq
