Financing Startup:

Venture Financing and

CrowdFunding
Introduction to Venture Financing and Crowd
Funding
Venture Capital
• Venture capital is financing that investors provide to
startup companies and small businesses that are
believed to have long term growth potential.
• It is estimated that worldwide venture capital hits
US$155 billion.
• Innovator, Incubator and Financier are the three
parties.
• The three principal types of venture capital are early
stage financing, expansion financing and
acquisition/buyout financing.
• Example: ChaalDaal by Y combinator and 500
Startups.
Crowdfunding
• Crowdfunding is the method of funding a
project or new idea by raising many small
amounts of money from a large number of
people, typically via the Internet.
• It is estimated that worldwide over US$34
billion is raised in this way.
• Four types of crowd financing are:
rewards-based crowdfunding, donation-
based crowdfunding, equity
crowdfunding, debt crowdfunding.
• GoFundMe, Kickstarter, Indiegogo are the
most popular platform of crowd funding.
Venture Financing in Bangladesh and its
prospect
• Huge potential in Startup Business.
• Internationally started in 1945 after second world war to accommodate
soldiers.
• In Bangladesh VF started in 1994 (Grameen Fund).
• 2015 Act for venture financing company.
• Non financial institution working on venture financing
• Bangladesh Venture Capital Ltd. (1.Information Technology 2. FinTech 3.Bio-
Technology 4.Leisure and lifestyle 5.Digital Education)
• BD Venture Ltd. (BD Venture was launched with the mandate to invest in innovative
business concepts or enterprises in emerging and high-growth sectors.
• SEAF Bangladesh Venture (Invests in medium-sized businesses in Bangladesh)
Pros and Cons of Venture Financing
• Advantages
• They bring wealth and expertise to the company
• Large sum of equity finance can be provided
• The business does not stand the obligation to repay the money
• In addition to capital, it provides valuable information, resources, technical assistance
to make a business successful
• Disadvantages
• As the investors become part owners, the autonomy and control of the founder is lost
• It is a lengthy and complex process
• It is an uncertain form of financing
• Benefit from such financing can be realized in long run only
Introduction to Crowdfunding
• Definition

• Small amounts of capital from a large number of individuals

• Combines crowd sourcing and microfinancing

• Easy accessibility of vast networks of people through social media and

crowdfunding website like Kickstarter/Indiegogo

• Expanding the pool of investors from whom funds can be raised beyond the
traditional circle of owners, relatives and venture capitalist.
Introduction to Crowdfunding
• Categories

• Reward Based Crowdfunding: Backers give a small amount of money in exchange for a
reward, within a range of $10-1000.

• Donation Based Crowdfunding: Donors donate a small amount of money in exchange for
gratitude and the feeling of supporting a cause they believe in within a range of $10-1000.

• Equity Crowdfunding: Investors invest large amounts of money in a company in exchange

for a small piece of equity in the company.

• Debt Crowdfunding: Lenders make a loan with the expectation to make back their
principal plus interest.
Introduction to Crowdfunding
• Viability over venture financing
• Easier to access: Crowdfunding enables you to raise money, even if you don’t have the
‘connections’, because it puts the decision into the hands of many more people. Venture capital is
incredibly hard to access because of size as well as unfamiliarity.
• Better investment terms: Terms are in favor of venture capitalist. Founders can try to negotiate,
but their position is weak – they need the money, and they are afraid of the venture capital firm
walking away. Crowdfunding platforms is that they offer standardized documents which efficiently
manage the real need for pre-emption rights and avoiding dilution, but do so in a way that is fair
for both founders and investors.
• Publicity: Equity crowdfunding offers building awareness of a company among new
consumers. The ability to put your name out there to the world through a public equity
crowdfunding campaign can be a game-changer through the exposure it gives. Conversely, a deal
with venture capital is done behind closed doors.
Introduction to Crowdfunding
• Viability over venture financing

• Broad shareholder base: Venture capitalists would be advocates, through the networks and
introductions they can provide, but for sheer number of advocates, crowdfunding wins
hands down. Imagine having dozens, or hundreds of new people who are incentivized to
look out for your interests, because your financial interests are now the same as theirs!

• Equity crowdfunding doesn’t preclude “smart money”: When founders think equity
crowdfunding, they can be envisaging having investors who don’t bring anything to the
business apart from their money. When weighing this against bringing on board a single
financial investor that promises to lend their time and experience to the business, founders
become sold on this idea of having this “smart money” on their side.
Crowdfunding Platforms
• Current Platforms
• Indigogo
• Kickstarter
• Gofundme
• Rockethub
• Spacehive
Crowdfunding Platform Operations
• Operations
• Entrepreneurs made a proposal
• Prototype
• Model
• Crowdfunding model
• Fixed crowdfunding
• Flexible crowdfunding
• Crowdfunding ends
• Pledged money collected
• For fixed funding if the required amount is not met refund to the pledgers.
Crowdfunding in Bangladesh
• Prospect in Bangladesh
• International platforms wont work
• Bangladeshi company raised money in Kickstarter (Over US$21000).
• Residence issue
• Doller conversion, taxation.
• Local crowdfunding sites
• Projekt.co
• Ovoyaronno Bangladesh
Conclusion
• Venture financing is a risky investments, but essential for growth of
talents.
• Although it takes up a large chunk of Equity from the entrepreneur,
they helps to guide them to make it happen.
• Crowdfunding is for those who are already in the brink of a
breakthrough.
• Angel financing can happen in both modes of financing.
Questions!!!
Thank you!