Bangladesh Banks Launch $35M VC Fund for Startups

In a significant move to bolster its nascent technology sector, Bangladesh Startup Investment Company PLC (BSIC) has officially launched, backed by a consortium of 39 commercial banks. The newly formed venture capital firm has initiated its operations with an inaugural fund, Onkur Bangladesh Fund 1, securing a substantial Tk 425 crore (approximately $35 million) in committed capital. This initiative directly addresses a critical funding deficit for Bangladeshi startups, particularly in the crucial late-seed to Series A stages, a segment that has historically struggled to attract local institutional investment.

The establishment of BSIC represents a strategic pivot from a previous, less effective mandate. In 2021, the Bangladesh Bank had directed commercial banks to allocate a minimum of 1% of their annual net profits towards startup financing. However, this directive resulted in minimal capital deployment, with less than Tk 5 crore from a potential pool exceeding Tk 100 crore being utilized. The challenge lay in the banks' lack of specialized expertise, risk appetite, and appropriate structures for venture investing. BSIC is designed as the institutional solution, pooling resources and expertise under a single, professionally managed entity to overcome these hurdles.

This collective investment vehicle is poised to cultivate Bangladesh's underdeveloped venture capital ecosystem. Historically, local investor participation in Bangladeshi startup funding rounds has been remarkably low, often less than 1% of total capital raised. For instance, in 2025, local investors contributed under $1 million to a total of $124 million raised by Bangladeshi startups, a figure heavily skewed by a single large merger. The absence of robust local VC support not only hinders domestic growth but also creates perception challenges for attracting international capital. BSIC aims to bridge this gap, providing credible local backing that can, in turn, attract co-investment from global players.

BSIC's investment strategy will focus on companies requiring institutional capital for scaling, targeting late-seed and Series A rounds. While early-stage funding has seen some improvement through angel investors and accelerator programs, the need for patient capital at later stages remains acute. The fund will prioritize sectors identified for high growth potential, including healthcare, agriculture, education, transport, retail, and logistics, with a mandate that also extends to small and medium-sized enterprises (SMEs). Investment instruments will be flexible, encompassing equity, SAFEs, and convertible notes, with a clear exclusion of idea-stage ventures.

The governance structure of BSIC is designed to ensure professional investment decision-making, insulated from traditional banking operations. It features a four-tiered system: a dedicated local investment team for deal sourcing, an investment committee composed of experienced VC professionals, an advisory committee, and a board of directors representing the shareholder banks. The initial capital corpus was formed by the banks' cumulative 1% profit allocations from 2020 to 2024. Future capital injections will be sustained through the ongoing annual 1% profit contribution, with projected annual inflows around Tk 200 crore and an authorized capital ceiling of Tk 2,000 crore. The banks are shareholders, with their exposure capped and returns expected through dividends and capital appreciation.

Leading the charge as the first chairman of BSIC is Mashrur Arefin, managing director and CEO of City Bank and chairman of the Association of Bankers, Bangladesh. The nine-member board includes managing directors from prominent banks such as City Bank, Prime Bank, Mutual Trust Bank, Sonali Bank, and Pubali Bank, alongside four independent directors. Nazeem A Choudhury, additional managing director of Prime Bank, is serving as interim CEO while the firm recruits a permanent chief executive with international venture capital experience. The full investment team and committee are expected to be operational by the third quarter of 2026, with the first three investments slated for Q4 2026. BSIC anticipates building a portfolio of eight to twelve companies by 2028, with exit strategies including Dhaka Stock Exchange listings and direct stake sales from 2029 onwards.