Startup sandbox to encourage new ventures on the cards

The government is going to announce a "startup sandbox" for new entrepreneurs to help them come into more prominence using their full potential in a smooth process.

Startups will have no reporting obligation if they provide permanent access to their system or books to the National Board of Revenue, according to the ministry of finance officials.

The next budget will reduce the minimum tax rate to 0.1% from 0.6% under the sandbox benefits. Besides, they will also be allowed to carry forward their losses up to nine successive assessment years. Currently, all companies can adjust their losses for up to six years.

To propel their growth, the startups will also be given amnesty from penalties even if they fail to comply with tax rules, according to the sources.

Welcoming this move, business leaders say such facilities will help more entrepreneurs join the startup industry.  

A startup, to enjoy the benefits of a sandbox, has to be registered with the NBR.

To become eligible for the facilities, startups should be incorporated under Companies Act, 1994 and they will have to work towards deployment or commercialisation of new products, processes or services driven by innovation, development and technology or intellectual property, according to the new budget proposals.

A startup company should not be a subsidiary of another company holding 50% or more of its shares. It also cannot be a resulting company of a scheme of amalgamation or demerger.

It has to be incorporated after the fiscal 2017-18 but must be registered by the last day – June 2023. Those five years will be calculated as the growth year of a startup venture. 

Startups may create value by offering novel solutions or making a significant improvement to any prevailing solution to any significant problem or a set of problems. 

According to the budget proposals, a startup is a newly registered company with an annual turnover not exceeding Tk100 crore in any fiscal year. 

The new budget will also remove the expense ceiling so that they can promote and market their products to customers and at the same time, spend on research and development. 

Talking to The Business Standard, Rizwan Rahman, president at Dhaka Chamber of Commerce and Industry, said definitely, the startup sandbox will help to boost startups, but the government should monitor them to prevent any misuse of the facilities. 

Sarwar Kamal, founder of a new startup named Chardike Limited, said, "Such facilities will be very encouraging for new startups like us."

Young entrepreneurs do not have enough knowhow to maintain various reporting required by different authorities or regulators. 

Masum Khan, co-founder and CEO of Aladin Kids, said, "Giving a relief from the reporting obligation will encourage young entrepreneurs to set up new ventures."

The rise of startups 

Bangladesh has experienced a significant transformation in the startup industry in recent years. According to a recent study by Light Castle Partners, Bangladesh currently has over 1200 active startups, with 200 new startups joining the industry every year.

Bangladeshi startups have raised roughly $400 million in international investment and created 1.5 million jobs over the last decade. They received $150 million to $200 million in funding in 2021, nearly double what they previously received.

Startups in Bangladesh came into prominence since the emergence of Bkash in 2010. It was founded and supported by "Money in Motion" of the United States and Brac Bank Ltd. 

Following an investment by Ant Financial, a sister firm of Ali Baba, in 2018, Bkash's valuation climbed to almost $1 billion (according to Brac Bank's Annual Report), making it Bangladesh's first unicorn.

ShopUp, a commerce platform, received $75 million in funding from Peter Thiel's Valar Ventures and Proses Ventures, making it the largest investment in a Bangladeshi startup to date. 

Bangladesh's largest digital services platform, Pathao, raised approximately $35 million in venture finance in 2021. 

Another rising e-commerce platform, "Chaldal," has received $10 million in international funding for expansion. PaperFly ($11.8 million), Praava ($10 million), Truck Lagbe ($4 million), and Bangladeshi Edtech firm 10 Minute School ($2 million) were among the other significant fundraisers. Apart from that, many other startups received undisclosed seed and pre-seed funding.