Usually to start up a business seed funding is necessary at the initial phase of the business from an external investor. Thus, getting funds in a startup business is one of the most challenging phases. There are many ways of financing at different stages of a startup. There are several government initiatives for funding small and medium enterprises in the country. Among those, the Innovation Fund of Access to Information Programme, Prime Minister’s Office, ICT Division, Bangladesh Bank Equity and Entrepreneurship Fund (EEF) are highlighted also there are other sources that provide funds for startups. Therefore, it is important to sort out places to get the funds. In Bangladesh, there are four sources of getting seed funds.
Firstly, venture capital is one of the reliable sources of funds and there is a group of people who invest in businesses that they find promising. Along with providing funds they advise and monitor the business. In return for providing funds, they will ask for a piece of ownership of the startup. Some venture capitals in Bangladesh include Bangladesh Venture Capital, BD Venture Ltd., etc. On the other hand, structured Social Businesses can look for startup funding from Grameen Telecom Trust Social Business Fund.
Secondly, Similar to venture capital Angel Investors are the second source of seed funding. Whereas venture capital is run by a group of persons, angel investors are run by an individual, and the person provides fun for a startup. For example, if any person has a business idea but cannot materialize it for lack of funds the angel investors can be a better option for that person. Whereas venture capital requires a startup to be in operation as their pre-condition of funding angel investors do not require so rather if they find any innovative idea, they provide the funds for a startup.
Thirdly, Incubators or Accelerators are organizations that help to growth of the startup by providing mentorship along with resources if needed. It is to be mentioned that by applying to such incubators the person can get access to potential investors as well as mentorship and other resources. These programs in Bangladesh are held by GP Accelerator, Banglalink IT Incubator, Toru Institute of Inclusive Innovation, and Startup Bangladesh.
Fourthly, generally in Bangladesh, the financial system is bank-based. Thus, banks are the single and most important sources of both short-term and long-term funds for entrepreneurs. However, banks usually provide funds to known and proven clients and for security ask for guarantees from the directors or others along with considering the part performance to assess the creditworthiness.
The last funding for a startup can be said to the crowdfunding and most crowdfunding websites allow individuals or companies to present an idea to others and therefore who want can donate money with no expectation of anything in return. It is to be mentioned that most creative types of ideas are approved to present on the site to others.
Starting a business and collecting funds seems easy but not as seen because one of the biggest mistakes made by new business owners is not engaging any startup legal services to handle possible issues for their new business or venture. Starting an enterprise needs not only marketing and creativity rather also eliminating legal risks as every aspect of continuing a business there must need to follow the laws and regulations for smooth running.
There are some legal issues that every person faces during the startup and collection of funds-
Incorrect Legal Structure, the investors always want funds from persons who are competent and dependable entities but sometimes due to incorrect structure though have an innovative idea the people get rejected. Therefore, it would be wise to consult a legal person or advisor for the correct structure as according to the law also correct format can help save taxes along protect the personal assets of the proprietors in times of crisis.
Not Having Proper Licenses, and not compelling with the regulation may sometimes be ineffective for the business or license for continuing business. Therefore, startup business owners must engage experts to know about all the legal permissions they need to possess to run their organization.
Intellectual property is the most common issue faced by the person who wants to start up his business and wants to collect funds. It is to be mentioned that intellectual property means that has no substance but has value. The most common types of intellectual property are patents, copyrights, and trademarks/service marks which can be even ideas also. As we know at the time of collecting funds the person needs to explain all ideas along have to share his trademarks or others to convince investors, on the other hand in crowdfunding the person needs to share on public websites which is a great risk of stealing if not register the trademark and others. If the trademark or others are registered according to law the Person can sue for copyright infringement.
Patents, this is like a new idea of a particular person and as in crowdfunding or venture capital the idea or invention has to share with a group of persons or the public, therefore the patent needs protection. Therefore, to avoid this legal problem registration is required.
Copyrights and Trademarks/Service Marks, to use images music, or other copyright-protected content, need the copyright or a license to use the content. If the symbol or content is self-made then the copyrights is just before putting it in the public for the fund.
The common legal issues are non-compliance of formalities before startup therefore it is important to find out what type of records and other documents should be generated and maintained along with the laws which apply to the particular business. The selection of laws varies depending on a range of different factors such as what type of business entity is and other factors.
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Lastly, it is observed that not only are the above-mentioned legal issues faced by any person before startup and funding rather there are also many other rules which required to be followed, therefore it is wise to consult with a lawyer or expert for smooth continuity and avoid all legal issues. Also, one thing must be kept in mind before going for fundraising the person must be prepared with all documents as the investors or banks provide funds only to those whom they seem reliable.
