Jamaica joins the Angel Investor Network Community

Over the last three decades, Jamaica has undergone major socio-economic changes. A number of government’s fiscal and monetary policies designed to improve the economy have engaged the majority of Jamaicans in a painful process, and most businesses, large and small, have felt the effects of the high cost of and low access to capital, the declining value of the Jamaican dollar and worrying levels of crime and violence. Coupled with the problem of coping in this dynamic local economy, is the fact that global trade barriers have largely been dismantled, forcing Jamaican business owners to come to terms with the fact that in the marketplace, businesses are no longer competing with their local or regional counterparts, but with other businesses in the "global village".

However, there have been many significant positives. Successive governments have developed and are implementing strategies to:

• Stimulate the micro and small enterprise sector in order to reduce the dependence on the traditional foreign exchange earners in the economy - tourism, export agriculture and mining;
• Reduce unemployment, especially among the vulnerable groups in the society - women and youth;
• Improve the regulatory and legal framework for business;
• Improve the country’s physical infrastructure, including the road network, transportation, and telecommunications.

Jamaica continues to struggle to structurally adjust its economy, characterised by perennially low growth and high debt, systematically hindering the government’s ability to provide quality services and foster economic growth and development. A challenging IMF programme and projections for low growth over the medium term, present serious development challenges for the government and the country. It is widely agreed that significant growth in the economy will only come from private sector-led, entrepreneurial activities, particularly SMEs that have high growth potential. Access to financing, however, has been a major constraint to expanding job creation by SMEs as credit providers have a preference for traditional collateral-based lending. Several key stakeholders, notably, the Development Bank of Jamaica collaborating with business owners, universities, institutions in the financial services sector, government agencies, legal and accounting firms, private sector membership organisations as well as Jamaica’s international development partners including the Inter-American Development Bank, the Government of Canada and the World Bank – have been working to strengthen the ecosystem for venture financing in Jamaica.

Access to finance for SMEs

The Government of Jamaica is acutely aware of the problems affecting businesses’ access to finance. A study conducted by David Tennant for the Inter-American Development Bank examining the factors that affect the demand and supply of business credit in Jamaica, revealed that the most glaring gap in the financial landscape was the absence of private venture capitalists and business angels and proposed that the creation of venture capital funds and angel investor networks should be treated as high priorities.

Wealthy Jamaicans step up to the plate

In March 2014, after a forum discussing the need for angel investor networks, a few influential businessmen and businesswomen decided to “take the bull by the horns” and as a Nike commercial once said: “Just Do It!” This was the genesis of FirstAngelsJA (FAJ), Jamaica’s first Angel Investor Network, which had its soft launch on July 3, 2014 at a luncheon meeting of fourteen of Jamaica’s wealthiest and most socially aware business owners. Led by Joseph M. Matalon, Chairman of the ICD Group of Companies and supported by J.J. Geewax, chief engineer at Invite Media, a New York City-based advertising display company that was acquired by Google for US$81 million in 2010 and myself, we set about creating the framework for FirstAngelsJA. We registered a not-for-profit company, built a website, created and membership documents using guides produced by the Kauffman Foundation and later updated by the infoDev project of the World Bank. My company, BizTactics Limited was hired by FAJ to manage the network.

The creation of FirstAngelsJA was actually a dream come true for me. In 2004, having founded the Technology Innovation Centre (TIC), a technology business incubator at the University of Technology, Jamaica, with help from Susan L. Preston, then Entrepreneur-in-Residence at the Kauffman Centre, we hosted seminars on angel investing in Kingston and Montego Bay to drum up support for a proposed Angel Network to be aligned with the incubator. Though I had secured a commitment from Michael Lee-Chin, Jamaican-Canadian billionaire for a million dollar sidecar fund, the Network never got off the ground, for various reasons. It was, I guess, “an idea whose time had not yet come”.

FirstAngelsJA brings together “Angels” –high net worth individuals or “accredited investors”, who invest their own funds in private companies, typically at the seed and early stages. Under Jamaica’s Financial Services Commission (FSC) Guidelines for Exempt Distributions, an accredited investor is defined as “any individual whose net worth exceeds JA$50,000,000.00, (at current exchange rates, about US$430,000) or a corporation over 90% of the voting shares of which are owned by such an individual or a trust of which such an individual is the sole primary beneficiary ”; OR “any individual who had an income before taxes in excess of JA$10,000,000.00 (about US$90,000) in each of the two most recent calendar years by such an individual or a trust of which such an individual is the sole primary beneficiary”.

Like our counterparts in other parts of the world, our member Angels not only take the risk of financing seed and early stage companies; they bring much more to the relationship with entrepreneurs: expertise to support the development of their company’s product or service, access to markets, management team and governance, acting as advisors or mentors, providing additional relationships to aid the business’ growth, and supplying industry and entrepreneurial experience that the founders may lack.

On April 22, 2015, FirstAngelsJA was officially launched in Kingston with the support of our partners, the Xcala programme, a project funded by the Multilateral Investment Fund (MIF) of the IDB, and the infoDev programme, funded by the Government of Canada and the World Bank. We proudly announced our first investment in DRT Communications Limited, a marketing communications firm owned by Danielle Terrelonge Irons offering a technology-driven media monitoring service.

With support from Xcala and the infoDev programme, FAJ has developed a strategic plan with a number of aggressive targets to support Jamaica’s SME sector. We are well on our way to achieving our target of 25 members by April 2016 (with 25% of them being women) having already signed up 18 members including associate members, KPMG and Hart Muirhead Fatta. With one investment under our belt and four currently in due diligence, we are also likely to surpass our target of five investments by April 2015. We’re excited to have joined this vibrant community of global leaders supporting entrepreneurship development. Look out for more good news from us!

Sandra A. C. Glasgow is the Managing Director of BizTactics Limited, a consulting firm dedicated to supporting growing firms in the Caribbean. She is a Founding Member of FirstAngelsJA and her company manages the Angel Network.

This blog is a part of our July 2015 series on inclusive business in Latin America and the Caribbean. View the full series for more from practitioners, inclusive businesses and researchers in the region.