Legal Framework for Venture Capital Programme by 2015/16

Finance and Planning Minister, Dr. the Hon. Peter Phillips, says the legal and regulatory changes to develop Jamaica’s venture capital industry, should be implemented during the next fiscal year.

He said that the Development Bank of Jamaica (DBJ), through the Jamaica Venture Capital Programme (JVCP), has made significant headway in identifying some of the regulatory changes that will be required in establishing a venture capital/private equity (VC/PE) industry in Jamaica.

Dr. Phillips, who was speaking at the official opening of the 2^nd annual Venture Capital Conference at the Jamaica Conference Centre on Tuesday, September 9, said the Ministry has been working with the DBJ and other stakeholders to cement the specific recommendations for implementation.

“What is required is much more than simple capital and efforts are being made to identify the nature of the changes, which would be required to the legal and regulatory framework,” he stated.

The JVCP is a Government initiative, aimed at developing the environment to mobilize long-term equity funding to enable greater access to alternative financing sources for high potential, small and medium size enterprises (SME), and entrepreneurs.

Its development and implementation, which commenced in 2013, is being embarked on over a three-year period.

In 2013, the DBJ signed an agreement with the Inter-American Development Bank (IDB) to develop a venture capital ecosystem through the JVCP, and aims to get two venture capital funds started by 2016. The IDB is putting up US$150,000 to match the DBJ’s US$128,000 to establish the ecosystem.

Minister Phillips also informed that a toolkit is being developed by the legal advisers of the DBJ that will provide access for all stakeholders to the standardised documents and the guidance as to the international best practices to be followed in undertaking venture capital transactions.

He said an investor panel of local public and private sector investors, including institutional investors, investment bankers and advisors, as well as pension funds and multilateral partners has been formed.

The panel’s mandate is to encourage the establishment of venture capital and private equity funds operated by qualified local and/or international fund managers, who are fund-raising for the purpose of investing in companies operating in Jamaica.

Dr. Phillips said a call for proposals was also issued, earlier this year, for those interested in establishing venture capital funds.

“It is my expectation that in the course of next year, we will have established functioning venture capital funds, which will provide a way for those with good ideas and good business plans, but without access to capital to start their businesses,” the Finance Minister said.

Chairman of the DBJ, Joseph Matalon, said the bank’s partnership with the IDB, through its Multi-lateral Investment Fund, has been invaluable.

“They have continued to share their significant body of technical expertise with us, while also providing much needed funding support for the programme,” he stated.

Mr. Matalon said he also looks forward to collaborating with the Caribbean Development Bank (CDB) on the JVCP.

“We do believe that the linkages across the Caribbean, the sharing of ideas among investors, fund managers, and entrepreneurs will not only help to build skill, but will serve to strengthen development of the venture capital industry and put the Caribbean on the map,” he stated.

In the meantime, Harvard Professor, Josh Lerner, in his keynote address, said innovation and entrepreneurship are key components of economic growth and development, particularly within a 21^st century environment.

He noted that much of the job creation in the United States is not from the established companies, “but it’s really the young companies that deal with the bulk of the job creation”.

The 2^nd annual Venture Capital Conference, organised by the DBJ, is being held from September 8 to 10, under the theme: ‘Towards a Dynamic Ecosystem…Linking Capital, Innovation and Entrepreneurship for Growth’.