Work Far Advanced to Establish Venture Capital Programme

Work is almost complete on a strategic plan to establish Jamaica’s Venture Capital Programme (VCP), being spearheaded by the Development Bank of Jamaica (DBJ).

Project Consultant at the DBJ, Audrey Richards, tells JIS News that the task is being carried out by a Special Consultant, recruited for this undertaking, and include, among other things, a market analysis to determine stakeholders’ readiness for venture capital and private equity investments; and an assessment of the legal and regulatory framework for venture capital in Jamaica.

Mrs. Richards advises that work on the strategic plan, which commenced in January, should be completed by the end of July.

The Venture Capital Programme is a Government of Jamaica (GoJ) initiative, which aims to develop the environment to mobilize long term equity funding to facilitate greater access to alternative sources of financing for high potential, small and medium size (SME) enterprises, and entrepreneurs.

Venture capital represents one solution, out of a suite of much needed solutions, for businesses which encounter challenges accessing financing for their operations from traditional institutions, such as commercial banks, which usually require collateral, among other pre-requisites, to facilitate loan applications and disbursements.

Mrs. Richards explains that the market analysis has provided an in-depth assessment of the current environment for venture capital in Jamaica. This, she points out, has enabled the consultant, in collaboration with market stakeholders, to identify the appropriate interventions to be applied to create the environment for the programme’s successful implementation.

She says work under this first phase forms part of a number of activities being facilitated through a non-reimbursable technical co-operation agreement between the Inter-American Development Bank (IDB) and the DBJ.

The agreement, which was inked in February, sees the IDB providing some $15 million (approximately US$150,000) in grant financing under its Multilateral Investment Fund (MIF) facility, with the DBJ putting up counterpart funding totalling $12.8 million (approximately US$128,000).

In addition to the strategic plan’s development, other activities slated to be undertaken include: implementation of a communications/public education programme to heighten awareness and sensitize targeted stakeholders about the benefits of venture capital financing.

Mrs. Richards points out that the strategic plan will focus on several key areas. These include: enhancing capacity building programmes for SMEs, to improve their record-keeping procedures; business proposal preparation; and presentation skills, in order to prepare stakeholders to meet with prospective investors.

“It’s not good enough that an entrepreneur (only) knows that his business is viable or that his ideas have a lot of potential. He needs to be able to demonstrate that through a proper business plan and proper record keeping procedures, so that an investor or fund manager would be able to assess that operation and make an informed investment decision,” she tells JIS News.

Against the background of the venture capital programme being designed to provide long term equity capital financing, Mrs. Richards says wide-scale buy-in and participation by private sector investors with the requisite expertise is anticipated.

She points out that the focus on attracting private sector investors is based on the determination that their involvement will significantly enhance development of a sustainable venture capital industry.

“We have recognized that there is a need for creating access to finance for many small and medium sized enterprises and entrepreneurs. What we are doing is trying to find a solution. So venture capital (provides the opportunity) for an investor to invest in a start-up or an existing entity and provides them with that level of support. We believe it needs to be private sector-led, with the Government acting as a catalyst to ensure that the environment is conducive to the private sector making these kinds of investments,” she argues.

A key aspect of the programme will be the support given by the DBJ to the development of venture funds and hosting of a venture capital conference and a number of training workshops over the next two quarters.

Internationally recognized experts will be invited to Jamaica to make presentations and conduct workshops, in order to increase the levels of understanding and knowledge of venture capital and private equity among local investors and entrepreneurs.