The Jamaica Venture Capital Programme 2013 - 2015

The DBJ’s medium term strategy increasingly gives focus not only to facilitating access to credit, but also access to equity via the Jamaica Venture Capital Programme.  Having signed a non-refundable Technical Co-operation Agreement with the Inter-American Development Bank through its Multilateral Investment Fund (IDB-MIF) in February 2013, the major imperatives of the DBJ’s venture capital strategy are:

  • Developing a venture capital ecosystem to create an environment conducive to the establishment of a dynamic private equity/venture capital (PE/VC) industry to include legal, taxation and regulatory changes as well as significant training of local investors, fund managers and entrepreneurs;
  • Fostering the establishment of new venture capital and private equity funds through public and private sector collaboration with local and international fund managers.  Further, the DBJ will also seek to stimulate investments in new venture capital funds by becoming an anchor investor in VC funds along with private sector partners;
  • Fostering the development of a sustainable deal flow of investment-ready businesses, through the support of entrepreneurs, incubators and accelerators and sponsorship of business model competitions and pitch events;
  • Building strong linkages with our international development partners (IDPs), the Jamaican Diaspora as well as our Latin American and Caribbean neighbours;

Since inception of the programme, strong focus has been placed on ‘filling the gaps’, within the local environment, which are likely to constrain the development of a vibrant VC market.  The VC team, along with its international development partners, the IDB and The World Bank embarked upon a programme of knowledge development, information sharing and sensitization of stakeholders, in an effort to increase awareness and move local market participants along the ‘learning curve’.  Activities included conferences, speaking engagements, presentations at seminars and workshops as well as participation in local panel discussions and sponsorship of key industry events.

Milestones & Achievements to date

1. Legal Taxation & Regulatory Framework
Specific legislation is required for the PE/VC industry.  The JVCP has identified a number of legal, taxation and regulatory changes that are required. Recommendations have been documented and short, medium and long-term strategies have been devised. A public, private sector working group will be deliberating these recommendations with a view of submitting legislative amendments for consideration by the Ministry of Finance and possibly the Cabinet during Financial Year 2015/2016. 

As a start, a special working group comprising public and private sector attorneys, tax accountants, Government of Jamaica tax policy specialists, external services commission and the DBJ are reviewing the existing taxation legislation under the Income Tax Act with a view to clarifying the processes for applying for taxation incentives and identifying legislative amendments.

Dialogue has been ongoing with the Financial Services Commission (FSC), relating to the regulatory limits for investment by Pension Funds and Insurance Companies in private equity/venture capital funds.  The FSC is expected to provide guidelines relating to the existing regulations and to review same and recommend whether specific allowable limits are to be ‘carved out’ for VC.

                Legal Toolkit
In an effort aimed at cost reduction to the end-users, entrepreneurs and SMEs, the JVCP has identified and developed a ‘toolkit’ of best practices, guidelines, forms and templates for the venture capital and private equity industry.  It is anticipated that this compendium of forms, templates and documents will greatly assist in reducing the overall legal costs to stakeholders undertaking venture capital transactions.

2. Executive Training Workshops
As part of the developmental process, two executive training workshops were held over the period June 30 – July 5, 2014 with the objective of ensuring that all critical stakeholders are provided with the requisite knowledge and information to ensure a vibrant and sustained industry.  Ascentium Associates, a UK-based specialist-training provider that focuses on the private equity sector conducted the workshops. Sixty four (64) participants were exposed to topics such as:  private equity and its role in an investment portfolio; key issues in investment selection and appraisal, exit strategy development and execution, among others. 

3. Venture Capital Conferences
The DBJ-JVCP has successfully hosted two Venture Capital Conferences.  The first, held in September 2013 was a two-day event and was attended by over 300 persons, representing a wide cross-section of Jamaican professionals, local and international policymakers, regulators, academics and entrepreneurs.  The keynote address was delivered by venture capitalist, Paul Ahlstrom, the founder of Alta Ventures, USA.  Other presenters included the Hon. Minister of Finance & Planning who officially opened the Conference.  Day One of the conference took the form of plenaries and round table discussions, and concluded with a dynamic post conference workshop on Day Two, for local and international, private sector and governmental policymakers. 

Building on the success of the first VC conference, the second was held in September 2014 at the Jamaica Conference Centre, downtown Kingston and was well supported.  Keynote presenter was world-renowned Harvard University Professor Josh Lerner, as well as some 30 local, regional and international presenters, with conference events held over three days, the main 2014 VC conference  event addressed a wide range of topics such as: Putting the Caribbean on the Global Venture Capital & Private Equity Map; Backing Women Entrepreneurs; The Creative Economy, Sports, Culture and Grow. Is VC a ‘game-changer’ to the creative industries?  Fuelling a Hub for Innovation and Getting the Deals Done.  Day One was dedicated to workshops for angel investors, and for policy & decision-makers; Day Two was Conference Day and the final day was geared specifically to students, entrepreneurs and SMEs.  In excess of 400 persons were in attendance at the events and plans are already in train for the third annual VC conference, which is tentatively set for March 2016

4. Investor Panel
An Investor Panel comprising local public and private sector investors, including institutional investors, corporates, investment bankers and advisors, as well as pension funds and multilateral partners, was established in April 2014.

The mandate of the Panel 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.  The members of the Panel will individually, based on their investment preferences, make the decision to invest in selected fund managers, following a due diligence process.

Through the mechanism of the Investor Panel, new, as well as existing fund managers, have had the opportunity of presenting proposals to this consortium of prospective local investors and have the potential to acquire partners with access to significant pools of capital.   The Panel will drive the process of identifying, selecting and investing in these fund managers.  Many of the investors who sit on the Panel are expected to be actively involved in the angel and venture capital communities.  It is anticipated that members of the Panel will also participate in mentorship and coaching of new entrepreneurs.

5. Call for Proposals for Fund Managers
During the period June – September 2014 the first ‘Call for Proposals’, for Venture Capital & Private Equity Fund managers interested in investing in Jamaican businesses, was issued.  Eight proposals were received (four from local managers and four from overseas).

A due diligence process is underway with a view to final selection of fund managers, early in the 2015/16 Fiscal Year.

6. Entrepreneurship Development - National Business Model Competition (NBMC)
The National Business Model Competition was introduced to Jamaica at the September 2013 Venture Capital Conference, when keynote presenter, Paul Ahlstrom of Alta Group, extended an invitation to the universities to organize the competition.  Alta Group, USA and Jamaica’s ICD Group of Companies sponsored prize monies as well as a place in the international competition.  Further sponsorship was secured from the DBJ, through the JVCP, the IDB’s Multilateral Investment Fund and the Private Sector Organization of Jamaica.  The DBJ-JVCP provides leadership, technical support and sponsorship to the NBMC.

The objectives of the NBMC are to encourage and promote creative thinking and the entrepreneurial spirit and to create a pool of potential businesses.  The idea of involving the universities was based on the international model where universities are seen as fertile grounds for the unearthing of new innovation.

Organized on a tiered model whereby intra-university competitions were held between October, and January to select their top four teams to participate in the national finals, the competition saw three universities – University of Technology, Joan Duncan School of Entrepreneurship, Ethics, & Leadership; Northern Caribbean University’s Morris Entrepreneurial Centre and the University of the West Indies through the Mona School of Business & Management - working together collaboratively, to develop a first-class event.  The winning team participates in the annual International Business Model Competition, held in May each year, in Utah, USA.  The winner of the inaugural Jamaica NBMC in 2013 placed 8th overall out of a total of 42 US and international teams and also won the International Award.

Over the two years, some 520 students organized in 130 teams have benefited from participating in the training and coaching relating to the development of their business models.

The number of universities participating in the NBMC is likely to increase over the short to medium period as more universities sign onto the initiative, and, as the NBMC is now listed on the universities’ calendar of events, the expectation is that the competition, in the coming years, will attract the participation of many hundreds of student entrepreneurs, across the various campuses.

7. Angel Investor Network
Critical to the success of a vibrant and sustainable VC/PE industry is the need for ‘angel’ investors who will provide guidance, mentorship and patient funding for start-ups and innovators.  The JVCP is supporting the establishment of Jamaica’s first angel investor network – FirstAngelsJA.  Advice and guidance on the establishment of a network is being received from the Bank’s international development partners and the network now has 13 members and is actively hosting pitches from entrepreneurs, and has announced its first investment.
 
8. Legal Forum
On February 24, 2015 the JVCP Unit hosted a Legal Forum under the theme:  setting the table… a legal, taxation & regulatory framework for Jamaica’s private equity-venture capital industry at which three critical documents were presented (i) The Legal, Taxation & Regulatory Framework; (ii) Toolkit: Private Equity and Venture Capital Best Practice standardized documents guidelines and templates; and (iii) Allowable Limits for Pension Funds and Insurance Companies. The Forum was well attended and participants included: lawyers, accountants, business services providers, entrepreneurs and small business owners.  The theme - “setting the table” - was borrowed from Professor Josh Lerner’s book “Boulevard of Broken Dreams” and recognizes the need to have an effective ecosystem conducive to VC growth.

Going Forward
The JVCP imperatives over the 2015/2016 fiscal year include a continued focus on knowledge development, information sharing and establishment of a conducive legal, taxation and regulatory framework.  The DBJ and its partners are committed to the process and will:

  • Spearhead the necessary advocacy to guide the GOJ and FSC in addressing VC-specific legislation and regulations
  • Host the annual Venture Capital Conference and Executive Education Training workshops on Private Equity and Venture Capital,
  • Continue the training of entrepreneurs through partnerships with local agencies and universities in order to promote a deal flow of eligible projects,
  • Embark upon a major communication and change management programme aimed at fostering a cultural shift, particularly among entrepreneurs.  This programme will incorporate a more dynamic, interactive website and an active social media presence;
  • Continue to lend support for the newly established Angel Investor network, through facilitation of training and linkages with local and international stakeholders.
  • Continue to support start-ups and innovators through the business model competitions, Digital Jam and Startup Jamaica and some pitch events, in addition to engaging business service providers, legal and accounting advisors in providing affordable services. 
  • Continue to support more established SMEs through linkages with fund managers either directly or through venture forums and pitch events;
  • Commence the establishment of a private equity and venture capital Association in Jamaica, to provide leadership of the venture capital industry, in the long term.
  • Establish a database to track the growth and development of the industry, thereby facilitating the establishment of new initiatives to ensure sustainable growth of the industry.