Venture capital market will need incentives to thrive, says expert

For Jamaica?s foray into the venture capital market to be successful, the Government must provide incentives to spur the creation of businesses, which will in turn lead to further job creation, according to Professor Josh Lerner.

To set the table, Jamaica must ensure the legal and financial environment are conducive to start-ups, said Lerner, the keynote speaker at the second annual capital markets conference held in Kingston.

The state should ease the formal and informal sanctions on involvement in failed ventures, break down the barriers to technology transfer, and make entrepreneurial education core to student training.

?The tax regime in place must also make entrepreneurship attractive,? the keynote said Tuesday at the conference put on by the Development Bank of Jamaica (DBJ).

He noted the example of Japan which had to alter its economic policies because they ?did not encourage individuals to leave their jobs?, and go start a company, Lerner said a successful venture capital industry strives for labour mobility.

?Having an environment where shareholders can feel confident when they do the investment they are going to see their money back or least see it being spent in clear defined ways are very important,? Lerner said.

Led by DBJ, Jamaica is in the process of developing its own ?ecosystem? for venture capital financing.

recruiting stage

The bank is now at the stage of recruiting fund managers to create and manage venture funds for lending to start-ups and other enterprises.

DBJ has invited proposals, on which bids close mid-September, for individual fund managers to lay out how they would raise capital of about US$20 million ? though it has said the target is an aspiration and not necessarily a condition.

The bank plans to inject up to $1 billion over five years in the funds that are approved and become operational.

DBJ managing director Milverton Reynolds said on the margins of the conference that he hopes that about two of the venture funds up will be up and running by yearend.

Project consultant for the Jamaica Venture Capital Pro-gramme, Audrey Richards, said several bids have been submitted under the call for proposals, including one from overseas.

DBJ intends to issue calls for proposals again next year.

Lerner said while it is common for governments to fear that start ups will migrate and the country will lose some of its best minds, they should not, as those who leave will likely become angel investors themselves, returning to add further value to the economy.

?Sometimes there is sort of a tendency on the part of people to say we don?t want venture capitalists investing here because they are going to invest our companies and they might steal their ideas or they (the companies) might go off take their ideas and I think it?s natural for policymakers to be

nervous about that and say we don?t want a brain drain of our best people, but even if people end up leaving, it might up being very positive for the country,? he told the conference, while noting the plethora of Israeli companies that have

listed in the stock in exchange in the United States.

Also at the conference, entrepreneurs were advised that their own character was just as important to angel investors looking to back them as the market in which they planned to compete.

They need a winning business plan to pitch to potential backers, but must also be knowledgeable about the scope of their venture, said panellists at one of the discussion segments.

?The most important thing for me is the extent of the market that you are looking to get into and how developed is that industry ecosystem,? said Aun Rahman, head of InfoDev Access to Finance Program at the World Bank Group.

For Susana Garcia Robles, chief investment officer of the IBD?s Multilateral Investment Fund, a proposal that applies innovation to traditional industries makes a business plan appealing.

?Innovation applied to traditional sectors such as education agro business and health can be as innovative as the next Facebook,? Robles said.

Both the Inter-American Development Bank and World Bank are backers of Jamaica?s venture capital project.

Angel investor, Nelson Grey, says he needs to be able to trust the entrepreneur personality?s and ability to drive the company.

?The one thing is important to me as a business angel investor is that I need to be able to work with the entrepreneur,? Gray said.

?I don?t want to work with someone who only wants my money and I don?t want to work with somebody who expects me to run the business. I need someone who is willing to be coached. So it?s the character of the entrepreneur that is important to me.?

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