For the past two years, a World Bank Group team has tested organized business angel investing as one solution to the funding and business development challenges that Caribbean entrepreneurs face.
As part of the Entrepreneurship Program for Innovation in the Caribbean (EPIC), which takes a multi-faceted approach to growing the ecosystem through business incubation and acceleration services, the project represents a new avenue for entrepreneurs to access capital, business know-how, professional networks and mentoring that can help their businesses grow.
Administered by the Canadian-backed trust fund infoDev, part of the Innovation & Entrepreneurship unit in the Trade & Competitiveness Global Practice, the pilot serves as a prototype for other developing markets that seek to build dynamic entrepreneurship-enabling ecosystems that include non-traditional forms of funding.
Business angel investing:
- Involves high-net-worth individuals, typically successful business owners and corporate executives, investing their own capital and, more importantly, their time into start-up and early-stage businesses.
- Usually represents the first outside capital (non-friends, family and founders) for entrepreneurs and investment occurs at earlier stages than venture capitalists.
- Is a flexible, accessible source of capital for enterprises with new business models or technologies that traditional financiers tend to turn away.
The World Bank Group team strategy involves technical assistance and coaching to both entrepreneurs and investors. For investors, the team urges local champions (well-connected, influential angels who take the lead) and the angels themselves to discover the operating model and investment philosophy that works for them. For entrepreneurs, training is provided on how to approach and pitch to angels.
Initial results are encouraging. Three angel investor groups now operate in the region, First Angels Jamaica (Kingston, Jamaica), Alpha Angels (Montego Bay, Jamaica) and Trident Angels (Bridgetown, Barbados), with other prospects being cultivated in Trinidad & Tobago and Belize. The groups include over 50 members and have completed five equity investments and a small loan.
These investments offer unique insights into the strategic value angels can contribute to firms. Take mSurvey, a company that provides enterprise mobile surveying solutions. The founder, Kenfield Griffith, hails from Montserrat, attended MIT and moved to Kenya to conduct his doctoral research. While there he developed his entrepreneurial vision and launched mSurvey.
As he sought partners to expand his business into the Caribbean, Griffith connected with the World Bank Group team, who introduced him to Alpha Angels. The company secured a six-figure investment from Alpha and has since gone on to raise over $1 million, including from Silicon Valley investors and Safari.com, the founder of M-Pesa, the highly successful mobile money transfer company based in Kenya.
Alpha Angels Chairman Yoni Epstein noted, “Ken is a great entrepreneur, and investing into a Caribbean national who has a vision and a product that is globally scalable shows the talent from our region. Alpha Angels is proud to have helped him kick-start mSurvey.” Since the investment, mSurvey has hired three Caribbean-based employees tasked with growing the company’s business in the region.
LINK-Caribbean: An Early-Stage Investment Community
Left to right, Sandra Glasgow, manager, First Angels Jamaica, and angel investors Dereck Foster of Trident Angels in Barbados and Lisa Lake of Alpha Angels in Jamaica. They spoke on a panel at the launch event for LINK Caribbean. Himal Reece/Caribbean Export Development Agency
Establishing angel groups and seeing the first deals completed represent initial successes in a broader ecosystem play. In fall 2016, the World Bank Group and the Caribbean Export Development Agency launched LINK-Caribbean, a $1.6 million investment facilitation project to further build out the investment community and to create connections between entrepreneurs, business support organizations, and investors that lead to better deal flow and stimulate investments.
LINK aims to create a pan-Caribbean network, where entrepreneurs and investors can break down geographical barriers. An online platform will facilitate deal sharing and LINK will host regional events. LINK will also provide grant funding, mentoring, and fundraising support to entrepreneurs.
As the community grows and confidence rises, LINK could be a conduit for the large Caribbean diaspora community to consider investing in early-stage enterprises back home. Ultimately, the project will provide important insight into the role angel investors can play in early-stage entrepreneurial communities.
Aun Rahman is a financial sector specialist with GTCID. Jeremy Bauman is a consultant with GTCID and managing director of New Dominion Angels, an angel investors group in the Washington, D.C. area.