“I have seen something else under the sun: The race is not to the swift or the battle to the strong, nor does food come to the wise or wealth to the brilliant or favour to the learned; but time and chance happen to them all” – Ecclesiastes 9:11
The CEO of the Barbados Investment and Development Corporation, according to a report in the Barbados Business Authority of Monday March 24 2008, said that “Small entrepreneurs in need of sizeable start-up capital should either willingly share business ideas with investors or take a longer route to raising funds”.
I have practised as a private sector management consultant for more than 30 years, following a period of almost 10 years as a Biometrician mainly at UWI in the field of agricultural research and development. I identified with the need for seed and venture capital in Barbados and the Caribbean over 20 years ago and, even though there has been many a foray in an attempt to find a solution, no comprehensive model has so far been implemented.
Where entities have dared to offer venture capital funds, in most cases, there seems to have been a “commercial banking override”, probably because of the experience of the fund managers. When a departure from the requirement of hard collateral (as security to protect the depositors’ interests against the risk of business failure) has put the managers in a position of discomfort, they have reverted to protecting their anatomy and hence have compromised the true venture capital spirit.
Over the last 10 years I have been focused on designing and implementing a model to nurture start-up enterprises which have the potential for high performance or exponential growth in the global market or, as we term it, the “DNA of an elephant”. My experience in the field, having partnered with tens of start-up enterprises over this period, has confirmed that the lack of seed and venture capital is the single most important constraint to development. Many good ideas have not seen the light of day and as a result, not only are the entrepreneurs failing to capitalise on their ideas but more importantly the rate of growth is being stymied because these business have been denied the opportunity to have a positive collective impact on development. When the country wins we all win! It is therefore mandatory that we do all that is in our power to establish a viable Quick Response seed and venture capital fu nd.
The CBET Shepherding Model™ has evolved as necessary and sufficient for sustainable start-up business success. It recognises the need to provide the start-up entrepreneur with timely access to (1) business systems, (2) appropriate financial instruments and (3) shepherding services. Recent experience has shown that there is no shortage of “DNA of an Elephant” ideas. The business systems and shepherding activities can be procured from a cadre of consultants wherever the appropriate expertise is available. The challenge is the lack of a Quick Response seed and venture capital fund. Lest there be any ambiguity, I should distinguish between the terms “seed fund” and “venture capital fund” since they serve different but related purposes.
Quick Response Seed funding is required for the leg of the journey from business concept to the completion of the business plan, which signals the conditions under which the business is viable and the investment capital required for its implementation. The purposes for which the seed capital is required are (1) Creating or Shaping Innovative Ideas, (2) Entrepreneurs’Living Expenses in this critical phase, (3) Product Development & Market Research, (4) Emergency Loans, (5) Strategic Visioning Retreats, (6) Business Plan Development and (7) Identification of Potential Investors.
Quick Response Venture capital funding is required as the primus inter pares among potential investors. An injection of capital from the quick response venture capital fund may engender confidence in other venture capitalists, angel investors, equity participants thus expediting the capitalisation process.
I refer again to the reported quote from the BIDC CEO “Small entrepreneurs in need of sizeable start-up capital should either willingly share business ideas with investors or take a longer route to raising funds”. This does not address the seed capital requirement in the initial leg of the journey. Investors are not likely to get involved until they are presented with a viable business plan. Also, it is my experience that the entrepreneurs can be sold the concept that it may be better to be a small fish in a big pond, especially if your partners can complement your business needs, than a big fish in a small pond, especially if the small pond is potentially non-viable. “Taking a longer route to raising funds” seems to be patronising to the investor’s idea and certainly does not recognise the potential contribution that this idea could make to growth at the national level. It should not be encouraged as a developmental concept.
The seed capital funding would be a revolving fund replenished, at a profit, as the venture capital investment is made. The venture capital fund would be accompanied by an equity agreement with an appropriate exit clause.
The sources of the seed and venture capital funds would be private investment and permanent subscribed capital by the public sector. The private sector investors would receive financial dividends and the return to the pubic sector investors would be macro-economic benefits. Let us pray that “time and chance will happen to us all”.