“But remember the Lord your God, for it is he who gives you the ability to produce wealth, and so confirms his covenant, which he swore to your ancestors, as it is today.” – Deuteronomy 8:18
Last week we reflected on the HIGS workshop methodology for generating business ideas for marketing, entrepreneurs, intrapreneurs and MSMEs. Today we shall focus on Investor Incentive-led Equity Funds with Shepherding Squads as Collateral.
The hypothesis is that when these two innovative concepts are twinned, the elements of the Shepherding Model (Metamorphosis, Management, Money) are all activated, the chances of achieving sustainable business enterprise development are enhanced, and economies grow.
For budding entrepreneurs and intrapreneurs in the Caribbean, securing a bank loan can feel like an insurmountable challenge. Traditional lending institutions often require applicants to meet stringent criteria, including a stable income, substantial collateral, an impeccable credit history, a favorable debt-to-income ratio, and the ability to cover various fees. Additionally, projecting a healthy cash flow can be particularly challenging for startups in their early stages. These barriers can create a significant roadblock for innovative ideas and entrepreneurial dreams, preventing them from taking flight.
Enter the Quick Response Revolving and Growth Equity Fund, a game-changer for Caribbean startups. This innovative fund offers a swift response to funding requests, ensuring that promising ventures don’t get bogged down in lengthy approval processes. The revolving nature of the fund means that as one startup succeeds and repays its investment, those funds become available to support new ventures, creating a sustainable cycle of growth.
One unique aspect of this equity fund is the concept of a “Shepherding Squad” as collateral. Instead of traditional assets, startups have access to a team of experienced mentors and advisors who actively guide and support the growth of the business. This approach not only reduces risk for investors but also provides invaluable expertise to entrepreneurs.
Effective fund management systems ensure that capital is allocated efficiently and transparently. This level of oversight helps maintain the fund’s integrity while fostering trust among entrepreneurs, intrapreneurs, MSMEs and investors.
The Quick Response Revolving and Growth Equity Fund sources its capital primarily from the private sector, where businesses and individuals invest in promising startups. To incentivize this crucial private sector investment, governments in the Caribbean can offer tax breaks, subsidies, or other financial incentives to encourage participation. This public-private partnership model creates a robust ecosystem where the government plays a supportive role in nurturing entrepreneurship while leveraging dormant private sector expertise and capital.
One of the fund’s most attractive features is its flexibility in working with both entrepreneurs and MSMEs. These enterprises can offer shares to the fund in return for equity investment. This injection of capital helps fuel growth and expansion. Importantly, when a startup’s cash flow becomes robust, it has the opportunity to buy back its shares from the fund at market price, eventually regaining 100 percent ownership.
Intrapreneurs, individuals within established organizations with innovative ideas, can also benefit from this fund. They can pitch their ideas to the fund and, if approved, receive the necessary capital to develop their projects within their current workplace. This approach encourages innovation from within established businesses and contributes to their long-term sustainability.
The Quick Response Revolving and Growth Equity Fund offers a win-win outcome for all involved parties. Startups gain access to the critical funding they need to grow and thrive, creating jobs and contributing to economic development in the Caribbean. Investors enjoy a return on investment as their funds are strategically allocated, and the region benefits from increased economic sustainability driven by a vibrant entrepreneurial ecosystem.
This represents a promising solution to the challenges that have historically hindered the growth of startups in the Caribbean and has the potential to unleash a wave of creativity and economic growth in our region, ultimately leading to a brighter and more prosperous future for all.
(Dr. Basil Springer GCM is a Change-Engine Consultant. His email address is basilgf@marketplaceexcellence.com. His columns may be found at www.nothingbeatsbusiness.com).