angel investors

A country is hit by the entrepreneurial bug and start-up culture

jamaica startup women

Guest post by Susana Garcia-Robles (@RoblesSusanaro)

September 9th:  Arriving at my destination to speak at a Venture Capital conference sponsored by a local government agency.

September 10th and 12th: Attending the inauguration of the country’s Start-Up program and meeting the women behind that initiative and Startup Weekend. Listening to the manager of a prestigious private sector incubator. 

September 11th and 12th: Meeting tech entrepreneurs and participating in pitch events showcasing the winners of two local pitch competitions— one run by a local university, the other  a National Business Model competition spearheaded by a US fund manager who visited this country last year, fell in love with it, and has supported different entrepreneurial activities since.

September 12th: Meeting with a woman who runs mentorship programs for entrepreneurs. Meeting with potential  investors in VC/PE funds. Meeting with regulators.

Can you guess where in the world I am? If you are thinking Silicon Valley, Israel, or Brazil, you’re wrong. 

I’m in Kingston, Jamaica.  And I’m witnessing history in the making.

When I started working with the public and private sectors in developing entrepreneurial ecosystems in Latin America and the Caribbean more than 16 years ago, the world –in spite of the Internet boom – was a very different world than the one we live in today. We were beginning to experience the power of the Internet. Globalization was an issue discussed at an academic level. In Europe, the Euro had not been implemented yet. The region was not an investors’ destination, and there were subjects pending to be taken care of before we could be considered as a region with potential: poverty, economic crises, corruption, weak institutions, and lack of innovation better described us then.

Fast forward to 2014. The region has improved dramatically: many people who belonged to the Base of the Pyramid are now entering the middle class. No global or regional crisis has originated in the region  in a long time and better yet, we showed resilience during the last global crisis. Democracy is established at large. Globalization, coupled with access to technology, has shortened geographic distances, making access to information and knowledge available all over the world. 

Add to this mix the benefits of many countries having a young growing population known as the Millennials. They were born and live in a world where technology allows them to reach out to anyone they want, learn and work in informal settings, and be informed of what’s going on in the world as events unfold. Most importantly, they have developed a sense of belonging to a global community where they can work together in teams.

And this is what’s happening today in Jamaica. The  entrepreneurial bug has infected this country  and there is no cure for this.

I have met these Jamaican entrepreneurs and they resemble any other entrepreneur from any country that has a well-established VC industry. They are full of drive, trying out their ideas to make them into viable business models that can attract financing.  Angel investors, incubators, accelerators, MVP, pivoting the model, are part of their daily lexicon.

Together with many actors that come from different sectors of the country, the MIF is helping this ecosystem thrive: establishing a culture where risk of failure is accepted as part of the innovation and start-up creation process (fail fast, learn from your mistake, get up and move on to try again!), where being an entrepreneur does not mean having lost your job and not yet found your next one, but a life choice.

So…  yes, there is a Start-Up Jamaica, a Startup Weekend Jamaica, a Branson Centre of Entrepreneurship, a Jamaica LAB. And entrepreneurs are running start-up companies like Herboo, DocuJam, and Regal Farms Ltd.

Best of all, the Jamaican entrepreneurial movement and early-stage industry seem to have a greater participation of women than in other countries like the US or Brazil. Women are running the Start-Up programs and incubators, and start-up teams have women founders!

The future is bright for this island committed to fostering innovation from both government agencies and the private sector. At the MIF, we are working on a project with the Development Bank of Jamaica to strengthen this growing ecosystem for venture capital.

Meanwhile, major players in the Jamaican economy are getting involved as well. Jamaica’s largest bank, National Commercial Bank (NCB), and the Jamaica National Building Society (JN) are the companies behind Start-Up Jamaica, the cellular company LIME helped establish the infrastructure for Start-Up Jamaica’s awesome space. 

Have you seen signs of the entrepreneurial bug in Jamaica? And where do you think it will be seen next? 

Not All Angel Investors Are From Heaven

angel investor

On Angel Investors

As entrepreneurs, in the initial stages of the startup, we often think that the answers to our problems will come in the form of an angel investor. By definition, angels are high-net-worth individuals who get involved early in the company’s life, bringing capital, sector knowledge and network, and relevant expertise.

Angel investors usually invest anywhere between $20k-$300k and take on 10-30% ownership. They spend some of their time coaching entrepreneurs, opening doors, helping the company build the team and product, participating in strategic decisions.

Not all angel investors are the same

However, not all angel investors are the same. Reality has “expanded” the definition of an angel and many times what we see is well-off folks with no particular value-add (beyond the dough) playing the angel role almost as hobby. This is particularly true in less developed markets, such as Brazil (which I know from experience) and the rest of LatAm. Being rich and successful doesn’t necessarily make someone a good angel.

As an example, a retired C-level executive from a large pharmaceutical company may easily have a couple of hundred thousand dollars to spare and decide to invest in a startup. Why not help a couple of smart kids with a brilliant idea for a new technology or web business? What better way to stay busy and motivated!

The problem is that often these investors often have no idea what they are getting into. They just don’t know the real challenges and risks of starting a company. As time goes by, the product doesn’t launch as planned, the bank account gets thinner, and the investor gets nervous.

Entrepreneurs also get frustrated because they had expected miracles from this angel. After all, he is the older, successful mentor, who’s been there, done it all.

But it turns out the guy you looked up to actually doesn’t know much more than you when it comes to building a tech company from the ground. His rolodex only has contacts of retired people from irrelevant sectors. And as he sees his investment going down the drain, he doesn’t think you’re that cute and inspiring anymore.

Of course, I’m painting a pretty extreme scenario here. But the point is that you shouldn’t necessarily accept the first person who’s willing to invest in you. If the angel investor is not a good fit, it’s better to hold your horses, bootstrap the business a bit further, until you find someone who can actually add value to the company.

Originally posted on the Entrepreneur Academy (NEN). Image: nenonline.tv. See also Time To Start a Company – or Not.

What’s your experience with angel investors? Leave us a comment!

In Seed Capital Fundraising, You Gotta Choose Your Pizza

early stage funding seed capital

Seed capital and ownership

A common mistake entrepreneurs make, especially in the startup’s early stage, is to worry too much about valuation and dilution. The business, after all, is their “baby” and they can’t give away too much too soon – every share is worth fighting for! Well, guess what, the business is almost as much of a baby to those who are willing to back you up so early. Overvaluing the company from the get-go generates problems on several fronts.

Seed capital must be priced with care

First, very often the early investors are “3Fs” (friends, family and fools) or an angel who is only within one or two degrees of separation. Selling an overpriced product, even if you didn’t do it with bad intentions, may leave everyone with a bad taste in their mouths; especially if an institutional investor comes in a year later and values the company at half the first round. It’s hard to explain that to your uncle.

Also, overpricing makes it more difficult to raise new rounds. It sends the wrong message to more sophisticated investors. The impression is that you either don’t know how to value a company, purposely overpriced it, or the company simply lost some of its value. Neither is a good story to tell when you are sitting across the table from a VC.

Obviously, at the same time it isn’t good for anyone that the first couple of investors grab more than say 30-40% of the company. The entrepreneur needs to remain motivated, ideally also vesting some of the equity (more about that in a future post). But getting obsessed with dilution is bad for your startup. The more deep-pockets have their skin in the game the better and greater the chances the business will grow for everyone. After all, which would you prefer: 90% of a pizza or 10% of Pizza Hut?

See also Not All Angel Investors Are From HeavenImage: generalstorecafenj.com

Have you raised seed capital with 3Fs or angel investors? Leave us a comment!