Access to Finance: Examining Non-Traditional Platforms for Funding
Access to Finance: Examining Non-Traditional Platforms for Funding
Bridgetown, Barbados November 12th, 2014
infoDev’s Entrepreneurship Program in the Caribbean
GOAL: Develop and grow competitive SMEs across the Caribbean
Support Business Enablers
1
Climate Technologie s
Mobile Innovation
Growth-Oriented Entrepreneurs
Investors
Women Entrepreneu rship
Other Enablers
Access to Finance
2
Challenge – Lack of Financing for Early-Stage Companies
Stages of Business Development:
Early- Growth
Idea/Concept
Start-up
Early-Stage
Growth
Banks, Private Equity Public Markets
FFFs, Incubators, Grants, Bus. Plan Competitions
“Valley of Death”
Supply-side challenges • Banks are structurally risk averse • Few formalized early-stage investors
Demand-side challenges • Lack of quality deal-flow
• Equity aversion of entrepreneurs • Entrepreneur skills in engaging investors
Potential Early Stage Financing Options
Early- Growth
Idea/Concept
Start-up
Early-Stage
Growth
Banks, Private Equity Public Markets
FFFs, Incubators, Grants, Bus. Plan Competitions
Venture Capital
Angel Investing
Diaspora Financing
1. Venture Capital
Venture Capital as a potential financing option works in select situations
Growth opportunity must be huge
•
Snapshot of US Venture Capital Industry
• Mostly Technology focused investments
By Sector Focus
%
By Stage
%
Software
35%
Seed
3%
• Mostly in near-growth or expansion stages
Bio-Technology
15%
Early
30%
Medical Devices
10%
Expansion
35%
• Fund manager has less flexibility
Industrial/Energy
10%
Later
32%
• Deal sizes of $1 – $10 M
Source: National Venture Capital Association
To what extent is venture capital relevant for Caribbean businesses?
2. Angel Investing
Angel Investing is likely to be a more suitable alternative early-stage financing option in the Caribbean
Invest across Stages
Range of Sectors
More than Capital
Multiple Models
Seed/Start-up
Technology
• • •
• • •
Mentoring Connections
• •
Early
Traditional Industries Service businesses
• Formal and informal group of investors
Growth
Smaller sized deals
Mix of instruments
• Organization led network
$50K - $1.5M
Equity
•
• • •
Convertible notes Revenue based financing
3. Diaspora Financing
Key Findings
85% would be interested in investing in businesses back home
Willingness to invest across the region outside of home country
Interest in investing in non-traditional sectors such as ICT
However, only 13% of respondents have invested in a Caribbean-based business
Major Obstacles
infoDev study published in 2013
Lack of visibility into deal flow
Trusted local investors/validators
Complex regulatory environment
Based on the results of a survey of 850 Caribbean diaspora members
“Demand Side” Preparation
More needs to be done to prepare entrepreneurs for raising capital successfully
• Developing businesses that will attract investors
• Building deeper capacity to effectively engage investors • Understanding investor types and expectations • Understanding of investment terms and suitable instrument options • How to pitch and position the business • Managing the relationship once the deal is done
Areas for Discussion
1. What is the mix of financing options to consider given enterprises needs, stages and potential?
2. What must happen to make alternative financing options a reality for entrepreneurs?
3. What role can enablers play to build stronger pools of investable entrepreneurs?
Made with FlippingBook