A Seed Fund for the Caribbean
A Low Cost, High Margin Export
Human ingenuity expressed as software is the lowest cost, highest margin export for any nation. Caribbean nations have many advantages when it comes to building software and tech enabled service companies that can build local and sell worldwide. To succeed on a global scale, Caribbean entrepreneurs need access to more early-stage investment capital and connectivity to business networks that can facilitate entry into overseas markets, particularly the United States. The Caribbean Seed Fund (CSF) is being organized to assist start-up companies in Jamaica and other Caribbean nations by providing early-stage funding and access to business expertise/networks that will accelerate growth.
Bringing Overseas and Caribbean Investors Together
CSF is a collective effort by local and overseas business leaders to bridge the capital and connectivity gaps faced by ambitious entrepreneurs. Our vision is to bring a structured approach to helping Caribbean entrepreneurs scale their businesses into larger overseas markets. Such businesses have the potential to create high paying jobs with equity sharing and foreign exchange inflows. Participating investors in the fund will include successful entrepreneurs who have created exits for equity backed companies. These exits have also led to further entrepreneurship and investment activities which accelerate overall startup ecosystem growth.
Local and Global Markets
CSF will invest in founders developing products for local and global markets. The fund’s primary goal is to help entrepreneurs define and shape emerging businesses into ventures that create wealth and jobs for the region. CSF will be a for-profit enterprise which may on occasion coordinate with NGOs and public sector entities involved in technology based economic development. CSF members will include experienced angel investors and those interested in learning how to make smart investments. CSF will give members the opportunity to take an active role in investment due diligence and decision-making to facilitate sharing of knowledge and best practices. We expect that the creation of CSF will lead to a corresponding flow of capital and new enterprises entering the region, significantly leveraging our investments.
Targets for CSF
CSF’s targeted initial funding is to have a total investment of about US$1.75 million. While the minimum amount to be invested per member is yet to be determined, we note that should 35 individual members participate this would represent a commitment of US$50,000 from each member. By traditional standards, CSF’s funding is modest and the very minimum necessary to create a diversified portfolio of investments. Since CSF members may have different levels of interest in different businesses, they will also have the option to invest additional amounts in a company via a “sidecar” structure (at identical terms) after the Fund has made its decision. The diversity of member experiences and network relationships, and the talent available in the region all combine to give CSF an intellectual asset base which any early-stage venture capital firm would be hard pressed to match.
CSF Deal Flow
Deal flow for CSF will come from multiple sources including individual fund members and their networks, co- investment opportunities with other Caribbean and U.S. VCs, as well as inbound requests for funding driven by visibility at meetups, startup pitch competitions, and incubators.
Entrepreneurs seeking funding must bring sufficient intellectual property, going concern value and financial capital to the table such that CSF’s ownership at a reasonable current valuation does not exceed 49%. Our due diligence evaluations will verify that the management team has the requisite operational skills and experience to run an early-stage venture regardless of the merit of the technology or the technical qualifications of the principals. An important qualification is demonstration of the entrepreneur’s commitment to the venture. This involves personal investment by all principals in terms of initial capital, minimal cash salary requirements, appropriate employment contracts and a willingness to be open to suggestions from CSF management, CSF’s representative on the Board and CSF’s advisors.
CSF Due Diligence
All CSF partners will have the opportunity to participate in investment due diligence as well as post-investment reviews and oversight activities. To make the best possible use of each partner’s time and resources, all deals will go through our extensive due diligence filter prior to presentation to CSF partners for an up or down vote (2/3 or greater support required for investment). Presentations would be scheduled as a function of deal flow and are likely to average one all-member meeting per month. Out of country partners will be able to attend virtually. As part of this process, the Management Committee will contact CSF partners with specific technology/industry experience for possible participation as a “deal champion” and to gauge their interest in joining the board post investment. Our experience with other seed funds is that partners frequently noted that the opportunity to participate in these discussions and to meet other likeminded investors was alone worth the “price of admission.”
Ongoing administration of CSF operations will be the responsibility of a Management Committee, elected bi- annually by the membership that includes a Chairman, an Executive Director, and three to five additional partners.
Martin Babinec, the founder of Entrepreneurs Across Borders was recently interviewed by Sandra Glasgow of First Angles Jamaica about member managed seed funds, why they are important to developing economies, and his experiences starting them. Check it out below.
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