Where can an entrepreneur with a brilliant idea or a rapidly expanding business go for low-cost capital? In T&T, angel investment capital is a great option for start-ups, while the T&T Stock Exchange, particularly its SME market, may be the right fit for established businesses that need equity capital to grow
by Kay Baldeosingh-Arjune, Freelance writer
Published in CONTACT Magazine
Two angel investor groups in Trinidad and Tobago are Avatar Capital, led by restaurant executive Peter George, and IP Angels, led by manufacturing industry executive Robert Tang Yuk. They are both passionate about the need for a supportive ecosystem to nurture new entrepreneurs, and about the role of angel investors in providing support and guidance which is often more critical to the success of a start-up than actual financial capital.
IP Angels is about three years old, and wants to fuel diversification through the development of entrepr-eneurship. They do not require entr-epreneurs to have a full-fledged business plan when making their pitch. “Let’s just understand your idea and your target market. We will develop the numbers together. The pitch is really the beginning. From that we decide if we will invest our time further,” Tang Yuk explained.
Avatar Capital was formed in 2013. According to Peter George, “We get more involved in the building out of ideas, putting in the corporate structure, legal and otherwise, clean-ing up the capital structure, taking ideas and getting the business to a point where it can go out for Series A financing.” This is seven-figure funding for start-ups that have dev-eloped their business model and now have some performance indicators.
What entrepreneurs need to know
Don’t come if you only want capital. Understand that angel investors are themselves entrepreneurs at heart. They are not interested in just giving you money. The fun part for them is to help build something from the ground up. Take advantage of what they are offering. Even if your pitch fails, you will leave better off. Even one conversation with an angel inv-estor can put you one step closer to success.
Angel investors have a close relat-ionship with their entrepreneurs. “Our expectation is that we should be involved with the strategic direction. While we are not there to operate or run the business, we can add tremendous value if the entrepreneur is open and coachable. If the entrepreneur requires just a source of finance, then they should be looking elsewhere,” Tang Yuk said.
How can entrepreneurs improve their pitch?
“They need to understand that getting angel capital is the beginning, not the end; this is where the work begins,” Tang Yuk warned. “Angels are investors with expectations. This is not grant funding.”
IP Angels is looking for innovation, export potential and entrepreneurs who can go the distance. In particular, Tang Yuk urged: “Be unique! The most common problem is that the idea does not have sufficient unique value. It’s either a great idea with no clear plan to create value, or it’s a ‘me too’ idea.”
Avatar Capital wants products or ideas that will bring about meaningful change, be disruptive or transformative. It prizes entrepreneurs who really believe in their product, are putting their heart and soul into their business, are having fun, and are looking for a partner, not just money.
George advises entrepreneurs to be ready to supply information about their business and answer questions such as: Are there any competing products? Are there any regulatory issues? What is the track record for similar products? Why is your product better than its competitors?
Want to become an angel investor?
George’s advice to potential angel investors is:
- It cannot be profit first. It’s about incubating ideas and creating an ecosystem where entrepreneurship can thrive.
- You have to believe the business is sustainable and scalable.
- Don’t jump in too quickly.
- Have a cadre of advisers to bounce off ideas; get input.
- Get some consensus re: the viability of a project.
- Do your own research. Don’t just accept what the entrepreneur says.
T&T Stock Exchange (TTSE) also helps entrepreneurs to grow
To support the development of small and medium-sized enterprises (SMEs), the TTSE introduced the SME Market in 2012. It’s a junior stock market attached to an existing exchange, developed to give access to additional funding for thriving SMEs who need it to take their company to the next level.
These companies must have a subscription capital of TT$5 million to TT$50 million after listing, compared with the First Tier Market range of TT$4 million to over TT$50 million. A major benefit is a 10% corporate tax rate for up to five years after listing.
TTSE CEO Amoy Van Lowe is looking to do more. “We have recognised that a key success factor to drive the SME initiative is the development of an active and passionately committed ecosystem.” This ecosystem includes brokerage firms, accountants, compliance professionals, financiers, investors, entrepreneurs and regulators. She believes that, working in partnership, this group “will be the catalyst that has the potential to take the SME market to another level.”
Equity investment: Credit Unions
Credit Unions are a great source of low-interest capital for entrepreneurs. Here are some facts about the sector:
- No. of active credit unions in T&T: 295
- Number of members: over 564,000
- Value of total assets: over TT$11 billion
Many credit unions offer business loans and even have specialised business windows, but you must be a member to access a loan. The advantages of credit union loans include: fixed interest rates, interest calculated on the reducing balance, low processing fees, no-penalty lump sum payments.
Documents/information that may be requested include:
- Projected cash flow for 12 months
- Six months’ bank statements
- Certificate of registration
- Recent financial statements
- Supporting documents for the purpose of the loan, such as pro-forma invoices for stock or equipment
- Business plan
- Collateral in the form of cash, near cash securities, equipment or property may be required
- References
- Contracts (where applicable)
Source: Ministry of Labour and Small Enterprise Development website, various credit union websites.
Case study: Jamaica Stock Exchange
The Jamaica Stock Exchange (JSE) is celebrating its 50th anniversary in 2019 and has much to be proud of.
Selected milestones:
- Established 1969
- Launched Junior Market in 2009 Value of total assets: over TT$11 billion
- Main benefits: lower listing fees and an attractive tax incentive for a 10-year period
- Named “World’s Best Performing Stock Market” by Bloomberg Businessweek in 2018 via a 29% increase in the JSE’s main index at year-end
- Capital raised in 2018 on main markets: J$21 billion (34.6% increase)
- Total market capitalisation (main and junior markets): J$1.52 trillion (December 2018)
- JSE accounts for retail investors: 199,145 (53.3% increase over 2017)
- New securities listings in 2018: 18
– JSE Main Market:
36 listed companies
– Junior Market:
36 listed companies - February 2019: launched Jamaica Social Stock Exchange (JSSE)
- April 2019: signed a new seven-year agreement for Nasdaq to deliver matching engine and market surveillance technology (SMARTS) to the Jamaica Stock Exchange.
Source: www.jamstockex.com
