Un­der­stand­ing ven­ture cap­i­tal

Jamaica Gleaner - - GROWTH & JOBS -

THE DE­VEL­OP­MENT Bank of Ja­maica has im­ple­mented the Ja­maica Ven­ture Cap­i­tal Pro­gramme to de­velop a vi­able and sus­tain­able ven­ture cap­i­tal and pri­vate eq­uity in­dus­try in Ja­maica.

Ven­ture cap­i­tal is a sub­set of the pri­vate eq­uity as­set class which looks at com­pa­nies in the start-up to growth stages of the busi­ness life cy­cle.

Pri­vate eq­uity pro­vides long-term, sta­ble and com­mit­ted cap­i­tal to help com­pa­nies not listed on a stock ex­change to grow and be­come suc­cess­ful busi­nesses.

If you are look­ing to start or ex­pand your busi­nesses, then ven­ture cap­i­tal may be a fi­nanc­ing op­tion you may want to con­sider.

Eq­uity in­vest­ments dif­fer from loan fi­nanc­ing as an eq­uity in­vestor ex­changes fi­nanc­ing for a stake in your com­pany as a share­holder. The eq­uity in­vestor’s re­turns are de­pen­dent on the growth and prof­itabil­ity of your busi­ness. On the other hand, a debt fi­nancier (usu­ally banks) has the le­gal right to in­ter­est on a loan and re­pay­ment of cap­i­tal re­gard­less of whether your busi­ness fails or suc­ceeds.

Many small com­pa­nies are ‘life­style’ busi­nesses whose main pur­pose is to pro­vide a good stan­dard of liv­ing to the own­ers. These busi­nesses are, in many cases, cre­ated out of ne­ces­sity to pro­vide em­ploy­ment for the owner. Ne­ces­sity-based busi­nesses are not gen­er­ally in­ter­est­ing to an eq­uity in­vestor as they are un­likely to pro­vide the fi­nan­cial re­turns re­quired and may not have the abil­ity to scale and grow.

What type of busi­ness is at­trac­tive to eq­uity in­vestors?

Ven­ture cap­i­tal and pri­vate eq­uity in­vestors are at­tracted to busi­nesses that can grow and scale. If your an­swers to the fol­low­ing ques­tions are yes, then eq­uity in­vest­ments may be right for your busi­ness.

Does your busi­ness have high growth prospects?

Does your com­pany have a prod­uct or ser­vice with a com­pet­i­tive edge and a po­ten­tially large market?

Do you or your man­age­ment team have the rel­e­vant in­dus­try ex­pe­ri­ence?

Are you will­ing to sell some of your com­pany’s shares to a pri­vate eq­uity in­vestor? For ad­di­tional in­for­ma­tion, con­tact: Ja­maica Ven­ture Cap­i­tal Pro­gramme, De­vel­op­ment Bank of Ja­maica, 11A-15 Ox­ford Road, Kingston 5. Tel: 929-4000 www.ven­ture­cap­i­tal­ja­maica.com

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