It has been a very long time in coming, but last week saw the closing of Jamaica’s first venture capital fund — investors commit money for investment in early-stage companies — in nearly 35 years. The last true venture capital fund in Jamaica was the Jamaica Venture Fund, which started in early 1991.

The brainchild of Dr Noel Lyons, its first major investment was in the Braco resort, but its most successful investment was financial services player JMMB, which was one of those who successfully capitalised on the revolution in the government debt markets at the time.

Much of the credit goes to the Development Bank of Jamaica (DBJ), which roughly a decade ago, around 2015, under then Chairman Joe Matalon, began what it called the Jamaica Venture Capital programme with the help of Inter-American Development Bank (IDB) funding, spearheaded by its then regional Caribbean head Gerard Johnson. Although the original programme has now ended, in addition to its overall work in helping to create a private capital ecosystem, it had as a required outcome the setting up of the Caribbean Alternative Investment Association, which occurred at the end of 2019.

The fund had been started under the related successor BIGEE programme — Boosting Innovation Growth and Entrepreneurship Ecosystem – a Government of Jamaica (GOJ), five-year, US$25-million project financed by the (IDB) for which the DBJ is the executing agency. The objective of BIGEE is to promote sustainable and robust growth among start-ups and micro, small and medium-sized enterprises (MSME) in Jamaica. The programme has been supported by a non-reimbursable grant of US$8.2 million from the European Union.

The investors in the fund are DBJ; PanAfrican Capital Holdings; Joe Matalon; and the Spaceship Collective, a company owned by Afrobeats global star Burna Boy, who is very popular in Jamaica.

The new fund, of which the DBJ is responsible for just under one-third of the over US$15 million invested in the first close, will be managed by Mscale LLC, a Delaware-based management company focused on venture and permanent capital advisory. Its CEO, Ugo Ikemba, has 20 years of experience in venture capital and private equity expertise focusing on early-stage companies from four funds, which combined had invested US$300 million in technology, hospitality, fintech, banking, building materials, agribusiness, logistics, and manufacturing, largely in Africa.

The fund will invest in tech and tech-enabled firms, focusing on four main areas: financial services, entertainment, agribusiness, and health, inclusive of manufacturing, tourism, sports, retail, digital health, renewable energy, mobility, fintech, e-commerce, agritech, logistics, and business services sectors.

The recently closed venture capital fund is a major step towards completing Jamaica’s private capital ecosystem, which already includes real estate funds, mezzanine funds, private equity funds (more mature companies than venture capitals), an infrastructure fund, and loan funds, amongst others. David Wan, acting managing director of DBJ, describes the DBJ’s long journey towards improving capital access well: “The provision of alternative sources of financing for businesses outside of debt is part of the DBJ’s focus on ensuring economic growth and development for all Jamaicans. This VC [venture capital] fund is trailblazing for DBJ, in that it fills a gap in our portfolio for equity investment into early-stage companies. Previous funding activities include innovation grants, supply chain grants, loans, and private equity for SMEs. This new fund will expand the DBJ’s suite of products to underscore our mission to be a ‘business builder’ within our country.”

It is no coincidence, of course, that adding this difficult form of private equity capital to Jamaica’s financial ecosystem came after the creation of both the junior stock market and followed almost a decade of macroeconomic stability.

However, the DBJ deserves enormous credit for moving away from the previous government-directed approach for providing capital, which used to be the standard globally and has instead used their involvement to catalyse a multiple of private sector capital. Those interested in more detail on the history of this approach can look at my 2006 online paper ‘A new approach to development banking in Jamaica’. Hopefully the combination of African and Caribbean entities in the fund and the arrival of African development bank Afriexim in the region will also improve cooperation between the Caribbean and Africa in taking advantage of our proximity to the US market.