PRIVATE equity (PE) has a glamorous international image, thanks to shows like Shark Tank, where investors write cheques to promising start-ups. But the Jamaican reality is very different. Here, private equity almost never funds start-ups or SMEs, instead targeting established businesses with proven cash flows.

“Their model is fundamentally unsuited for most small businesses and start-ups,” said Sandra Walter-Glasgow, managing director of FirstAngels Caribbean.

Private equity firms are institutional investors that raise large pools of capital from pension funds and wealthy individuals to acquire significant stakes in companies. PE firms are not in the business of funding ideas or product development. They look for established, proven businesses with stable revenue and earnings. Start-ups, by definition, are still proving their business model, often pre-revenue or with minimal, untested income. That level of risk is far too high for traditional PE funds. For young entrepreneurs seeking funding outside of traditional loans, the more realistic option is angel investors. Unlike PE firms, angels are affluent individuals who invest their personal wealth into early-stage businesses.

“Our model is perfectly suited to the high-risk, high-reward nature of start-ups,” Walter-Glasgow told the
Jamaica Observer.

Angel investors not only provide capital but also mentorship and industry connections that are often more valuable than money itself. Start-up founders would be more in need of investors who will act as partners and advisors, not ones who will take over operations, as there is a risk involved with PE funding. They also know the long road ahead: It can take a start-up five to seven years just to find product-market fit and 10 or more years to achieve a successful exit through acquisition or IPO. That patience, combined with smaller ticket sizes ranging from US$50,000 to over US$200,000, makes angel investing a much closer fit for Jamaica’s early-stage entrepreneurs. For FirstAngels Caribbean, which is Jamaica’s only formal angel investor network and the only functional angel network in the Caribbean, Walter-Glasgow revealed that one company in its portfolio received almost US$800,000 in equity investments in four rounds, demonstrating that companies can get multiple rounds of funding.

Having established why angel investors are a closer fit for start-ups, the next question is: Who actually qualifies for angel funding? First are coachable founders and those who can demonstrate deep knowledge of their product or service and show passion, integrity, and a compelling value proposition. Most importantly, the business model must be scalable.

“The product or service must solve a real pain point for a clearly defined, growing market,” said Walter-Glasgow.

FirstAngels looks for companies with a competitive edge, whether through proprietary technology, unique intellectual property, or an innovative approach. Sectors such as healthtech, AI, climate tech, and agtech are particularly attractive, offering both global relevance and strong local impact. But while angel investors are willing to take risks on early-stage ventures, they generally do not fund at the pure idea stage. Instead, they look for evidence that customers actually want what the founder is offering. This proof doesn’t always mean massive revenue; it can be a growing user base, a successful pilot, or consistent month-over-month progress in acquiring customers, generating revenue, or building the team. In short, traction is the single most important element in assessing an early-stage start-up. It shifts the conversation from “this is what we think will happen” to “this is what is happening”. Traction validates the business hypothesis and signals to investors that there is a market for the solution to real customer pain points. But Walter-Glasgow cautions that even with traction, founders often make mistakes that turn investors away. Chief among them are presenting unrealistic financial projections without a clear, logical basis or approaching investors without understanding their investment thesis.

“We see many passionate founders who can describe their product beautifully but cannot clearly articulate what makes the business viable, including what their go-to-market strategy is, their customer acquisition cost, or their long-term competitive moat,” she said.

She also pointed out that the way a business is structured can signal a green or red flag to investors. Start-ups that are not registered as limited liability companies — which is the form angels require since they invest by buying shares — or those without strong financial systems, proper record-keeping, and clear ownership of intellectual property are unlikely to be considered for investment. But entrepreneurs are not alone in this journey to secure funding.

In 2021, drawing on several years of experience, FirstAngels members created RevUP Caribbean, a five-month virtual incubation programme designed to close the gaps commonly seen in entrepreneurs seeking capital to grow and scale their businesses. The programme combines psychometric testing and 70 hours of management training in areas such as strategy, digital transformation, AI, marketing, finance, governance, ESG, and scaling and concludes with a PwC-led retreat on leadership. At the end, graduates are equipped to pitch directly to FirstAngels Caribbean for financing. Even if founders are not successful on their first attempt, Walter-Glasgow reassures them that rejection is not the end of the journey but rather an opportunity to improve.

“If the feedback pointed to a lack of traction, focus on getting customers. If it was the team, consider adding a co-founder with complementary skills. If it was the business model, be willing to pivot,” she said.

She asserts that the best way to secure an investment is to build a great business, so every new customer, feature, or partnership makes the business more attractive to investors.The key is to maintain relationships, keeping investors updated on your progress after you’ve hit key milestones. Since 2021, 145 founders have completed the programme, with 20 pitching to investors, and the initiative is now serving its sixth cohort.

Sandra Glasgow, managing director of FirstAngels Caribbean and RevUP Caribbean, says angel investors are better suited than private equity to fund Jamaica’s start-ups.

Sandra Glasgow (centre) with entrepreneurs from RevUP Caribbean and cohort participants, celebrating growth and collaboration during the business incubation programme.