JVCAPITAL has been established by the Development Bank of Jamaica (DBJ), a public sector financial institution, with technical assistance and financial support from the Inter-American Development Bank’s, Multilateral Investment Fund (MIF).
The DBJ has had a history of supporting venture capital financing since the 1990’s, with the advent of the Jamaica Venture Fund, in which the DBJ’s predecessor institution, the National Development Bank, was among the initial investors. In spite of these earlier forays into venture capital, there has been no sustained development of the industry, due to a number of factors, among these being the absence of an environment conducive to long term private capital development.
The projects to be undertaken under JVCP represent a new approach by the DBJ, to create sustainable development of the VC industry, by focusing on the establishment of an ecosystem conducive to venture capital development, through partnerships with private sector interests in the development of projects which impact entrepreneurs, fund managers and investors. A key aspect of the ecosystem development is the establishment of an appropriate legal and regulatory framework for venture capital and private equity in Jamaica.
Small and Medium-sized Enterprises (SMEs) have long been recognized as the primary drivers for job creation and GDP growth in most economies. In spite of this, access to finance continues to be a major problem for SMEs in Jamaica and, in fact, in most countries.
The DBJ believes that the development of a dynamic venture capital industry in Jamaica represents a viable option for creating greater access to long term ‘patient’ financing, particularly equity capital, to high potential SMEs, in Jamaica, allowing them to invest in the start-up, expansion and growth of their enterprises.
The current venture capital ecosystem in Jamaica has a number of gaps that inhibit the development of the industry, and the DBJ interventions are aimed at the development and execution of programmes, over the medium term, to address these gaps. The model being pursued recognizes that an effective, sustainable, long term venture capital market will need to be private sector driven.
However public policy intervention is needed to create the necessary incentive to catalyse private capital formation and venture capital investment. The DBJ will eventually scale down its involvement as the leading driver of the industry when the private venture capital markets have reached a stage of maturity and sustainability.
The model being pursued has been utilized, with the assistance of the MIF, in other programmes such as the Inovar Program in Brazil. The model involves the development of a programme of activities, aimed at providing the training, tools, mechanisms, knowledge and infrastructure needed by stakeholders to develop the VC market.
The medium term objectives of JVCAPITAL include the training and capacity building of SMEs and entrepreneurs, to improve their readiness for investment, building the expertise of local fund managers and investors, as it relates to the venture capital asset class, and partnering with eligible fund managers in the development of local venture funds.
The sustainability of the industry is linked to its ability to attract long term, stable, financing, particularly from institutional investors. However, as significant gaps exist in the legal, regulatory and taxation framework for venture capital locally, the project team will undertake a review of the existing legislation and regulations and, where necessary, implement amendments in keeping with best practices in other jurisdictions.