Tue | Sep 18, 2018

Wealthy Jamaicans form angel investor group

Published:Wednesday | April 15, 2015 | 12:00 AM
Joseph M. Matalon, founding member and chairman of First Angels Jamaica.
Sandra Glasgow, founding member and manager of the First Angels Jamaica network.

A number of Jamaicans of high net worth or who run their own companies have banded together with other financiers to form the first home-grown angel investor group to back the start-up ventures of aspiring local entrepreneurs.

First Angels Jamaica (FAJ) was initially formulated by Jamaicans Joseph M. Matalon and Sandra Glasgow and American John 'JJ' Geewax, as founding members, and has since added eight others to the mix of financiers.

Glasgow said Tuesday that her company, BizTactics Limited, manages the First Angel network.

First Angel itself consists of individual angel investors and "accredited investors" as defined by the Financial Services Commission (FSC), said Glasgow.

The FSC defines an accredited as any indivi-dual whose net worth exceeds J$50 million or holds more than 90 per cent of the voting shares of a corporation. It also includes any individual with annual pre-tax income in excess of J$10 million in each of the two most recent calendar years.

The other members of the First Angel group are Keith Duncan, Stephen Facey, Paul Lalor, Mark Mahfood, William Mahfood, Tyrone Nevada Powe, Sharon Roper, Paul B. Scott, Melanie Subratie and Wayne Sutherland. Its associate members are accountancy firm KPMG and law firm Hart Muirhead Fatta.

"The investor members are all individuals. Our associate members are organisations, such as legal, accounting firms and the like," Glasgow told Wednesday Business.

Glasgow said while the group is broadly focused on nascent entrepreneurs, the angel investors each have "different appetites in terms of how much they invest in a venture".

application process

First Angels, which is chaired by Matalon, will launch officially next week. The group is not starting out with a set pool of funds. Instead, it will be left to each angel to determine how much capital they will put into different ventures - whether as individuals or as a syndicate - as business pitches are approved for funding, said Glasgow.

Explaining the process, Glasgow said prospects will submit a project or application via FAJ's website firstangelsja.com - which was developed by Geewax, himself a tech entrepreneur - followed by screening and meetings to see "if the venture is interesting and investible".

Applicants admitted to the programme will receives coaching on how to make a successful pitch and/or will participate in a one-day training programme. Next is an invitation to a pitch presentation where FAJ members may either express interest or decline to invest.

"If the venture is investible, I work with one or two other investors to undertake due diligence; issue a term sheet - the Angels may co-invest with other networks or syndicate the deal with others - and continue due diligence," said Glasgow.

Eventually, a shareholders' agreement will be signed and the investment made. In terms of funding, required from each angel, Glasgow said "FAJ has no minimum or maximum", nor will it dictate the amount of equity members take in projects they are backing.

"The level of investment is generally dependent on how much is being requested, and how much each angel wants to risk on each investment in which they participate. The angels might invest in tranches, and in a later round, depending on the progress the venture is making in terms of meeting its milestones and the cash needs of the venture," Glasgow said.

Already, First Angels has hosted three pitch events at which seven entrepreneurs have made presentations. Of these, one is nearing completion with the deal to be announced at the launch event planned for April 22.

Three others are going through due diligence checks; one entrepreneur withdrew; and the angels declined to fund two.

"Typically, a pitch will be successful if the entrepreneur makes a clear and defendable presentation of an opportunity - big problem plus big market; their plan for addressing it - their solution; a global versus local reach; identifying the team that is uniquely positioned to do so; and the likelihood of a feasible exit for the investors."

Also pivotal is the innovativeness of the product or service, the level of competition, the projections for profits and cash flows, the valuation, the amount of investment required, the qualification and passion of the entrepreneur and the team.

First Angels has struck beneficial partnerships with a number of regional and international agencies, including Xcala, a programme based in Uruguay and funded by the Multilateral Investment Fund of the IDB.

"FAJ is one of a number of beneficiaries of funding from Xcala which is helping to develop Angel Networks in Latin America and the Caribbean," said Glasgow.

First Angels is also tapping into Government of Canada-funded World Bank programme called InfoDev, which supports the initiation and development of angel networks in the Caribbean.

"InfoDev has assigned to FAJ a consultant - Nelson Gray - who is available to us for consultation on all aspects of developing our angel network," Glasgow said.

Glasgow notes, "FAJ's investment focus will evolve over time as opportunities for investment are presented. Some founding members have already invested in companies developing digital applications, digital media, and other innovative businesses. Potential members should have prior experience in the markets in which they plan to invest or a strong desire, willingness, and capability to learn substantive components of these industries."

First Angels chairman Joe Matalon also chairs the Development Bank of Jamaica (DBJ), while Glasgow sits on a DBJ steering committee which is working on developing a robust ecosystem for venture capital in Jamaica, but any connection to the state agency's venture capital project is tangential, the network manager said.

First Angels is currently inviting other members to join, saying benefits include access to a "members only" section of the FAJ website that captures information on deal flows through its online database.

First Angels' documentation notes that because the capital is being invested at a risky time in a business venture, the angel must be capable of taking a loss of the entire investment, which is why most angel investors are high-net-worth individuals.

First Angels was incorporated in June 2014, and is governed by a six-member board of directors.