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Even minimal venture capital investments good for Jamaica — DBJ

Published:Friday | February 19, 2016 | 2:00 AMMcPherse Thompson
Jermaine Barnaby/Photographer Project Coordinator of the Jamaica Venture Capital Programme, Audrey Richards, and Chairman of the Development Bank of Jamaica, Joseph M. Matalon, at the Gleaner Editor's Forum on venture capital on Wednesday, February 17, 2016.

It would be a good outcome should Jamaica's private equity and venture capital market reach an equivalent of 0.1 per cent to 0.5 per cent of gross domestic product within five years.

Project coordinator for the Jamaica Venture Capital Programme at the Development Bank of Jamaica, Audrey Richards, made that observation Wednesday against the background of what she said was the value of private equity issuance in very developed markets, which totals about two per cent of GDP each year.

"When you look across the world, one of the metrics that they use and it's not just VC (venture capital) but private equity as a whole the asset class, private equity issuance each year in the very developed private equities markets, such as Israel and the United States at the top of the list, it's about two per cent of GDP per year in terms of the value of private equity ..." she said.

"So for us, if in five years time we are even at a 0.1 per cent or a 0.5 per cent of GDP ... I think we would be doing very, very well," Richards told a Gleaner Editors' Forum on Wednesday.

DBJ Chairman Joseph M. Matalon suggested that in Jamaica's case, that two per cent would be equivalent to about US$300 million.

He said how the Jamaican market evolves will depend on the local and international business environment, among other factors.

"But the important thing for us is that the asset class, both angel investing and venture capital, is on a rising trajectory," said the DBJ chairman.

He noted that in the United States, in 2013, there were 70,730 angel deals valued at US$24.8 billion, while there were only 3,995 venture capital deals valued at US$29.4 billion.

"So, despite the fact that venture capital investments are greater to the extent of US$5 billion than the total investment in angel deals, the fact is it's an order of magnitude it's much, much greater in terms of the number," he said.

According to a MoneyTree Report by Pricewaterhouse Coopers LLP and the National Venture Capital Association, in the US venture capitalists invested US$48.3 billion in 4,356 deals in 2014, an increase of 61 per cent in dollar terms and a four per cent increase in deals over 2013.

Internet-specific companies captured US$11.9 billion in 2014, marking the highest level of Internet-specific investments since 2000, it said.

Annual investments in the software industry also reached the highest level since 2000, with $19.8 billion flowing into 1,799 deals in 2014. Dollars going into software companies accounted for 41 per cent of total venture capital investments in 2014, the highest percentage since the inception of the MoneyTree Report in 1995.

The venture capital system deployed US$58.8 billion across the United States in 2015, marking the second-highest full-year total in the last 20 years, according to report.

On the other hand, total investments in the angel investor market in 2014 amounted to US$24.1 billion, a decrease of 2.8 per cent over 2013, according to the Center for Venture Research at the University of New Hampshire.

More than 73,000 entrepreneurial ventures received angel funding in 2014, an increase of 3.8 per cent over 2013, the research centre said.

Total investments in the angel market in the first six months of 2015 were US$10.5 billion, an increase of 4.1 per cent over the corresponding period in 2014. A total of 29,500 entrepreneurial ventures received angel funding in the first six months, a 2.5 per cent decrease compared to the same period in 2014.

mcpherse.thompson@gleanerjm.com