Waiting to be touched by an angel investor

KIRAN MATHUR MOHAMMED and EDWARD INGLEFIELD

What most people don’t realise is that the Caribbean region has the potential to midwife dozens of new billion-dollar businesses – but only if our current crop of successful mid-tier business leaders rediscovers the entrepreneurial spirit that originally animated them.

For a start, Caribbean “angel” investors need to recognise the role they play in the companies that they invest in. A lot of what “big money” individual investors like to do is throw money at a business that they like and act as a cash cow without providing real value to the business.

Yet much of what businesses need is not just capital, but support to build partnerships, connections and ideas, many of which cannot be bought.

We have many brilliant people who have earned their money in traditional businesses. Yet as much as they may have vast experience, it is in many cases in legacy industries in a small market.

They have taken years to build their businesses. However, in the tech space, you have companies which can increase in value by ten-100 times very rapidly. Valuing a company is an art as much as it is a science. The same goes for making the transition from being a successful traditional business leader to allocating capital in new high growth companies.

One such example is that many “angels” hard-ball new companies into giving up far more shares and control at an early stage. But often, by doing so, they make it harder for companies to find follow-on investment so critical for later stage growth.

From the perspective of the investor themselves, the question you have to think about is whether you are actually preparing your portfolio companies for the next stage. Billionaire venture capitalist and Paypal co-founder Peter Thiel has said it is actually a red flag for him to invest in companies at a Series A or later-stage funding round that have given away too much equity in the earliest stages just for cash – because it tells him that they are not very good at communicating their own value propositions, or at negotiating.

On the flip side, often founders lack confidence in the face of a potentially major early investor. How do you speak as a startup owner, or, as a small business owner, to someone who has all this clout in your local market, and invite them to open their minds to some of the ways that business practices have changed?

Part of the challenge is that local business leaders who have been relatively successful and built mid-sized businesses often face a struggle to shift their mindset from a day-to-day operator to someone who allocates capital to big-picture visions.

In small countries like ours, once you’re making a few million dollars a year – enough to buy a smart house and relatively flashy car – many people you end up surrounded with stop questioning your decisions. It is therefore easy for mid-sized businesses to stay that way. That is why so many family companies take so long to professionalise, although it would be better for their bottom line. This is also part of the reason why we have billions of excess liquidity lying idle.

Ultimately, this “small town” culture has fuelled an ambition deficit amongst many (apart from some visionaries) of our business elite. It would be revealing to poll many of our business leaders and ask: “Are you currently working towards building a billion-dollar company, and do you have a plan to do so?” and tally their replies. We’d be willing to bet that many would equivocate and change the subject.

At the recent World Angel Investors week, it was striking how many angel investors there were from Jamaica and Barbados and how few (relative to our market size) there were from TT. The encouraging thing is that those who were there were approaching investing from a position of humility despite how successful they were in their own fields.

Now to be clear, there is no such deficit of ability, brilliance, or resilience amongst the great majority of these same business leaders.

Many have built what they have from scratch. Imagine if they returned to the drive of their scrappy early days, using their currently idle capital to grow their own companies and seed dozens more. There is a raft of potential billion-dollar companies waiting to be built. But that requires consistent humility and simply the willingness of investors and owners to adapt to different stages of growth.

Kiran Mathur Mohammed is a social entrepreneur, economist and businessman. Edward Inglefield is an entrepreneur and former chef. Inglefield and Mohammed are co-founders of medl, an IDB lab and Microsoft-backed social-impact enterprise.