The Bahamas Entrepreneurial Venture Fund (BEVF) has been allocated $2 million from the dormant accounts fund to provide equity financing to businesses seeking to re-establish themselves following their destruction during Hurricane Dorian.
Deputy Chairman of the fund Edison Sumner said while other agencies like the Small Business Development Centre (SBDC) are providing small loans and grants up to $10,000 for impacted businesses, the BEVF is different in that its lowest threshold for investment ($50,000) is in the form of equity.
“The venture fund has access up to $2 million of those funds and our approach to this is that we want to actually go into Abaco and Grand Bahama – and there are two visits planned for those two islands in the next week and a half or so – where we actually want to support the re-establishment or the rebuilding of businesses that were impacted by Hurricane Dorian. The other agencies have their mandate, so we don’t want to cross hairs. If everyone stays in their lanes we’ll be okay, meaning that the SBDC provides small loan facilities and the banks are doing what they do,” Sumner said while appearing as a guest on Guardian Radio talk show Z Live last week.
“The venture fund in our role is that we are offering equity investments to these companies in Grand Bahama and Abaco that were destroyed or very badly damaged by the storm. This is a special fund that was established for this, we’re still managing our daily operations. If companies from Abaco, Freeport, Andros, Exuma or wherever want to come in to talk about funding their businesses that were not impacted by the hurricane, then there is still that option… we’ve established a special committee within the board that will deal with businesses that were already operating.”
The funding, according to Sumner, would provide working capital for businesses to rebuild or repair their buildings, replace equipment and/or inventory that was lost in the storm. Because the investment is in the form of equity, business owners “don’t have to worry about paying this money back” right away Sumner said.
“Venture capital funding really is an initiative undertaken by a group of investors, principally it comes through an investment fund where they take on – almost like a hedge fund type thing, but they take on more risk than the ordinary private equity fund type of companies. These venture capital funders, who are known as venture capitalists, not only do they invest in the business, but they also get involved in the operations of the business because they now want to watch their investments grow, they want to manage how it’s operated. So, they effectively get involved in your company through equity arrangements, meaning they actually buy shares in your company. They take on some leadership role, whether it’s in the operations of the business or it’s at the very senior level at the board level where they have to actually form policy and procedures and strategic directions for the company,” he said.
“Also, in the venture capitalist mindset they do not want to hold onto your investment forever, there’s always an exit strategy. There’s never a long hold, like 20-year-old, typically it’s five years. In some cases, if the business is growing that rapidly they can exit their strategy in less than five years. But typically, it’s five years to get out. Because what they want to do is take that same capital and invest in another enterprise and that that’s how they get to grow their portfolio, by investing in multiple enterprises.”
Since the fund, which is a government-owned entity yet privately incorporated with a nongovernmental board, started more than 15 years ago, Sumner said there have been quite a number of success stories.
“There are a good number of stories … where we funded some companies at the very early stages of their development, some of them we don’t mind calling out because they are a part of our public relations campaign. You think about companies like the [Bahamas Striping Group of Companies], they were beneficiaries of early seed funding, the grant funding; and then when they got through the grant for the first development they had, then they came and we funded them for a couple of their rounds and now they are a very successful company in the country. Then we have others like Sunryse Shredding. Chris Sawyer, who’s building that mammoth structure down on Gladstone Road, he was one of the beneficiaries and he is one of our great success stories. And we have got quite a number of those like that,” he said.
“Now let me say just to be clear, not every venture that we funded became a success story. We’ve also had some of those who have failed, and we had to go back and determine why some of those businesses failed or why they were failing. So we had to then revise how we approach some of these companies, and rather than in the early days when we were only doing investments, several years later, we decided that we can’t just make an investment in a company, we’ve got to really act like a real venture capital fund, not act like we are a government sponsored fund.”