Q: How can I get financing for my Internet business?

A: Well to answer this in some detail, as it is a fundamental requirement for business creation, unless you have money of your own, I went to see Jelle Sjeordama at Dynamic Equity, which I believe, is the only active Venture Capital firm in Trinidad and Tobago (please write to me if I'm wrong and tell me about your business). Jelle is a Trinidadian of the Point Fortin Sjeordamas', and has an active portfolio of investments in Trinidad and Tobago with some $7 million invested and $28 million available for investment. So entrepreneurs listen carefully. Amazingly enough, Dynamic Equity does not get anything like the number of applications they would like, so this is your chance to build a new e-commerce business.

Jelle makes the point that Venture Capital provision is in its infancy here in Trinidad, and the usual support structure that you might find in the USA is missing.

Because of that, his fund is unique in that it considers a wide range of opportunities including start-ups. Start-ups in the USA have a kind of informal tier system driving them, tier one is the three Fs: friends, family, and fools. In other words getting money from people you know who believe in you.

Tier two, which does not exist here, is known in the USA as the "Angel system". This is usually a bunch of wealthy people who club together to help very early start ups with seed money. They take great risks and usually invest in things in their own interest areas where they have knowledge of the market. Venture Capital in the USA tends to be about successful small businesses that need capital to become big business. So they start out being able to evaluate a company who is already successful and rarely invest in start-ups.

A start-up is an interesting thing, Jelle explains it thus: "If you take a bottle of rum to Smokey and Bunty and spend an evening, you will get flooded with bright ideas, but an idea is not a start-up its an idea and has no intrinsic value. A start-up has gone beyond that and has a number of key developments already". Those developments are:

1) A management team (not one persons good idea)

2) A defined and understood market which preferably should be external to Trinidad although that is not absolute

3) An idea of the scale of the opportunity

4) A plan of how to compete in that market and what to do about competition which will arise in the copycat culture of Trinidad business

5) Financials, a grasp of the basic numbers for successful growth

6) An understanding of the risks involved and answers to the key risk areas

7) Some idea of an exit strategy for the investor, how will they get repaid?

In the USA this might form a 200-page business plan, but in Trinidad a more informal approach works as long as you do understand these points. Jelle says a PowerPoint show plus some documents is enough to start the ball rolling. The investment process at Dynamic Equity is two-stage, the first stage is outlined above. If following that, Jelle and his team are convinced of the merit, then the entrepreneur will get a letter of intent, and as Jelle says his real work starts as he does a detailed due diligence on the business which can include calling customers and confirming claims made in the documents.

How much money can you get? The ideal first investment is between $1 million and $5 million and businesses can get follow up investment if things are proceeding according to plan. The sum could be lower if a picture emerges of a company that needs say $0.5 million now and then maybe more in year two or three. For that the budding entrepreneur should expect to give up at least 25 per cent of the business.

One thing that most people coming to a Venture Capital company do not realise, is that the equations generally must balance. So if you go to Dynamic Equity and say you want $2 million and are prepared to give up 25 per cent of your company then you must demonstrate that there is in fact $6 million already invested in some form. Jelle says most people have no idea about this, thinking that the equation is "my bright idea = their money" which is where the rum shop story applies.

On the Trinidad web boards I read, I see lots of people (you know who you are) moaning about the lack of funding and opportunity in Trinidad for bright people. Budding e-commerce whiz kids, this is your call to action. Write to Jelle Sjoerdsma at jelle@dynamic-equity.com.