Commentary: These Haitian venture capitalists will make you believe in the country's future
Did you ever think you would read about Haiti having a venture capital firm in your lifetime?
|Daniella Bien-Aime is the founder of the Bien-Aime Post, a digital media platform that focuses on business, leadership, education, and social media within the context of Haiti and its diaspora|
I know. I didn’t, either, until I connected with the firm directly.
Haiti does indeed have a venture capital firm, and it’s being led by Haitians to help build Haiti’s entrepreneurial ecosystem.
The founders are young, talented, and driven by a mission to provide equity finance to promising Haitian entrepreneurs.
When you hear about Haitians who are thinking BIG by starting a venture capital HFund, you naturally want to interview them to understand what drives these leading thinkers.
If you doubted Haiti’s potential when it comes to economic development, let the story of these men inspire you — either to hope for Haiti or even to partner with them.
Read my recent interview with the HFund team below.
HFund – from left to right, Marc Alain Boucicault, Luigi Voltaire, (Melior Joseph, CEO of Chocomax), and Karl-Philippe Alexis
The founders wanted to represent the company as one team, instead of each individual member responding to my questions.
Q1. Can you talk about your background, and how you got involved in working with early-stage companies and entrepreneurs in Haiti?
Fund team: We are a team of five young, multi-talented professionals who have experience not only in the conventional side of doing business in Haiti, but we have also been keeping abreast of the rapid changes in the innovative financial markets currently happening around the world.
As a team, we have all studied in Haiti and abroad, mainly in the United States and Canada. Our backgrounds range from economics and finance to engineering. Our experiences include management in the private sector, international development, and community-building.
Early on, in our respective professional paths, we were concerned by the lack of innovation in the finance sector in Haiti and how that is restraining access to capital and growth for many promising small businesses in the country. We wanted to address this challenge by creating access to this largely untapped market.
We saw that when driven entrepreneurs with the potential of a scalable business can access finance, gain access to a network and to a strategic advisor, a business can grow. Since we are passionate about our country, we wanted to bring our collective expertise in the technical, financial, and management know-how of the country to bring financial inclusion and to help create wealth in Haiti.
Part of that involved thinking about how to create a reliable financial infrastructure for investors to access a high-quality and diverse emerging portfolio comprised mostly of promising local businesses. We see this mission as an exciting journey in a risky and high-demand market.
Q 2. According to your company mission, you “apply an unconventional due diligence process to supply the unfulfilled demand of credit in Haiti.” Can you walk us through what that process looks like?
HFund team: We designed a rigorous selection framework with the goal of identifying the most promising businesses and constructing a quality portfolio. Although competitive, our approach carefully considers the local context of Haiti.
We assess the potential business growth, its long-term strategy, and the strengths of the team members behind the companies. Our due diligence process includes an online application, the examination of the business model (beyond the business plan) and a set of interviews and visits. We are not looking for the biggest cash return on day one. We are looking for those entrepreneurs who really have the potential to leverage our investment package to maximize their business.
Q3. In your experience, when do you think an early stage startup or business in Haiti is ready to raise capital?
HFund team: We can tell a startup or business is ready for our investment when the entrepreneur(s) behind it and the company’s financial records show some growth and an extensive knowledge of the business. If it’s a physical product, this includes a proven understanding of its supply chain and production processes.
We also prefer a working prototype that can give an idea of the targeted market and operating capacity. We don’t place much emphasis on business plan documents. We give more importance to the operation and capacity of the business, regardless of which stage the business is in. The main question we focus on is, can the business scale? And not just survive?
Our initial contribution to the business is to help expand productivity and to provide access to a wider network and market. In addition, we provide capital for growth.
We do not work with companies that simply need help at a cash-flow level, for example. We are not an emergency fund or an entrepreneurship support program. Our investments rely on the future success of the business, so we make sure we can get as close as possible to work with the business for long-term growth.
Q4. Looking at the few companies HFund has provided funding for, what’s been one key factor that has helped your team determine if a founder is ready to work with a Haitian venture capitalist?
HFund: Transparency and an open mind are key. We like to playfully describe our relationship with the entrepreneurs as a partnership. Before we engage, we have to be convinced of the entrepreneur’s openness and transparency.
Also, we look for a willingness on the entrepreneurs’ part to improve what’s not working. The teams we work with must be receptive enough to new ideas and techniques that may be new to them. This aspect, being receptive, can sometimes be sensitive to entrepreneurs who are wary of going against their traditional approaches.
Q5. In the US, when a founder or entrepreneur is looking for investment(s) from a venture capitalist, one of the components the venture capitalists look for is revenue. Is that the same thing you look for with the companies you work with? And if so, how far back do you look for revenue(s)? One year? Or two years?
HFund team: We understand the restrictions in applying the typical VC model in Haiti. The country is for sure a riskier market, and very often, startups and businesses will need additional technical support to reach an expected average revenue.
We are a young fund that is testing something fairly new in Haiti. We look at more than one year. For a company to take off in one year in Haiti can be a challenge, particularly if we have to focus on both creating capacity within the startup staff and scaling the business itself.
One way we manage capacity is through a tight reporting system where our disbursements are based on tangible milestones. This method helps us hedge the risk on shorter-term periods and anticipate challenges ahead of time.
HFund: From left to right, Marc Alain Boucicault,Karl-Philippe Alexis, Karl Delatour, and Chocomax CEO, Melior Joseph
Haiti also presents the issue of an exit strategy, as there is no liquid secondary market to sell company shares to. The companies then have to be able to generate enough resources for a buyback strategy. As for an exit strategy, we do not expect to stay in a deal for more than five years.
Q6. How does HFund help its companies get market visibility or awareness in Haiti?
HFund: Our general partners are among the most connected and visible leaders in the country, and that creates an immediate brand for our companies. We do that by facilitating connections through personal meetings and access to the most popular high-end events in Haiti. We also help to shape the marketing strategy of our companies.
Q7. Are the companies you invest in all Haiti, or are there a few that do business both in Haiti and overseas?
We invest only in companies contributing to creating wealth in Haiti at the moment. It’s part of our mission. It is our business to help them grow, and that may imply reaching to international markets in the future.
Q8. In our Haitian culture, even though it is a collective society, we have a trust issue. How do you and your team create healthy teams where trust is crucial in building a company that can scale?
First, we assess and put a strong emphasis on this element throughout the due diligence process, using multiple tools from the soundness and consistency of submitted business documentation, interviews, and visits. We are completely aware that those tools will never cover 100% of the risks.
That is why we then try to build a relationship with the entrepreneurs, where trust becomes central to whether or not we can invest in the business. We let them know that the success of the investment partnership will depend on long-term trust.
Q9. How many companies have you invested in so far, since HFund started?
HFund team: When we launched HFund in June 2015, we received about 80 applications and selected 10 applicants. However due to the risk level and the uncertainty of being the first movers in this type of market in Haiti, we decided to select the best application for a pilot round.
We invested in a two-year-old food-processing company, Chocomax, which transforms cocoa into commercial chocolate, chocolate cream beverage, and cocoa butter.
We focused in that sector because the Haitian cocoa has a very high value locally and in the international market. The CEO, Melior Joseph, is very passionate about his business, and his family was involved in the cocoa sector prior to Joseph taking the lead.
With that, he developed a close relationship with the stakeholders in that sector by doing community and social development work with cocoa producers from his hometown in Saint Louis du Nord.
He participated in international exchange programs with companies similar to his in the US. Melior is also a brilliant young entrepreneur with an open mind and a strong desire to scale his business.
Q10. Apart from capital, what other kind of supports do you provide the companies you invest in?
HFund team: Besides the capital, which is mostly invested in production, we have invested a lot in creating a knowledge-based, sharing environment at the senior level with the Chocomax team. We have worked closely with the business to create tailored strategies to improve its production process, reduce its costs, and increase its sales.
We helped the company sign an agreement with the faculty of agronomy of the Haitian State University to help it with quality control at production level. We designed a financial management system that now helps them plan and keep track of revenues and costs monthly, and at a very detailed level. We have also worked on a new branding and marketing strategy with the company.
Last, we have supported and/or facilitated various senior networking opportunities for the CEO, both in Haiti and abroad.
Q11. Where do you see HFund in one year from now? How about five years?
We firmly believe that a new class of entrepreneurs can emerge through a modern form of investing in early and seed-stage businesses in Haiti. Our immediate goal is to help Chocomax succeed and to gain a deeper knowledge of how to grow Haitian Venture Fund. We want to increase our portfolio in order to provide both the domestic and international investors the best opportunities in Haiti’s emerging market.
Haiti’s diverse natural resources, its young and bilingual population, geographic location and trade preferences with other markets make it a very attractive option for any investor seeking to add diversification to their portfolio. We want to help lead these opportunities.
Lastly, five years from now, we simply would like to get a phone call from a highly successful Melior Joseph who, because of our investment, reached a higher level of success for his company, which we hope would allow him to join us as an investor.
I hope you enjoyed this piece as much as I did doing the interview. You can connect with HFund directly on the company’s website.
Your Turn: What other questions would you asked the HFund team? Tell me in the comments section below.