Go Lean…Caribbean

Go Lean Commentary

The Washington, DC-based World Bank believes that Caribbean entrepreneurs can be funded by networking with the Caribbean Diaspora. This objective aligns with the book Go Lean… Caribbean which serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) with the charter to facilitate entrepreneurship and job-creation in the region.

Early in the Go Lean book, the responsibility to attract investors and create jobs was identified as an important function for the CU with these pronouncements in the opening Declaration of Interdependence (Pages 13, 14):

xxiv.  Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

xxvi.  Whereas the Caribbean region must have new jobs to empower the engines of the economy and create the income sources for prosperity, and encourage the next generation to forge their dreams right at home, the Federation must therefore foster the development of new industries… In addition, the Federation must invigorate the enterprises related to existing industries … – impacting the region with more jobs.

Before stating an opinion on the plausibility of the World Bank’s proposal, first consider the article, as follows:

Title: Caribbean entrepreneurs need to look to Diaspora for funding – World Bank Group Exec

BRIDGETOWN, Barbados — Caribbean entrepreneurs who are looking for funding to develop new or existing businesses are being encouraged to look to their own nationals living abroad.

“Diaspora financing should be explored as a source of funding for entrepreneurs”, said Aun Rahman, head of the infoDev Access to Finance Programme, at the World Bank Group.

Rahman was speaking on the topic “Access to Finance: Examining Non-Traditional Platforms for Funding”, during the final day of the Caribbean Exporters’ Colloquium 2014 in BridgetownBarbados today.

About 85 per cent of Caribbean people in the Diaspora have said they would “be interested in investing in business back home,” Rahman said adding that they are not only interested in their own countries – but those across the region.

But despite the high interest, Rahman said only a “very few” — about 13 per cent — have actually invested in the Caribbean. The Diaspora investors need a “trusted local partner,” he said.

Project co-ordinator for the Jamaica Venture Capital Programme at the Development Bank of Jamaica, Audrey Richards, also spoke on non-traditional investment sources.

“If we want to attract non-traditional finance, we need to start thinking in a non-traditional way,” she said.

Other participants in the session included Nelson Gray, special project director at LINC Scotland, Shadel Nyack Compton, managing director of Belmont Estate Group of Companies and Judith Mark, managing director and enterprise development consultant at CME Consulting Ltd.
Jamaica Observer Daily Newspaper – Online Site – Retrieved 11-14-2014
http://www.jamaicaobserver.com/business/Caribbean-entrepreneurs-need-to-look-to-Diaspora-for-funding—-World-Bank-Group-exec

“Say it ain’t so”. This assertion seems so out-of-touch. This plays into the fallacy that life is so much better outside the Caribbean, so that when a Caribbean resident emigrates and now lives in the US, Canada, or Europe that they thrive financially to the point that they have disposable income (beyond funding their own basic food-clothing-housing needs, plus support for their families left-behind) so as to be able to invest in entrepreneurs back in their ancestral homelands.

This is a distorted “view” from afar … as in Washington. This is not the true experience “on the ground”. (While a picture is worth a thousand words, it is no substitute to actually being “there”. A picture only describes the visual sense; there is so much more, there are the sounds, smells, touch and taste. All of that experience cannot be easily captured in words or pictures).

The book Go Lean…Caribbean, authored by Diaspora members, posits that while the Caribbean region is the greatest address in the world, (the tropical flora-fauna, islands landscapes-waterscapes, and Caribbean culture cannot be topped any where else on the planet), life “at home” is much harder than picturesque postcards depict. This is why residents leave in the first place,  “push and pull factors”, and join the Diaspora.

The Caribbean does need help from the Diaspora to fulfill the Go Lean vision; we need their Time, Talent and Treasuries. But in truth, the Caribbean Diaspora does not thrive financially in their foreign abodes; not with the first generation. Economic studies indicate that only at the 2nd generation, do the immigrant’s legacies (next generation) start to prosper financially^[a]. At that point, these are no longer Diaspora (Nationals of the Caribbean member-states); and may not feel any attachment to their ancestral homelands. This is not just a Caribbean issue; it has been proven with other Diaspora groups: Irish, Italian, Chinese, etc. Added to the reality is the fact that Diaspora/legacy members can easily participate in Wall Street; with such an investment/economic engine, local Caribbean options cannot compete. The foregoing article concedes as much:

“only a ‘very few’ – about 13 per cent — have actually invested in the Caribbean”

The Go Lean roadmap is therefore realistic! We are not expecting the Diaspora to be some panacea of Caribbean societal ills. Rather, as a region, we must do the heavy-lifting ourselves. This roadmap proffers a unified, consolidated Caribbean effort, engaging all stakeholders: residents, Diaspora, Direct Foreign Investors, passive investors, NGOs and even governmental agencies, domestic and foreign. “All hands on deck”!

The foregoing article also states that “if we want to attract non-traditional finance, we need to start thinking in a non-traditional way”. This is the siren call of the Go Lean book, to effectuate change in the region, allowing for the following 3 prime directives:

• Optimization of the economic engines in order to grow the regional economy to $800 Billion GDP and create 2.2 million new jobs.
• Establishment of a security apparatus to protect the resultant economic engines.
• Improve Caribbean governance/administration/oversight to support these engines.

The Go Lean book/roadmap reflects the recommended “non-traditional thinking” to attract non-traditional funding for Caribbean empowerment and entrepreneurial endeavors:

• The book advocates for incubators… helping/coaching entrepreneurs to put together proper business plans and structures…
• The book advocates for cooperatives…
• The book advocates for the full exploration and exploitation of social media, identifying www.myCarribbean.gov  …

All these strategies allow for non-traditional funding methods such as crowdfunding^[b] (already essentially practiced in the region as no-tech offerings: Asue, Partner, Asociacion); this is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.^[1] One early-stage equity expert described crowdfunding as “the practice of raising funds from two or more people over the internet towards a common Service, Project, Product, Investment, Cause, and Experience or SPPICE.”^[2]

(See crowdfunding definition/explanation in the below VIDEO in the Appendix).

The crowdfunding model is fueled by three types of actors:

• the project initiator who proposes the idea and/or project to be funded;
• individuals or groups who support the idea (inclusive of the Diaspora);
• and a moderating organization (the “platform”, envisioned for the CU‘s www.myCarribbean.gov) that brings the parties together to launch the idea.^[3]

This strategy has proven successful for many other endeavors. In 2013, the crowdfunding industry grew to over $5.1 billion worldwide;^[4] (see Kickstarter Appendix below):

There are three primary types of crowdfunding:

• Reward-based crowdfunding – entrepreneurs pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity/shares. Reward-based crowdfunding has been used for a wide range of purposes, including motion picture promotion,^[16] free software development, inventions development, scientific research,^[17] and civic projects.^[18] For a joint study between Toronto, Canada’s York University and Universite Lille Nord de France, in Lille, France, published on June 2, 2014, two types of reward-based crowdfunding were identified: “‘Keep-it-All’ (KIA) where the entrepreneurial firm sets a fundraising goal and keeps the entire amount raised regardless of whether or not they meet their goal, and ‘All-or-Nothing’ (AON) where the entrepreneurial firm sets a fundraising goal and keeps nothing unless the goal is achieved.”^[19] The study’s researchers analyzed 22,875 crowdfunding campaigns, with targets of between US$5,000 and US$200,000, and concluded: “Overall, [all-or-nothing] fundraising campaigns involved substantially larger capital goals, and were much more likely to be successful at achieving their goals.” In its review of the study outcomes, the Inc.com publication explained that potential investors are more inclined to support “all-or-nothing strategy” initiatives, whereby a substandard product will not be released if the funding goal is not achieved. The Inc.com review concluded that “AON” campaign typically provide more detailed information on the campaign.^[20]
• Equity-based crowdfunding – the backer receives unlisted shares of a company, usually in its early stages, in exchange for the money pledged. The company’s success is determined by how successfully it can demonstrate its viability.^[15] Equity-based crowdfunding is the collective effort of individuals to support efforts initiated by other people or organizations through the provision of finance in the form of equity.^[21][22] In the United States, legislation that is mentioned in the 2012 JOBS Act will allow for a wider pool of small investors with fewer restrictions following the implementation of the act.^[22]
• Credit-based crowdfunding – In the U.S., credit-based crowdfunding from non-banks became more prominent as a form of crowdfunding in 2012, with the launch of the Lending Club, which had advanced more than US$500 million in loans via its website by April 2012. Prospective borrowers of  the Lending Club first submit their requirements, and are then matched with pools of investors who are willing to accept the credit terms. Platforms such as the Lending Club gained popularity, as banks increased interest rates or reduced their level of lending activity. Another credit-based platform, Prosper.com, was established in 2006 and had funded nearly US$325 million in personal loans by April 2012.^[23]

There are many dynamics of this nascent industry that must be considered and mastered if the Caribbean is to benefit from crowdfunding. Consider the following:

• Crowdfunding applications – Crowdfunding is being experimented with as a funding mechanism for creative work such as blogging and journalism,^[51] music, independent film,^[52][53] (See KickStarter Appendix below) and for funding startup companies.^{[54][55][56][57]} Community music labels are usually for-profit organizations where “fans assume the traditional financier role of a record label for artists they believe in by funding the recording process”.^[58] A Financialist article published in mid-September 2013 stated that “the niche for crowdfunding exists in financing films with budgets in the [US]$1 to $10 million range” and crowdfunding campaigns are “much more likely to be successful if they tap into a significant pre-existing fan base and fulfill an existing gap in the market.”^[60]
• Philanthropy and civic projects – A variety of crowdfunding platforms have emerged to allow ordinary web users to support specific philanthropic projects without the need for large amounts of money.^[18]
• Real estate crowdfunding (and REITs) – Real estate crowdfunding is the online pooling of capital from investors to fund mortgages secured by real estate, such as “fix and flip” redevelopment of distressed or abandoned properties, and equity for commercial and residential projects, acquisition of pools of distressed mortgages, home buyer down payments and similar real estate related outlets. Investment, via specialized online platforms, is generally completed under Title II of the JOBS Act and is limited to accredited investors. The platforms offer low minimum investments, often $100 – $10,000.^[63][64]
• Intellectual property exposure – One of the challenges of posting new ideas on crowdfunding sites is there may be little or no intellectual property (IP) protection provided by the sites themselves. Once an idea is posted, it can be copied. As Slava Rubin, founder of IndieGoGo said: “We get asked that all the time, ‘How do you protect me from someone stealing my idea?’ We’re not liable for any of that stuff.”^[65] Inventor advocates, such as Simon Brown, founder of the UK-based United Innovation Association, counsel that ideas can be protected on crowdfunding sites through early filing of patent applications, use of copyright and trademark protection as well as a new form of idea protection supported by the World Intellectual Property Organization called Creative Barcode.^[66]

• Innovative new platforms, such as RocketHub, have emerged that combine traditional funding for creative work with branded crowdsourcing – helping artists and entrepreneurs unite with brands “without the need for a middle man.”^[61]
• Global Giving allows individuals to browse through a selection of small projects proposed by nonprofit organizations worldwide, donating funds to projects of their choice.
• Microcredit crowdfunding platforms such as Kiva (organization) and Wokai facilitate crowdfunding of loans managed by microcredit organizations in developing countries.

• The US-based nonprofit Zidisha offers a new twist on these themes, applying a direct person-to-person lending model to microcredit lending for low-income small business owners in developing countries. Zidisha borrowers who pass a background check may post microloan applications directly on the Zidisha website, specifying proposed credit terms and interest rates. Individual web users in the US and Europe can lend as little as one US dollar, and Zidisha’s crowdfunding platform allows lenders and borrowers to engage in direct dialogue. Repaid principal and interest is returned to the lenders, who may withdraw the cash or use it to fund new loans.^[62]

• DonorsChoose.org, founded in 2000, allows public school teachers in the United States to request materials for their classrooms. Individuals can lend money to teacher-proposed projects, and the organization fulfills and delivers supplies to schools.
• There are also a number of own-branded university crowdfunding websites, which enable students and staff to create projects and receive funding from alumni of the university or the general public. Several dedicated civic crowdfunding platforms have emerged in the US and the UK, some of which have led to the first direct involvement of governments in crowdfunding.

The Go Lean…Caribbean roadmap asserts that the adoption of new community ethos, plus the executions of the following strategies, tactics, implementations and advocacies will foster the “crowdfunding”/investment industry in the region:

Under the Go Lean roadmap, there will be plenty of opportunities for entrepreneurial funding. The CU will solicit investors and foster entrepreneurism by featuring the structures of Self-Governing Entities (SGE); these are bordered grounds like high-tech R&D campuses, medical parks, and technology bases; but they will also include low-tech blue-collar activities like salvage yards and ship-breaking. The subjects of SGE’s, self-employment opportunities and entrepreneurial hustle has been directly addressed and further elaborated upon in these previous blog/commentaries:

The Caribbean is arguably the best address on the planet, but there are a lot of missing ingredients so as to be the best address for everyone. Due to this deficiency, the region has lost a large share of its human capital, one estimate of 70%, to the brain-drain. Some of the missing ingredients, “push” factors, have been jobs and opportunities for entrepreneurship.

No More! Change has come to the Caribbean. Starting first with the CU leadership – “thinking in a non-traditional way”.

The roadmap anticipates 150 million unique subscribers on www.myCarribbean.gov. This technocratic approach is more viable, more engaging than simply throwing our hopes over some wall to the far-flung Diaspora.

We must stop the floodgates of the debilitating brain-drain now and encourage our youth to seek a future in their homeland. While, we are at it, we must also encourage the far-flung Diaspora to repatriate back to the Caribbean.

This plan identified in the Go Lean book and blog/commentaries is a good start to create the missing opportunities for the region. The end result of this roadmap is a clearly defined destination: a better place to live, work and play. 🙂

Download the book Go Lean … Caribbean – now!

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Appendix A – Video – Crowdfunding:  http://youtu.be/8b5-iEnW70k

What is Crowdfunding? Crowdfunding planning? What, How, Why and When? One platform’s view:

Appendix B – Kickstarter Campaigns

On April 17, 2014, the UK-based Guardian media outlet published a list of “20 of the most significant projects” launched on the Kickstarter platform prior to the date of publication:

• Musician Amanda Palmer raised US$1.2 million from 24,883 backers in June 2012 to make a new album and art book.^[40]
• American Hans Fex raised US$1,226,811 from 5,030 backers in March 2014 for his “MiniMuseum” project that he describes on his Kickstarter page: “For the past 35 years I have collected amazing specimens … I then carefully break those specimens down into smaller pieces, embed them in acrylic … Each mini museum is a handcrafted, individually numbered limited edition … The majority of these specimens were acquired directly from contacting specialists recommended to me by museum curators, research scientists and university historians”.^[41]
• Writer Rob Thomas raised $5.7 million from 91,585 backers in April 2013 to create a feature film version of the defunct television series Veronica Mars. The nine award levels were initially available to backers in 21 countries, including Brazil, Canada, Finland and Germany. Lead actress Kristen Bell explained on the launch date of the project: “I promise if we hit our goal, we will make the sleuthiest, snarkiest, it’s-all-fun-and-games-‘til-one-of-you-gets-my-foot-up-your-ass movie we possibly can.”^[42]
• Actor, writer and director Zach Braff raised US$3.1 million from 46,520 backers in May 2013 to create the feature film Wish I Was Here, which premiered at the Sundance Film Festival. Braff’s campaign was financially complemented by Worldview Entertainment.
• Filmmaker Spike Lee raised US$1.4 million from 6,421 backers in August 2013 to make a feature film that, as of April 2014, is not titled. The film will feature actors Stephen Tyrone Williams, Zaraah Abrahams and Michael K. Williams.
• YouTube celebrity Freddie Wong, who owns the company RocketJump, raised US$808,000 to produce the second series of the Web-based series Video Game High School. In February 2013, 10,613 backers committed funds to the project following the      series’ first season, which was also funded on Kickstarter.
• Performance artist Marina Abramovic raised US$661,000 from 4,765 backers in August 2013 after paying US$950,000 to buy a building that would house the “Marina Abramovic Institute”. The building, as well as a corresponding organization, was foremost to the campaign, as Abramovic seeks to feature and maintain “long durational work, including that of performance art, dance, theatre, film, music, opera, and other forms that may develop in the future”.
• The Kano technology company raised US$1.5 million from 13,387 backers in December 2013 to create a “computer and coding kit for all ages.” In June 2014, Kano will ship a case, a keyboard, a  speaker, a wireless server, and software that encourages children to learn the “Kano Blocks” coding language, a set of computer programming skills.
• The Flint and Tinder company raised US$1.1 million from 9,226 backers in April 2013 for its “10-Year Hoodie” hooded sweatshirt that consists of 100%cotton and is made in the U.S. The company explains on its website: “Companies have systematically lowered your expectations to the point where it’s hard to know what to expect anymore. But while they’re busy off-shoring, out-sourcing and generally making things as cheaply and quickly as possible. It ends here.” According to Flint and Tinder, one million units of the product have been sold.^[43][44]

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Appendix C – Source References:

a. http://www.urbandictionary.com/define.php?term=jamerican / http://www.nytimes.com/2013/04/21/sunday-review/hispanics-the-new-italians.html?pagewanted=all&_r=0
b. http://en.wikipedia.org/wiki/Crowdfunding