By NEIL HARTNELL
Tribune Business Editor
A Bahamian financial services provider yesterday said its companies “nursery” will help fill a potential “$800m a year” financing gap when it launches in three months’ time.
D’Arcy Rahming Jr, MDollaz Technology’s chief executive, told Tribune Business its ArawakX equity crowdfunding platform was anticipating final approval from the Securities Commission as early as this week having already received a conditional go-ahead from the capital markets regulator.
Speaking on the same day it was revealed that the Securities Commission is readying to release its crowdfunding rules (see other article on Page 1B), Mr Rahming Jr said ArawakX’s marketplace and clearing facility licence will help ensure that the promise offered by Bahamian entrepreneurs “doesn’t die on the vine” for lack of financing.
Mr Rahming Jr, who is the platform’s chief technology officer, described ArawakX’s creation as a four-five year “labour of love” that has seen his family “bet the farm” via a $2m-plus investment in a technology-based platform that aims to marry start-ups, entrepreneurs and small businesses with like-minded equity investors in a structured, regulated marketplace.
Aiming to be the first-of-its-kind to launch in The Bahamas, he added that it will also act as a clearing house and registry for the sale of equity interests in such ventures, with investors provided with a record proving their ownership.
Confirming that ArawakX will follow the Securities Commission’s new crowdfunding rules, Mr Rahming Jr said he and his colleagues had pressed ahead and obtained the “conditional licence” that was the best fit for what they plan to do.
He added that the marketplace and clearing facility, which is in the final stages of testing to “shake out the bugs”, will give Bahamian entrepreneurs and start-ups access to a much broader investor and capital pool.
While such ventures are presently limited to selling shares to a maximum of 40 investors, who are also friends and family, Mr Rahming Jr said the only limits imposed by ArawakX (and the Securities Commission rules) will be a $5m upper limit on the amount any start-up can raise.
To protect both sides, there will also be restrictions on the size of any equity stake held by one investor to protect a start-up against so-called hostile takeovers. There will also be safeguards for investors as minority owners, since they will be able to appoint board directors while the companies themselves will also have to comply with financial reporting requirements - albeit ones that are less stringent than for BISX-listed companies.
“It’s so needed,” Mr Rahming Jr said of ArawakX. “There are so many great ideas that die on the vine because people cannot get funding. We’re trying to help the entrepreneurs. They go out, hire great talent, and the country will be better off. This is a tool of growth for business people who are going out and creating value.
“Since COVID-19 especially, businesses have been repositioning themselves and restructuring. Everybody needs financing. It’s the number one problem of the day; always has and always will.”
Acknowledging that “a lot of different numbers have been thrown out there” when it comes to measuring the gap between small business and start-up financing needs, and the amount of capital available, Mr Rahming Jr added: “I think it’s closer to what the Bahamas Development Bank said, $800m a year. That’s how bad the need really is.
“We have a lot of really talented people here. They just need structure around them to monetise what they are doing. This is what our expertise is. We’ve bet the farm on it and I believe we can. You’ll see a lot more innovation as a result of this, and a lot more people staying in The Bahamas. If you can build a dream business in this country, why would you leave?
“We want companies to evolve into big companies. That’s the gap we’re filling. We want to be a nursery for companies. The demand is there, and is really, really high. There’s a whole generation of people that cannot afford $50,000 placements and are looking to find other opportunities to invest in. We’ll do a pre-launch with some of the companies, and there are some pretty sexy ones.”
Mr Rahming Jr said eight persons are currently employed by Arawak X, with that number set to increase to 20 before it launches. He added that his father, D’Arcy Rahming senior, former chief operating officer at the Bahamas International Securities Exchange (BISX), had “invested his whole future; everything he has ever earned in here. For us this is more; it’s my father’s life work”.
Mr Rahming snr chairs MDollaz Technology. Other directors include ex-Securities Commission chief, Hillary Deveaux; Open Systems Technology chief executive, Peter Bridgewater; and Doug Kryzan, a US technology entrepreneur, who is vice-chairman.
Crowdfunding involves financing a project or business venture by raising small amounts of money from a large number of people, typically via an Internet-based electronic platform such as ArawakX. It pools money from friends, family and investors.
Bahamian entrepreneurs and small and medium-sized enterprises are especially familiar with this, as it is typically the mechanism they have employed to raise start-up and expansion capital. Crowdfunders take equity stakes in the businesses they finance, appointing directors to the Board to safeguard their interests, rather than offering debt financing.
Besides crowdfunders earning a higher return on their investment, via dividends and share price appreciation if the business prospers, this financing method also enables start-ups and entrepreneurs to avoid having to take on a heavy debt financing burden than can often cause their idea to fail.
Mr Rahming Jr said ArawakX had suspended the education campaign it launched in 2019 after becoming overwhelmed by the level of interest. He added that, to-date, more than 254 companies and 469 investors have expressed written interest in equity crowdfunding to it.
He added that the platform’s launch, and structured market and rules it offers, will bring “more professionalism” to the start-up and entrepreneur market. Mr Rahming Jr described the initial financing round as “just getting them over the hump”, with the expectation being that successful ventures will come back for more financing rounds that will make them “10 times’ bigger”.
“We are in contact with our regulators who are being very thorough. A marketplace and clearing facility license is one of the most difficult licenses to get. This has been a labour of love; a very expensive and lengthy process,” said Mr Rahming Jr in a statement.
“We know that thousands of people will be impacted positively by our ArawakX platform. We have full operational capabilities with world-class technology providers and world class Bahamians running it. I’m so happy that we as a jurisdiction are taking the Fintech revolution by storm.
“In the past, young, talented Bahamians, like myself, would have had to leave The Bahamas for places like New York, Chicago, London or San Francisco to do anything innovative. Our initial hires are all Bahamians. We expect to hire over 200 more Bahamians,” he added.
“If our listed companies meet their funding targets, thousands of new high paying jobs will be created by those companies. Although we anticipate in later phases we will be expanding in the Caribbean, in this first phase we intend to find Bahamian companies capital up to $5m. Also, we will be providing Bahamian investors with opportunities to participate, starting as low as $25.”