The ArawakX Exchange is a unique exchange for small and medium enterprises in that it incorporates the concept of what we call M.A.G.I.C. Each company is vetted before being invited to list by the following Criteria: M stands for market; A stands for access; G stands for growth; I for innovative products and/or services and C for corporate governance standards that are necessary for reporting to all stakeholders. Let’s examine each of these criteria.
First of all, M, the market is a vital component to the success of a company. The market must be large enough for a firm to grow 10 times, 100 times or even a 1,000 times. Think of an agribusiness that has identified a national, regional or international market for a product or service like organic breadfruit. This means that a successful company would have the capabilities and experience to service that market and it is quantifiable by industry research. Too often we have seen companies that have a good idea but it is unproven because it is not filling a need or want. Indeed there have been many high profile failures of companies funded by VCs and Angel investors where a clever presenter has sold the idea without considering who is actually going to use it.
You may ask the question won’t this kill innovation of new products and services which haven’t been invented yet? The answer is a clear no. The issue is about needs and wants and adding value to the customer’s life. For example, a new tourist attraction on an island that has no tourist traffic would be of little value to an investor unless there is the ability for the market to grow. Yet that same tourist attraction would be a very investable product if there are plans for a new airport or cruise port and there is a great desire for people to be on that island.
A stands for access to the market. The market must be legally accessible to the company and it must be able to service that market efficiently and profitably. For example, a company may make the best cheese cake and it may enjoy a healthy local customer base. And if the cheese cake market in the US has a great need for more competition because people just love cheese cakes. However, let’s say the import of cheese cakes into the United States is banned then that market is not accessible.
A common way of calculating whether a business can be successful in entering or expanding its market or not is the percentage method. If the market size is deemed viable then it is assumed that a certain percentage of the market can be gained from any entrant. Let’s say the breadfruit market is one billion dollars. Using the percentage method a company might believe that it can capture 1% of this market or 10 million dollars. However, this is a fallacy if the company does not have among other things access to this market. A lack of access may be due to product quality, cost of getting the product to a new market or many other factors.
G stands for growth or scalability. In addition to the ability to accessing a large market a company must have the structure for growth. That means first of all that Founders have to be willing to work on the business, more than in the business. A growth mentality also means that professional management is employed at all levels to make a firm investible. It also means that a company is process oriented which happens when digitization occurs through technology. Each listed company will use comprehensive document management system with workflow process that can all be duplicated as a firm expands.
I stands for innovation of products and services. The Caribbean is not typically thought of as a place for innovation. Yet it has a highly educated work force with experience in many areas from product development to light manufacturing and even financial services and technological innovation. Innovation often comes from taking advantage of a robust and respected regulatory environment that enables certain businesses to thrive.
There are also a lot of unique natural resources found in the Caribbean such as a high quality grade of Aragonite sand, or natural fruits that are grown because of the temperature. This makes it possible for companies to produce organic products that can become world wide brands servicing markets all over the globe.
C stands for corporate governance. A company must have the correct team of Advisors and Directors. It must have the necessary professional management that can produce the reports to shareholders, management, regulators, and other shareholders if necessary. Without proper corporate governance investors will not have confidence because they will not have the information that their investment is properly cared for.
Corporate Governance is one of the things that takes the entire Caribbean from a Frontier Market to an emerging market. A place where information is more consistent and more readily available. However, this Frontier market designation is precisely why properly structured companies in the Caribbean are great to invest in. The investor market is less crowded as these companies have yet to be discovered.
Market, access, growth, innovation and corporate governance is where the MAGIC occurs in investing in the Caribbean through ArawakX our innovative platform. Invest with confidence knowing that your investment will not only be impactful but also profitable.