Equity risk investors in the country have identified the absence of timely and accurate economic data as one of the biggest challenge facing firms with ready capital to invest in start-up businesses.

This, they explained, is the reason behind the failure of many venture capital firms to fund start-up businesses whilst many operating small- and medium-scale enterprises lose out on the chance to secure additional capital injection into their business to induce growth.

Mattew Boadu Adjei, chief executive officer of Oasis Capital, a growth and venture capital fund manager, in an interview with the B&FT in Accra explained that data is undoubtedly the most important factor in investment decisions beyond stability in the macro-economic environment including the currency as well as education on corporate governance.

He said inadequate data on various sectors of the economy does not aid risk investors to make judicious and straight-forward decisions on start-ups’ applications for capital injection.

“One area that we struggle most in has been data. Even employment data in this country is non-existent.

“That is why we are more inclined to look out for existing businesses; because where we don’t have the data, start-ups become very difficult for us. But if we must do start-ups and there are significant and well-researched documents, then we can speak to that.

“But where these things are non-existent, then it becomes extremely difficult for us to be sold on any idea because it just becomes any of those things we’ve heard before; and that explains why targets that we set sometimes tend to be off-tangent,” he said.  

Mr. Adjei asked that the Ghana Statistical service be resourced adequately to enable them to keep accurate and reliable data consistently on various business activities in the country so that risk investors can have access to detailed information on the various sectors of the economy. 

“Someone should be responsible for the generation and provision of data and that responsibility lies in the ambit of the government because it is in the state’s interest for these data to be provided to private people to enable them to make investment,” he added.

He said venture capital firms in the country now rely mostly on primary data collection methodology to guide venture capital firms to make informed decision on SMEs and start-up business applications.

So far, Oasis Capital — a two-year-old private equity and venture capital finance company with specialty in venture capital fund management — has successfully provided risk capital to about five entrepreneurial businesses in the country out of the several hundred applications received.

Mr. Adjei said successful applicants to the firm have been those with entrepreneurial skills and backgrounds, and have also shown commitment to growing a business that has been found to be viable.

He said Oasis uses the entrepreneurial background to enable the firm to identify SMEs with viable, sustainable growth potential through a well-researched business-plan that articulates business and vision very well, and is not ambiguous.

“We do not want to give money to just anybody. We want to give money to people who have made money before and have some money to put in, because we are not doing micro-businesses: we are doing SMEs that are scalable with potential for growth.

So if the business model doesn’t show that it is scalable, we will not be willing to put money into it,” he added.

Oasis Capital, which started operations in March 2010 with the launch of the Ebankese fund, currently boasts a fund-size of US$11million provided by Venture Capital Trust Fund and Africa Tiger Mutual Fund.

Other investors including Dutch firm Social Venture Capital BV (Sovec) have also made commitments to up the fund’s seed capital with an additional US$3million.

The investment interest of Oasis Capital is focused on companies with concentration in the private educational sector, health services, real-estate and hospitality sectors as well as agri-business and micro-finance companies.

“These are the kind of institutions that we would be willing to put money into, because they have growth expectations and are serving the needs of the large masses in the society and are making an impact in the society,” he said.

However, companies with more than US$10million in turnover and are worth more than US$5million are not an Oasis-qualified SMEs.

By Evans Boah-Mensah

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