The Tribune

* Aiming to bring ‘transformational’ change to Bahamian business financing

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An equity crowdfunding platform spearheaded by the late Sir Sol Kerzner’s son yesterday said it is “full systems go” on bringing “transformational” change to the way Bahamian businesses are financed.

Koodoo’s senior executives told Tribune Business that two local crowdfunding “campaigns” are poised for launch once it receives Securities Commission sign-off on its registration, as it focuses on entities with sustainable development ambitions that will benefit “people, planet and communities”.

Lee Birkett, Koodoo’s strategic director, said the platform - founded by Brandon Kerzner in 2018 - will set itself apart from rivals such as ArawakX and the Bahamas International Securities Exchange (BISX) by using its digital wallet capabilities to give local companies access to international investors via a variety of fiat currencies but also “the seven most used cryptocurrencies” in the world.

He revealed that Koodoo was “keen to use The Bahamas as a global first for crowdfunding with digital currency” due to the Central Bank’s development of the Sand Dollar as the electronic version of the Bahamian dollar, adding that this initiative is “leading the way in how money should move”.

Disclosing that Mr Kerzner and others have invested “an eye-watering amount” in Koodoo’s development, Mr Birkett said the Government’s enactment of the Securities Industry (Business Capital) Rules 2021 will now enable it to realise its vision in The Bahamas.

Praising The Bahamas’ new crowdfunding rules as “best of breed”, he told this newspaper: “The pre-existing Bahamas infrastructure to do any equity raise was pretty archaic. Crowdfunding is a little lighter touch and more proportionate to the amount being raised. If someone wants to put $100 into something, they shouldn’t have to undergo a week’s worth of scrutiny.

“These regulations that have been adopted are very much best of breed with what’s happening in the UK. I think it’s very common sense; a maximum of $10,000 for a non-sophisticated investors, and I’m very pleased that the Government and Securities Commission opened up the opportunity for external investment.

“Crowdfunding is the perfect platform for that to occur. It does need the full support and engagement from the local authorities. For them to come out and publicly support the proposition, it has every chance to succeed.”

The Securities Commission, in unveiling the Securities Industry (Business Capital) Rules 2021, said small and medium sized enterprises (SMEs) can raise a maximum $5m via crowdfunding within a 12-month period through no more than two issues of equity securities to investors.

Businesses eligible to seek capital via crowdfunding must be organised under the Companies Act, operating in The Bahamas, and categorized as a small or medium-sized enterprise. Small-sized businesses are defined as having annual gross incomes of up to $1.5m, while medium-sized businesses have annual gross incomes between $1.5m and $3m.

As for investors, individuals - known as retail investors - are limited to investing up to $10,00 per crowdfunding issue, or a total of $50,000 over a single 12-month period. They will be able to trade their shares on the secondary market provided by platforms such as Koodoo.

Mr Birkett yesterday told Tribune Business that Koodoo was “ready to go” once its registration was formally approved by the Securities Commission, and he voiced hope that this could be “fast-tracked” given that the platform is already regulated in three other jurisdictions including the US and UK.

“It’s pretty much full systems go,” he said. “We’ve got [crowdfunding] campaigns ready to go live. We’re waiting for the speed of the sign-off on the registration. We cannot put Bahamian companies live without registration, but people can register with us now. We’re working with local professionals as well to carry out the relevant due diligence.

“At the moment there’s two from The Bahamas. Health is one, and food and beverage is the other. They both meet the UN’s sustainable development goals. The Bahamian entity we’re working with on the campaign for medical space said the bank will finance a physical building but not medical equipment.

“These are entities that are looking to change the community but don’t have the means to do so. That was the missing trigger point that convinced Brandon something needed to be done in this space.”

Varun Boughram, Koodoo’s operations and finance chief, added that the first was focused on healthcare for all, and the second “responsible consumption” with an eye on creating jobs for women in the entrepreneur’s own community

Describing Koodoo’s origins, the duo said Mr Kerzner, son of the late Atlantis founder, had always been interested in the financial technology (Fintech) space and how cryptocurrencies were disrupting and challenging “traditional financial architecture”.

With the Kerzner family “very close to community development” in all the countries where they have interests, Mr Boughram said it was his sister, Andrea’s, involvement as founder and chief executive of Lalela, a charity dedicated to bringing the arts to at-risk youth in South Africa, that enabled Brandon to see the potential marriage between a digital crowdfunding platform and firms needing finance for sustainable development.

Mr Boughram said Koodoo’s experiences in other nations, notably South Africa, had enabled it to “incorporate best practices” into the model it will employ in The Bahamas and help set it apart from what is shaping up to be a crowded marketplace for crowdfunding platforms.

“I think multi-currency is the big option,” Mr Birkett replied, when asked what will distinguish Koodoo from the competition. “We have an established digital wallet platform, which enables US dollar, sterling and euro funding, but also enables the seven most-widely used cryptocurrencies in the world.

“The Sand Dollar concept is leading the way in this in how money should move from nation to nation, and this is why we’re keen to use The Bahamas as a global first for crowdfunding using digital currency because the Central Bank digital currency is the first one.”