Richard Deane, Business Writer

When Grayson Alert and his business partner Neil Rhule made the decision to enter the software development business seven years ago, all they had was the idea, but no funds to get Aura Technology off the ground.

But armed with one client, the duo turned to a friend, borrowed some money and rented out a house for three months.

Then they found the Technology Innovation Centre at the University of Technology, Jamaica, a business incubator that takes promising entities like Aura Technology and guides them to commercial success.

No one knows how large Jamaica's software development sector is today.

Patrick Dallas, current chairman of the CITO Board and former president of the Jamaica Software Developers Association, says in 2002, there were at least 50 entities, but even then, he said there were others known to be operating under the radar.

"We had 50 who wanted to be registered but outside of that, you are going to find a lot of one-man, two-man operations," Dallas said.

And, neither is it clear what it takes on average to start a software development company, Alert said for Aura, it took between $200,000 and $300,000 - a combination of gifts and loans from friends and family.

Looking back, Alert said that even though he and Rhule had modest resources at the time, getting a bank loan was never an option because bankers just did not understand Aura's line of work and so could not conceive of its possibilities.

"They are very conservative," said Alert. "They don't understand how our business works."

It is an issue that Don Gittens, senior consultant at Jamaica Trade and Invest, has also raised publicly.

Speaking with Sunday Business, Gittens said financiers here generally lack understanding of intellectual property projects, the result of which was scarce sources of funding.

Banks were even less likely to lend to ventures like Aura's, he said.

Intellectual property

"Most of them do not see intellectual property as something they can put money in," said Gittens, "while in the First World, you can get funding for that kind of development."

Another local software development company, KRYS Global, opted to go the latter route and has received support from investors in Denmark.

As a result, KRYS now operates offices in Denmark and Jamaica.

Principal Chris Green says that in Jamaica, the concept of value is in "land and buildings" and intellectual property is not a concept that local banks are willing to invest in.

Green believes that if Jamaica is to grow into a First World country - it has set 2030 to reach developed status - it has to be more serious about backing sectors that have the potential to make money.

"There must be some investment in intellectual property, like reggae music and software," he said.

But Ingrid Riley, the owner of the tech blog Siliconcaribe and member of the Internet Alliance - a local association of companies that make their profits from the Internet - sees things a bit differently.

Riley believes local software development start-ups should find more creative ways to raise funds.

"I don't think we need to blame the banks for not lending us money," Riley said. "If they don't want to lend us the money, we should be creative and go and find the money somewhere else."

Riley also believes that the banks are getting the brunt of the criticism only because Jamaica lacks a "culture" of venture capitalism and angel financing that would act as a substitute for the banks.

Gittens acknowledges that a venture-capital market would be the answer, but said while Government could facilitate this by creating the legal framework, funding would be a challenge.

"The Government can only set the framework, but I think it has to be in tandem with the private sector," Gittens said.

Tap venture funds

One local entrepreneur has managed to tap venture funds for his software company, but Andrew Simpson had to look to Trinidad and Tobago.

To obtain the funds, he had to register his company, SYMPTAI Consulting Limited, in Trinidad - which he did.

But Simpson says his business, though incorporated in the twin island, actually operates from Jamaica and Canada.

The software developer believes that the real problem that he and his colleagues face as business operators is the competition from paper securities.

"In Jamaica, you can put your money in Government paper and get double-digit returns," he said.

So, to access capital, "we just have to look elsewhere," he said.

richard.deane@gleanerjm.com