Month: June 2019

Stock Markets

How digital is disrupting the world of early stage investing

 By Oliver Woolley, CEO, Envestors

 

The landscape we have today is the same landscape we had fifty years ago. We’ve got investment networks, clubs, incubators and accelerators, all of whom actively help investors to find opportunities and scale-ups to secure funding – but they are all closed and separate. Our vision for the future is one in which all these groups connect to one another, without sacrificing control or independence. We’ve built a software platform to do just that. Using an aggregated approach, we can bring the world of early-stage investing together in a way that benefits all of those involved.

 

For scale ups, it means working with one party and gaining wide exposure rather than promoting a deal through a number of disparate networks. For investors, it means having access to a near unlimited number of deals, all filtered according to interest and managed in a single location – regardless of network of origin. For investment facilitators, it means a greatly improved experience for their investors and decreased operational overheads.

 

 

Results – immediately!

 

We live in an age of instant gratification. This spans across all areas of our lives – from instantaneous validation on Twitter and one-hour Amazon delivery, to 24-hour news at our fingertips. So why should the investment experience be any different? If I can find out about anything in the world from wherever I happen to be, why should I – as an investor – wait for a pitch session to find out about investment opportunities?

 

ROBO: a behavioural change

 

Borrowing a term from the retail industry, ROBO (Research Online, Buy Offline) reflects a broad behavioural change. People no longer head to a shopping centre to browse for an item, they go online and find what they want and then go down to the store to get it. In many cases, they opt not to go to the store, satisfied with the information they have found online, and make an immediate purchase. This behaviour isn’t particular to consumers: a study, by Forrester Research, found that 68% of business to business buyers researched online independently and a further 62% say they go as far as developing a selection criteria and vendor list based on digital content.

 

So, why is it different with investing? When people prefer to get information instantaneously and independently, why do we ask them to wait for a pitch event? Using digital, information on potential investment opportunities and any relevant details can be ready for investors to read at their leisure. Further to that, information can be interactive. Potential investors can ask management teams questions – using online channels – and get answers in real time.

 

Achieving diversity

Digitisation has fuelled the unprecedented growth of start-ups in the UK.  This has produced a vast – and occasionally overwhelming – array of opportunities, resulting in a trend showing networks are becoming more niche and sector specific. While regional investment networks have long been part of the landscape, they are joined by networks specialising in – for example – Greentech, MedTech or women-owned businesses.  This is not a bad thing, but it has caused further fragmentation.

 

Experienced investors know, that if they are to get the best chance of a return on their investments, a diverse portfolio is a must. However, such specificity throws diversity out the window, leaving investors only one option – joining multiple networks and doing a lot of leg work to build and manage their portfolios.

 

Digital to the rescue. With an aggregated platform, regional and niche networks can connect to one another and share deals at the click of a button. This allows networks to protect their greatest asset – their investors – while offering them a broader array of investment opportunities without doing all of the vetting and admin.

 

Responding to uncertainty

 

By mid-2018, the impact of a looming Brexit was already starting to be felt across the industry.  With predictions of economic troubles in the UK in the short term, many investors tightened their purse strings, becoming increasingly selective over which investments to make. Yet, at the same time, reports show that foreign investment is at an all-time high: in 2017, a whopping £6bn was invested over the course of the year, with 396 of these deals involving at least one investor from abroad.

 

This is another opportunity that could be capitalised by digital. With a digital platform, deals can flow across borders – giving investors the ability to further diversify their portfolios, while giving businesses a better opportunity to find investment.

 

The benefits of using digital are clear so it is time for the investment sector to make changes. Some key players are already on board (for example, The SetSquared Partnership and Britbots).  I’m sure that more will be following and gaining the benefits.

Cash Management

What can cryptocurrencies offer during political upheaval?

Commentary by Ana Bencic, founder & CEO of Nexthash

The political and economic climate within the UK has been uncertain in recent months. The value of the pound has been turbulent and it has been rising and falling in response to political events, such as the Brexit vote and the recent departure of the prime minister. Investors who have been taking notice of the unpredictable nature of fiat currency’s’ value in relation to political events, as well as the near-constant rise in the value of several cryptocurrencies, will be looking at what makes cryptocurrency a viable alternative to traditional currency.

 

After experiencing a 4-month slump due to Brexit insecurity, the pound rose back up to $1.2710 shortly after the Theresa May’s announcement of resignation. Unfortunately, the recovery was short-lived and the pound almost immediately lost 3% of its value in the following days. Now, traders are showing concern that the next prime minister may seek a tough Brexit deal, which may hurt the value of the pound more than before. With more uncertainty than ever in the market, including the inability to hold above 1.27, the pound, it is clear that the value of pound sterling is predicated on political factors.


In stark contrast, cryptocurrencies like Bitcoin appear to be unaffected by political upheaval. The value of Bitcoin recently exceeded $8000, after a period of sustained growth over several months. Investors who are wary of traditional currencies will be attracted to the fact Bitcoin does not rely on any financial institutions or third-party entities. Bitcoin is a decentralized currency that uses peer-to-peer technology, which enables all functions such as currency issuance, transaction processing and verification to be carried out collectively by the network. While this decentralization renders Bitcoin free from government manipulation or interference, the flipside is that there is no central authority to ensure that things run smoothly or to back the value of a Bitcoin. Bitcoins are created digitally through a “mining” process that requires powerful computers to solve complex algorithms and crunch numbers. They are currently created at the rate of 25 Bitcoins every 10 minutes and will be capped at 21 million, a level that is expected to be reached in 2140.

Additionally, Bitcoin effectively increases efficiencies, adds security to transactions and eliminates traditional methods of fraud. Some economic analysts predict a big change in crypto is forthcoming as institutional money enters the market. Moreover, there is the possibility that crypto will be floated on the Nasdaq, which would further add credibility to blockchain and its uses as an alternative to conventional currencies. Some predict that all that crypto needs is a verified exchange traded fund (ETF). An ETF would definitely make it easier for people to invest in Bitcoin, but there still needs to be the demand to want to invest in crypto, which some say may not automatically be generated with a fund.

 


Cryptocurrencies are increasing in popularity with each passing day, as traditional investors & traders start to use it more often and several major first-world nations pass legislation in support of cryptocurrency trade and investment. At this point in time, there are 14 million Bitcoins in circulation. Countries with underdeveloped infrastructure and nations experiencing devaluation of their national currency can seize the advantages of cryptocurrencies- for the simple reason they are able to move money across their country’s borders with far greater ease than traditional currency. Cryptocurrencies exist outside of the control of central banks, where traditional accounts can be garnished or frozen. In fact, cryptocurrencies like Bitcoin exist outside the regulations and laws that allow this to happen, it’s very rare to be unable to access your coins.





 

 

Funds of Funds

Rural communities receive a significant boost from The Prince’s Countryside Fund

In June, The Prince’s Countryside Fund has awarded half a million pounds of grant funding to 26 grassroots, community-led projects across the UK, which will benefit people living and working in rural areas.

The Prince’s Countryside Fund awards grants to local organisations, and since 2010 has distributed over £10 million. The Fund’s mission is to help ensure a vibrant rural economy with a thriving and resilient farming sector at its heart, and its grant programme is a major focus of activity to achieve this.

The broad range of successful projects will create locally-delivered solutions to the ever-pressing challenges facing rural communities – from farmer mental health support in Wales, to rural skills training in the north east, and the creation of rural hubs in Northern Ireland.

The Rural Four programme supported 13 of these projects with thanks to players of People’s Postcode Lottery. Rural Four aims to tackle isolation in rural areas and is funding projects including social hubs in Norfolk and rural transport schemes in Northamptonshire. It is helping rural communities in Norfolk and Cheshire to improve their digital connectivity by installing high speed broadband in a central hub, which is open to all, and to provide digital skills training in Lincolnshire.

Announcing the grant recipients, Claire Saunders, Director of The Prince’s Countryside Fund said: “It is great to see so many organisations coming up with unique ways to combat the challenges that are facing rural communities and to know these projects are key to making a difference. From funding a community brewery in East Anglia, to a mentoring and land access programme for young entrants to agriculture in Northern Ireland – The Prince’s Countryside Fund is committed to improving the quality of life, in all aspects, for all people living and working in our great British countryside.

“This has been our most competitive round of grant applications in Fund history, with nearly 300 applications requesting £10 million of funding. The applications were all of a very high standard and we are delighted to be working with the 26 successful beneficiaries.”

The Fund will be open again for grant applications in January 2020. More details can be found at www.princescountryside.fund.org.uk/grants.

Cash ManagementFinanceSecuritiesTransactional and Investment Banking

What is next for cryptocurrency?

The rise of cryptocurrency is to be seen as a democratising force within the global economy. For example, secured token offering, has emerged as a true competitor to the traditional Initial Public Offering (IPO) for growing businesses. Judging from the growing acceptance of cryptocurrency by countries and companies, it is predicted that institutional investors will move towards secure cryptocurrency investments over the next decade, if not earlier. Ana Bencic, President and Founder of NextHash explores this phenomenon in more detail.

 

Uber Technologies Inc.’s large initial public offering launched in May and the ride-hailing app has run into some trouble. Uber proposed to go public with a $120 billion valuation, to be pitched by financiers at Morgan Stanley and Goldman Sachs ahead of its IPO. Nonetheless, the company eventually listed with a $75.5 billion market cap. The New York Times elucidated that institutional investors, many who privately owned Uber stock, would not purchase additional shares at a higher price. Uber had received in excesses of $10 billion from institutional investors and private equity firms, among other investors, according to the report and many bought their Uber shares at valuations below $61 billion.

 

The ride-hailing giant priced its IPO on Thursday 9th May at $45 a share, raising a minimum of $8.1 billion and putting Uber’s IPO well behind some of the other, large offerings on the U.S. market in recent years. Facebook Inc raised $16 billion its offering in 2012, while Visa Inc. raised close to $18 billion in 2008 and Alibaba Group Holding Ltd. brought in around $25 billion in 2014.

 

Initial Public Offerings can offer companies the prospect to raise new equity capital; to monetise the investments of private shareholders such as corporation founders or private equity investors and to enable simple trading of existing holdings or future capital raising by becoming publicly traded enterprises. 

 

Nevertheless, for companies looking to list, there are potential drawbacks. Foremost, there is the risk that the required funding will not be raised. Additionally, the cost for accounting, marketing and legal professionals to get to the point of an IPO can be sizeable. It might also necessitate a significant amount of time and effort from the management team, potentially disrupting them from their primary task of running the business. Furthermore, as in Uber’s case, there is a. While no promises can be made in these circumstances, many may be looking at the recent state of these tech unicorns (privately held start-up enterprises valued at over $1 billion) such as Uber and even Facebook may have people pondering if the next big thing will follow the same path. 

 

Aside from financial sacrifice, the time and effort to get to the IPO stage and the administration required once a company has gone public or floated, is considerable. For companies at the front-line of technological advancements, time is of the essence. According to Street Directory, an IPO typically takes between six and nine months. In some cases, this procedure can take up to 18 months. For high-growth businesses, this kind of interval may well bump potential unicorns off their path to a £1 billion valuation and present their rivals with a huge advantage. So what other prospects do highly scalable businesses have? 

 

The cryptocurrency market provides distinctive opportunities for businesses in need of access to vital growth finance and for investors desiring access to potential unicorn businesses at an early stage. This is made likely by cryptocurrency platforms’ capacity to operate across borders, an advantage that isn’t possessed by conventional markets.

 

In April, the French parliament permitted a ground-breaking financial sector bill which aims to encourage both cryptocurrency traders and issuers to set up in France. Organisations looking to issue or trade both existing and novel cryptocurrencies will soon have the option to apply for official accreditation.  The scheduled certification process exhibits a degree of official acknowledgement of the cryptocurrency marketplace. Bills like this enable French investors to trade and invest cryptocurrencies, as well as facilitating businesses to be traded as a Secured Token Offering which would give investors, traders, and entrepreneurs a way to trade and exchange tokens for cryptocurrencies, bringing the ecosystem into the cryptocurrency world. In exchange for charging tax, France is laying the foundations for the Europe-wide adoption of cryptocurrency trading.

France is pushing for the European Union to adopt a regulatory framework on cryptocurrencies.

 

There has been a largely positive attitude towards cryptocurrency by several countries. Malta, Slovenia and France are strong examples of those who are encouraging the implementation and use of cryptocurrency for trading and investment. The ability to invest or trade freely and across borders is an attractive prospect for businesses, who are able to receive financial investment from foreign parties.

 

New technologies are allowing businesses that are not in a jurisdiction that has cryptocurrency regulation in place yet to be included in the new, second generation of scaling business investment. 

 

With Brexit on the horizon for the UK, economists are making their forecasts about how the worth of the pound will be affected. Due to the interdependence of the pound and euro, some have claimed that in either of the potential outcomes- there will likely be some loss in value to these traditional forms of currency.  Cryptocurrencies offer an alternative to traditional, fiat currencies for both consumers and companies, due to their unique advantages of being decentralised, transparent and wholly unaffected by the Brexit situation

 

With incongruent regulation and legal frameworks throughout the globe, platforms that empower a corporation or investor in one jurisdiction to trade or exchange tokens or currency with another trader in another country with a different statute could open the doors to potential unicorn companies to thousands of family offices, hedge funds and institutional investors in a matter of years. In the medium term, platforms that give businesses access to global growth finance could help developing countries and the wider global economy grow at a truly competitive rate to their Western counterparts. 

 

CONCLUSION

 

Cryptocurrencies have spent the last few years in a stage of growth and maturation. The emergent importance of blockchain-based cryptocurrencies is easy to grasp today. From the snowballing rate of adoption of Ethereum and Bitcoin by conventional institutions, the instituting of digital-assets trading platforms and the implementation of cryptocurrency-specific legislation by numerous countries both inside and outside of the EU- cryptocurrency is seeing far greater adoption by both institutional and private traders/investors. With the ability to invest in a corporation from anyplace in the world, quicker than by traditional means and with a far greater potential for a swift return on investment, cryptocurrency offers manifold unique and substantial advantages that have fortified it a lasting place in society.

 

 

Infrastructure

The skills needed to become an independent non-executive director

By David Selves, Broadcaster and Business Advisor at The Selves Group

Authorised Fund Managers (AFMs) across the UK are scrambling to fill up to 480 independent non-executive director vacancies to comply with new legislation released by the Financial Conduct Authority (FCA).

 

As part of the legislation, the FCA requires that all AFMs must have a minimum of two independent directors on their board by Monday 30th September 2019. So, with just three months until the deadline, AFMs are actively looking for suitable professionals to fill this gap, but who are the desired candidates and what skills do they need to possess?

 

Essentially, the primary role of a non-executive director (NED) is to impart a creative contribution to the board by providing independent oversight and constructive challenge to the executive directors. Assigned to question the status quo of an organisation, NEDs typically do not engage in the day-to-day management, but are involved in policymaking and planning exercises.

 

Ideally, NEDs should not be from the industry in question, thereby enforcing impartiality in the best interests of the company stakeholders. In addition, they should either be worldly – which may mean simply having a vast experience of life in general across numerous disciplines, rather than senior roles in another industry – or be what is referred to as an ‘expert customer’; a person who potentially might use the product or service offered.

 

Regardless of industry experience, NEDs must be independent thinkers and question strategy, management techniques, performance and standards of ethics and conduct. Predominantly, they should always take an independent view on the promotion and external appointments of senior executives.

 

NEDs also need to understand the workings of the company before they accept a position because they will have exactly the same responsibilities in law as executive directors. Whilst they should be given sufficient industry training to be able to effectively challenge the executive directors, they must also ensure that they have the time to keep up to date with ever-changing industry standards.

 

For progressive businesses, the value of a NED is that they bring a broader perspective. Companies often appoint NEDs for their contacts, particularly in the bigger cities, but that can be a dangerous route. The idea of a NED is not to facilitate wheels within wheels, but in fact quite the opposite. A NED should act as a centre of influence to ensure the company contacts the right external groups. Moreover, smaller companies are increasingly finding that the relatively low cost of NEDs is a very worthwhile investment.

 

In short, NEDs need to bring a host of skills to the table. AFMs want someone who has a wide experience of life, is independent of thought and deed, acts impartially, and is a well-rounded and respected individual. While on the job, the ideal NED should provide constructive challenge both strategically and operationally, offer specialist advice where qualified to do so, and never be afraid to hold management to account.

David Selves is a business advisor at The Selves Group. He has enjoyed an eventful 50-year career as a seasoned broadcaster, entrepreneur, publican and hotelier. Making his name in business hospitality by purchasing struggling hotels and turning them into award-winning venues, David has built a reputation as a respected and highly regarded businessman. He was also the former Regional Chairman and National Board Member of the Small Business