All posts by Patrick Doherty

Social impact
Sustainable Finance

Younger Entrepreneurs Choose Social Impact As Their Top Business Priority

A new wave of global entrepreneurs are setting up their businesses with the aim of making a positive impact on society, according to a new report from HSBC Private Banking. The Essence of Enterprise report found that the younger generation of entrepreneurs are leading this trend, with 24% of entrepreneurs aged under 35 motivated by social impact compared to 11% of those aged over 55. The report, now in its third year, is one of the largest, in-depth studies into the motivations and ambitions of entrepreneurs, researching the views of over 3,700 successful entrepreneurs in eleven countries. The report also found that this new generation of entrepreneurs is embracing angel investing, viewing it as a way to connect and collaborate with their peers.

A socially minded brand of entrepreneurship

One in five entrepreneurs considers social responsibility, being active in the community, or environmental responsibility as their top priority as a business owner, rather than prioritising areas such as maximising shareholder value or economic prosperity. Those who prioritise social impact have a greater propensity to engage in angel investing, (55% of impact-focused entrepreneurs versus 44% of entrepreneurs who prioritise commercial factors), and report a stronger willingness to rely on mentors for advice and support (75% of impact-focused entrepreneurs versus 66%).

The report also suggests a strong relationship between an emphasis on social impact and entrepreneurial ambition. 33% of the entrepreneurs projecting high growth ambitions state that they started their ventures with the intention of creating positive social impact, compared to 28% of those projecting the lowest growth. This suggests social impact should be seen as an integral part of the recipe of entrepreneurial success, and not separate from it.

A new investment style

Almost half of respondents (47%) have invested in other private, non-listed businesses, funnelling both capital and expertise back to the entrepreneurial community. However, the research reveals that a new younger generation of entrepreneurs is investing at a much higher rate than their older peers, with 57% of entrepreneurs under 35 undertaking angel investing compared to 29% of entrepreneurs aged over 55.

Differences also exist between the generations in how they perceive and approach angel investing. Over half of younger entrepreneurs (57%) view angel investing as a way to connect and collaborate with peers, staying up to date with industry progress and disrupters and to grow their knowledge and expertise.  Entrepreneurs of an older generation view angel investing as a way to diversify and grow their investment portfolio, approaching angel investing in a more informal style, through their own network of personal contacts. 43% of those over 55 view friends as the best route to new business, while 44% of those under 35 turn instead to professional advisers to source new investment opportunities.

HSBC Private Banking Global Chief Investment Officer Stuart Parkinson said: ‘It’s clear younger entrepreneurs want to do good, and we would be wrong to dismiss this as youthful idealism that will act as a brake on financial success.  They know that their business cannot have the impact they want without sustainable growth, and they are focussed on achieving both. They see a similar virtuous circle when it comes to angel investing; they are happy to invest in the wider business community, to contribute to each other’s successes and to learn from one another.”

Differing approaches across the globe

The report also brings to light the differences in the entrepreneurial mind-set in markets around the globe. Entrepreneurs in the Middle East (66%) are the most active angel investors, with the US (54%) and Mainland China (53%) next in line. By contrast, 45% of UK entrepreneurs are angel investors, along with 35% in Germany and 33% in Switzerland.

Regional traditions have paved the way for different approaches to angel investing between these markets. In the US, angel investing is highly professionalised; investors source new opportunities through formal channels, such as financial or professional advisors. In comparison, entrepreneurs in the Middle East source new opportunities informally, mainly through friends (Use financial advisors US 51%, Middle East 38%) (Use friends US 45%, Middle East 53%) They also perceive their role to be supportive, cultivating business development and leadership skills. In the US, entrepreneurs view their role as a challenger, optimising the performance of the management team by challenging their thinking and strategy.

In Europe, investors are more likely than those in other regions to perceive angel investing as a way to grow and diversify their portfolio, rather than as a way to build their network and share expertise.

In relation to social impact, entrepreneurs in the US and China show a greater emphasis on environmental concerns – 8.1/10 prioritise environmental issues in their business planning compared with 6.7/10 in the UK, Singapore, Switzerland and Australia. When asked about their desire to contribute to communities, entrepreneurs from the Saudi Arabia (64%) and UAE (62%) are most likely to reference being active in the community and civil society as important to their business operations compared to the global average of 44%.

vc funds
Equity

Build a better VC and founders will beat a path to your door

More capital seeking hard and fast returns

With returns from traditional asset classes eroded by low interest rates, there’s plenty of dry powder looking to ride the tech wave while it lasts. Amongst the riskier asset classes, (notwithstanding the cash flooding into cryptos and ICOs), VC is becoming an increasingly attractive destination for capital seeking hard and fast returns.

As an indicator, VC assets under managements have tripled in just 3-4 years, while corporate venturing is back with a vengeance. Pitchbook data also shows that recent VC vintages are distributing capital back to LPs at a much faster pace than older ones, as well as carrying down more than 70% of their capital by the third year of investment.

Compared to the return timelines of adjacent asset classes, one can see why VC presents an attractive alternative, especially with the average Private Equity fund taking a staggering nine years to achieve a Distribution to Paid-in Capital (DPI) of 1.0x.

The ‘Halo Effect’ of traditional venture capital

Fund performance data shows only a dozen of the top VC firms generate consistently high profits. Between 3-5 percent of firms generate 95% of the industry’s profits, whilst the big name funds in the upper decile rarely change.

In a world where these firms are only as good as their last unicorn, this creates a ‘halo effect’ around a handful of well-known, long-standing funds, making it much harder for new entrants with no track record to attract exceptional founders. Meanwhile, a VC fund requires a 3x return to be considered a good investment by LPs, creating a lot of pressure to identify outliers and invest in “fund returners”.

So what defines a VC fund’s success? Is it all about picking winners? Do the top funds have a magic-8 ball to predict the next big market, or the hottest new tech? Or are markets there for the taking, with interest from the top funds compounding valuations through a self-fulfilling prophecy? Surely, it’s all down to the agency of brilliant founders, who gravitate towards the funds with the most capital and the best advice?

VC’s differentiation challenge

While it is hard to assess the additionality of advice over cash, at a later stage, picking winners is notably easier: more mature startups are typically generating revenue (though still unprofitable) and have moved beyond the most uncertain market and product development stages. The odds of a successful exit are also higher, with average loss-rates down to 30% and shorter holding periods (six years, on average).

However, it is also harder for funds at this level to differentiate themselves and attract the best founders looking for the ‘smartest capital’ (cash + advice), although normally it defaults to whichever fund offers the highest valuation. So “if the pound in my pocket is no different to the pound in yours”, how can funds articulate their ‘value add’?

Scanning websites of the best-known funds, they highlight their talent network and team of GPs, but it’s the fund’s track record that stands out, but in practice, the additionality of cash plus advice is extremely intangible.

Since 2009, a handful of US funds, (most notably Andreessen Horowitz) have started to buck the trend, working harder for their portfolio, hustling for them, providing introductions to their network of customers, acquirers and next round money. At the same time, the rise of the micro-VCs (investing across the pre-Series A spectrum) has also crossed the channel into the UK and Europe. However, instead of following an identikit model, these funds are finding a better way…

The earlier the better?

Considering the circumstances, investing earlier makes a lot of sense, not least for pursuing fresh pastures, but also for the most capital efficient returns, where investors can justify a higher reward for the increased risk they are taking, following on relentlessly in the winners of each portfolio.

However, the risks aren’t trivial, and according to Pitchbook, the loss rate amongst pre-series A startups is greater than 65%. Mark Suster, an investor at Upfront Ventures, captures this in his “1/3, 1/3, 1/3” principle: He expects one-third of his investments to be written down to zero, one-third to return the principal, and the remaining third to deliver most of the returns.

There’s no shortage of microfinancing available to pre-seed (“idea” stage) startups (crowdfunding, ICOs, angels, grants, accelerators), but it takes more than just cash + advice to build a rocket, and traditional VC funds are not set up to operate at this level.

Breaking the “two and twenty” model

While accelerator models attempt to plug the gap, investing small amounts of cash, and providing advice via their support networks, they don’t provide startups with the rocketfuel they need. There are also more sophisticated ways of investing than placing small cheques on lots of different bets. VC can add a lot at this level, but at pre-seed and seed, the traditional venture capital model breaks down for three main reasons:

  1. From a risk-return perspective, fund economics don’t work. For most funds, it would require an unmanageable number of deals to beat the odds of a 35% success rate, and still return 3x to the the fund.
  2. The traditional VC workflow doesn’t scale: a handful of GPs/investors receiving polished pitch decks and warm introductions from well-networked founders stands in stark contrast to the thousands of “idea stage” submissions, and systematic screening efforts required. There’s a huge amount of serendipity involved, and this needs to be ‘designed in’ at scale.
  3. Most importantly, startups at this stage require more than just cash + advice. Founders need help to build stuff, and that requires resources most funds can’t sustain out of the traditional two and twenty model.

De-risking through operational support

At Forward Partners, we believe there’s a better way to support early stage founders. Charging a higher management fee to LPs (the percentage of their investment that contributes towards a fund’s operating expenses) unlocks a unique value-add in a team of operators. This allows funds to offer tech, growth and product expertise as well as the hands-on help that founders need in their first year of operations.

By offering a ‘scale up team in miniature’ with experience across UX, design, full-stack development, talent, growth, PR and comms, a VC can truly help to mitigate the mistakes made by early stage startups, build stronger foundations for startups.

About Forward Partners:

Forward Partners is the UK’s leading early-stage VC fund, providing a game changing combination of capital and operational support to supercharge tech startups. Our unique model is helping to build the UK’s next generation of talented AI, e-commerce and marketplace businesses.

Bowmark Capital
Corporate Finance and M&A/Deals

Bowmark Capital backs buy-out of leading alternative legal services provider

“This is all about access to capital for our next stage of growth,” comments LOD CEO Tom Hartley. “We have been exploring alternative options since the summer of 2017 following our successful merger with AdventBalance in Asia and Australia in 2016.”

Neville Eisenberg, BCLP Partner responsible for LOD, said: “BCLP is extremely proud to have been a pioneer in the alternative legal services market. Nurturing the creation of LOD over 10 years ago, and supporting its growth and considerable influence over the legal market as a high quality provider of flexible legal services, has been an extraordinary journey for us all. We believe that LOD is ideally placed for further growth and that this new investment by Bowmark will help facilitate LOD’s ambitious plans. BCLP has committed to remain close to LOD, partnering with the business for its flexible lawyer needs and we look forward to seeing the results of this exciting new chapter in LOD’s development.”

Bowmark Managing Partner Charles Ind said: “We have been tracking the alternative legal services sector for a number of years and are delighted to have the opportunity to become the principal shareholder in LOD and support the whole LOD team as they build on the impressive growth they have achieved to date.”

Hartley adds, “BCLP has been a great owner, client and partner and this is the logical next step for us to take. LOD has already been a separate entity from BCLP for the last six years, during which time we’ve seen excellent growth.  We want to maintain that expansion by continuing to add new service lines, geographies and technology to our existing offering for our lawyers, consultants and clients. LOD is now in the perfect position to continue to lead the alternative legal services market supported by the capital and expertise of Bowmark.”

DasCoin
Finance

Dascoin Now Listed On Coinmarketcap.Com

Coinmarketcap is used by crypto experts and new adopters alike and is ranked as the 44th most popular website in the US according to Amazon rankings.  DasCoin’s Coinmarketcap listing gives the coin and its associated ecosystem, heightened credibility in the sector.

Michael Mathius, CEO of DasCoin said: “We’re excited to be recognised by Coinmarketcap.com.  This shows how much we’ve developed DasCoin and gives us enhanced visibility within the cryptocurrency space.”

Coinmarketcap lists more than 1,600 cryptocurrency prices among other key statistics about the coins and tokens including:

  • Total market capitalisation
  • Current price
  • 24-hour trading volumes
  • Circulating supply
  • Gain/loss

In April, DasCoin became available to trade on public exchanges CoinFalcon, BTC-Alpha and EUBX with several more in the pipeline.  DasCoin will only be traded on public exchanges that operate the same strict “Know Your Customer” authentication protocols that underpin DasCoin itself.

More than 750 million DasCoin have already been minted since March 2017. Members of the NetLeaders community purchase licenses giving them access to a certain number of Cycles – units of capacity – on the blockchain. These Cycles can either be used for a variety of services or submitted to the DasCoin Minting Queue and converted into DasCoin. There will be a total volume of 8.589 billion DasCoin.

DasCoin possesses and operates best-in-class Blockchain technology based upon BitShares’ distributed ledger technology, known as Graphene.  BitShares is one of the longest ledger in existence and is one of the highest performing ledgers with capacity exceeding 100,000 transactions per second.

Addtionally, DasCoins are not “mined” like those of Bitcoin and other proof-of-work coins. The minting process results in a significant reduction in energy consumption, as well as a more equitable distribution of value.

About DasCoin: DasCoin is a better way to store and exchange value and is the next step in the evolution of money. 

DasCoin is the blockchain-based currency at the center of an innovative digital asset system that seeks to optimize the strengths and eliminate the weaknesses of existing currency systems. It is fast, efficient, balanced, secure and scalable. 

DasCoin is focused on creating a digital currency that delivers superior performance through greater operational efficiency, increased transaction capacity, wider distribution, better governance and greater regulatory compliance. Protected by industry leading security protocols and a permissioned blockchain, DasCoin is a pioneer in the sector with the goal of becoming the world’s first mainstream digital currency.

Website: www.dascoin.com

FairFX
FX and Payment

9 top International Payment tips for businesses

Multi-currency payments provider FairFX has revealed that since the Brexit referendum, the Euro has decreased 13% against the pound increasing financial pressure on businesses who operate cross border.

Uncertainty over future trade agreements alongside fluctuating currency rates have put the spotlight on the cost of doing business internationally and highlights the importance of monitoring foreign currency transactions.

An estimated 17% of UK based SMEs are doing business internationally, boosting their own bottom line, as well as the UK economy.  Whilst international expansion offers access to new markets, ambitions for growth need to be well planned financially, starting with the basics.


35% of SMEs state cashflow is a barrier to growth, making smart currency moves essential when it comes to international payments, and by getting the best value for every international transaction, both business ambition and cashflow can be supported.


FairFX Top tips for getting the best value when making international payments

 

  1. Know what you want

To get the best international payment provider for your business you need to know what you want. Consider how regularly you’ll be sending and receiving money overseas, how many currencies you’ll need to transact in and understand the costs associated with making both singular and regular transactions. 

Fees and charges can vary by transaction type, day, time and speed you require the transaction to be completed in, so list out the different transaction types you may want to make and understand how the fees and charges can vary so you don’t get caught out. Understand how currency rates are set and how they compare to other providers. This can be confusing to unpick so speak to a currency expert if necessary.

 

  1. Review your current payment package

High street banks don’t offer the best value when it comes to international business payments. Using your current banking provider to handle international as well as domestic transactions may be convenient but defaulting to them might mean you’re missing out on better rates and lower fees.

As your business grows and develops, your business banking needs will also evolve and if you’re transacting regularly small charges can add up, meaning you could be paying a high price for an unsuitable service

  1. Select a transparent, convenient and consistent service

If you’re regularly buying from and selling abroad, fees could soon take a portion of profit from your bottom line. Pick a provider whose fees are transparent and made clear upfront so you can better manage your expenses. Look for a service where rates are consistently good – don’t be lured with teaser offers that expire and leave you trapped or unaware of post introductory fees and charges.

 

  1. Understand the market you’re operating in

Keeping track of currency movements can be easier said than done, so sign up for a reliable rate watch service, like the one provided by FairFX which alerts you when currencies you operate in have moved in your favour. This way you can make international payments when rates give you a commercial advantage.

 

  1. Maintain your standards

The rigorous standards you set for expenses and payments at home don’t stop when your employees pass border control, so find a solution where you are confident in who is spending what. Consider prepaid corporate cards which allow you to transact with competitive exchange rates and top-up in real-time, giving your staff the funds they need to travel for work, providing peace of mind and control over expenditure on a global scale.

 

  1. Watch the way your employees pay

When it comes to travel, regardless of whether your staff are hosting meetings or need to cover the cost of their own accommodation and essentials, make sure you’re in charge of the exchange rate they are using for their payments.

 

The FairFX corporate prepaid card allows staff to pay for expenses with the amount of money you have approved them to spend, whilst you can track and report on spending on the integrated online platform, so there is no reliance on employees using their own payment methods, choosing the exchange rate and fees charged and reclaiming the cost from your business.

 

  1. Benefit from the best rates

Exchange rates fluctuate from day to day with the euro currently 13% lower than before the Brexit referendum announcement, a sum that on a large transfer could make the difference between profit and loss. Consider a forward contract to ensure you can benefit from peak rates by fixing international transactions up to a year in advance.

 

  1. Ask an expert

If you are regularly making international payments it is worth finding an expert to help you with services not offered by your bank to help minimise risk and maximise the return of doing business overseas.

 

  1. Set up a stop loss or limit order

Protect your business against market downturns with the aid of a Stop Loss, which will ensure any losses are limited if you’re aiming for a higher rate and the market takes a turn.

Also consider a Limit Order where you set up ‘target’ exchange rates and ask your currency dealer to process the transaction when the rate you’ve set is achieved to give you certainty over how payments will affect your bottom line.


Ian Stafford-Taylor, CEO
of FairFX said:

“Easy access to international currency at market-leading rates whether travelling abroad or sending and receiving payments is vital for businesses breaking into and operating successfully internationally, especially in a market where rates are constantly fluctuating.

“Many small and medium sized businesses settle for high street bank accounts which can charge extortionate fees for international transactions and offer poor service. The right account and sensible planning could add up to big savings, something that SMEs can ill afford to waste in a competitive marketplace

“As future trade agreements post Brexit become clearer businesses could find themselves with heavy workloads as they adjust the way they operate, so finding a trusted payment provider and reaping every possible benefit when it comes to currency will continue to be crucial for success.”

Duologi
Finance

Specialist finance platform launches to offer 30% sales boost to retail sector

Backed by global investment firm, Oaktree Capital, the company offers merchants the chance to increase their sales, boost customer satisfaction and grow profitability through the delivery of tailored point-of-sale finance options.

Duologi research shows that by providing finance options to customers, merchants can expect to achieve a 30% average uplift in sales, with 57% of shoppers saying they would have bought elsewhere if finance wasn’t available.

In the retail market which – in the past six months alone – has struggled with ongoing store closures and profit uncertainties, the question of consumer spending power is of particular importance. Duologi’s platform allows retailers to offer flexible loans to their customers, from £150-£25,000 on 3-60 month terms; many at a 0% interest rate. Lending decisions are typically made within just four seconds, allowing shoppers to immediately purchase goods, either online or in-store.

Unlike many other similar businesses currently in the market, Duologi does not offer a ‘one size fits all’ model; aiming instead to work with each partner on an individual basis to ensure a bespoke service is created for each. The platform is powered by ground-breaking technology, built from scratch in London, allowing retailers to quickly and simply start offering finance to their customers.

Duologi is led by co-CEOs, John Taylor and Gary Little, who between them count more than 50 years’ consumer lending experience at institutions such as Barclays and Close Brothers. Since launching in September 2017 as a two-man start-up, the business has already secured £100m in annual rolling commitments, with ambitions to have a seven-figure lending book within five years.

 

Gary Little, co-CEO of Duologi, said: “Retail is having a tough time at the moment, so it’s more important than ever that brands set their business apart from competitors and keep up with today’s savvy consumers. Innovative, user-friendly finance solutions can do just that; providing shoppers with the flexibility to purchase items from your store and pay back the cost in a way that suits them.”

 

John Taylor, co-CEO added: “Our vast experience in this industry means that our finance products are backed by decades of expertise and specifically tailored to the way the retail sector works. We look at each business individually in order to create an approach that fits with that particular organisation’s needs.

“There is a whole host of retail brands out there that we can support and add value to, and we are committed to building specialist solutions that will help these businesses deliver robust sales growth and customer loyalty. We are incredibly excited to be launching Duologi and look forward to working hard to create innovative solutions for our partners.”