Daily Archives: July 7, 2014

Future of Financial Lending

Tired of investing in company debentures, shares, bonds and looking for something else to play around? How about Social Impact Bonds or debentures for funding renewable energy projects?

financial-lending

Social Impact Bond, a concept born with the setting up of a not-for-profit organization ‘Social Finance’ in 2007, is a form of outcomes-based contract in which public sector commissioners commit to pay for significant improvement in social outcomes (such as a reduction in offending rates, or in the number of people being admitted to hospital) for a defined population.

Take for instance the case of re-offending by criminals in UK, as per the statistics 63% of all men who come out of short sentences from prison reoffend again within an year and average number of previous offences they have managed to commit is a whopping figure of 43 with they being stashed back to jails 7 times!!! Does these statistics scare you and move you to do something? Here’s a solution.

Why not invest your money in Criminal Justice Social Impact Bonds offered by Social Finance which through other NGOs based around this issue will carry out streamlined rehabilitation and reformation programs for the offenders helping them to find a different way of living. The reductions, in any, in reoffending rate will help the government cut down on jail costs, police costs, etc and hence it would return back investor’s money along with the annualized return varying between 7.5-13%. The model is a win-win for all from the investors who earn from every crime saved, the government which saves on its spending on upkeep of jails and rehabs, the society which ends up having lesser crimes, to the offenders who instead of walking out of jail with 46 pounds in their thrall not knowing where to go get somebody’s help in seeking shelter and employment.

The first such bond was signed with the Ministry of Justice, UK around Peterborough Prison to work with 3000 offenders both inside prison and after release, to help them resettle into the community. The bond was an oversubscribed fund of 5mn pounds. A maximum return annualized of 13% was promised by the ministry for fall in offending rate beyond a threshold of 7.5%.

Such bonds not just deal with the re-offending problem but deal in numerous social issues helping investors to create an impact in diverse social fields. There are now 13 social impact bonds in Britain. David Cameron has put 20 million pounds into a social outcomes fund to support this idea while Obama has suggested 300 million dollars in the U.S. budget for these kinds of ideas.

While Social Finance works in the social arena, Abundance, a UK based startup calls for the help of ‘people for greener world’ to pool in money towards renewable projects while offering them return on their investments.

The future of investment now seems to be taking a turn with more people up for experimenting and creating an impact on the society through the way they do business. Instruments of such kind will form the future investment industry as institutions acquire expertise and offer greater annualized returns.

So when are you investing in social change?

Rejected by VCs??? 4 reasons why VCs might reject you!!!

vc-rejection-21The financial capital to an early stage, high potential, growing Startup Company popularly known as venture capital has become a trademark for repute and standing for the businesses who receive it and a most sought after challenge for those who seek it or fail at it. Carrying a success rate of only 1-2% as venture capitalists grow more cautious about their funding choices, raising capital has become an uphill task for thousands of mushrooming startups which are in need of liquidity. While there seems to be no sure shot formula for becoming VC’s darling but certainly there are things you should abstain from doing to avoid your outright rejection. This article talks about the 5 possible reasons of why you might be rejected by a VC?
1)      Only idea and no team

More than the idea, VCs invest in your team so instead focusing more on your idea, pitch about how you plan to execute it and who in the team assumes the responsibility of doing what? Your “I can do everything myself” attitude might not go well with most of the VCs. They would be interested in seeing colors from all hues so as to assure themselves that the company houses talent needed to scale up the business.

2)      Too long pitches to bore

The presentation etiquettes hold a significant impact on VCs response. A classroom like presentation is most likely to get you a ‘no’ from investors. Hence it is important to thoroughly work up your presentation to keep it precise, engaging and meaningful. Aptly put by Woodrow Wilson “If I Am To Speak Ten Minutes, I Need a Week for Preparation; If an Hour, I Am Ready Now”. To know more on excellent presentation skill

Visit- http://blog.hubspot.com/marketing/inspiring-slideshare-presentations-for-marketers-list

3) No Focus On Business Building

Instead of fixing meetings with the VCs right after the launch of the company, work on your idea to give it a strong footing. Developing a prototype and doing beta tests to create demand and solicit customers is the right thing to do at the initial stages. If the idea succeeds in attracting customers then the chances of VCs investing the business increases manifold.

4) Incorrect valuation of the company

It is highly recommended to have proper valuation of your company in mind while pitching to the VCs. Looking at the valuation of companies with similar traction in initial stage can help you to get an approximate idea of the valuation. The correct valuation plays a very important role in deciding the funds needed for expansion.

Whatever might be possible reason for rejection of your plan by the VC but one thing that everybody needs to keep in mind to go long way is that “Even if we fail, we are still one step ahead of where we were earlier”.

Role of Women Directors in Companies

“Theory of contract, theory of social contract, a husband and wife are bound by a contract Women-directorwhich says ‘you (woman) look after the household chores and satisfy me, I (man) will take care of your needs and will protect you’.

This statement made by RSS Chief Mohan Bhagwat reveals the antiquated mentality of Indians, which is embarrassingly noticeable in the statistics relating to the board seats held by women. In India the representation of women on corporate boards is currently at an abysmal low of about 4.7 per cent. Of the top 500 companies on the Mumbai Stock Exchange, at least 300 do not have a single woman on their on their board, says Arun Duggal, Chairman Shriram Capital who leads a entorship programme that aims to get high potential executives on the board. Even internationally, scenario is no different as developed nations, US, UK witnessed women’s representation of around 20% whereas in Japan its only 1.1%. Some countries, including France and Italy are considering significant action to improve women representation. Others including Norway, Sweden and Finland have already done so, which resulted in drastic increase in number of women representation which is now 40.5%, 27% and 26.8% in Norway, Sweden and Finland respectively. India starts its endeavour by a stipulation in the new Companies Act, which was approved last year and came into effect from 1 April, says that every listed company or public company with a minimum paid up capital of Rs.100 crore or a minimum turnover of Rs.300 crore needs to appoint at least one woman on its board. Further, according to new corporate governance norms finalized by the Securities and Exchange Board of India (Sebi) in February, all listed companies must have at least one woman director on the board. One person cannot be a director on the boards of more than seven listed companies, Sebi said. This compliance issue has forced Companies to start their head-hunt for women directors while keeping in mind that it should add some value. Many people believe that presence of a woman in the board would bring a new perspective as “women are forthright, ask pertinent questions, are not silent spectators, they want to be heard, they want to be relevant,” says Kiran Mazumdaar Shaw, Chairman Biocon Ltd. The demand for women director has increased drastically owing to the fact that a person can’t be on the board of more than seven companies and simultaneously there is a problem of scarcity. As a consequence, obvious candidates like Mazumdaar shaw, Chanda Kochar(MD,ICICI Bank),Vinita Bali (Former MD, Britannia Industries)already approached by many companies. Many of them don’t have time to commit. Manisha Girotra (CEO of Indian Unit of investment bank, Moelis), who is already a part of three boards, said though she gets offers, she cannot accept any more. Moreover, most of the women are approaching membership very cautiously. Many of them are evaluating facts like their future role, composition of existing Directors and Track record of the Company. This existing demand supply problem forced companies to go beyond obvious names in corporate sector. But here question is that what kind of value, someone from a non-business background will bring? Many companies are opting for an easy way by appointing their women family members on boards. This is quite disappointing as this kind of practices would defeat the ultimate purpose of the law. It should be insured that no one is appointed on the board just because she is a woman. Thus achievement of the ultimate purpose of law is a tedious task as it is easy to change a law, but changing a mindset is a mountain to climb which requires considerable time.

Job Enrichment! That’s what makes people move from big firms to startups

Frederick Herzberg

Frederick Herzberg

Why skilled employees are leaving their jammy jobs to join or create startups? The answer may lie in job enrichment. It is a concept developed by the American psychologist Frederick Herzberg in the 1950s, who argues that jobs should be designed in such a manner that they give employees a range of tasks and challenges of varying difficulties. Most of the employees who quit their jobs admit that they were looking formore challenging jobs, as their existing jobs often propose pre-defined roles and they get straitjacketed in those roles.

This urge of doing something challenging is most dominantamong mid-level professionals. As a consequence there is a growing need of establishments that can fulfil these requirements. Here come the startups into the picture, offering challenging assignments, stakes and equity in startups, milestone-linked compensation packages, sense of ownership etc. Aside from this, while the take-home amount may be less, dramatically high financial returns are also possible thanks to steep valuations.

Nowadays funding a startup has become easier, as many big corporate houses are showing keen interest in investing in them. Almost every day one startup is acquired by one or another firm: this increases the probability of success and makes startups more tempting propositions for mid-level professionals.

An Economic Times feature quotes such a mid-level professional Nitin Dubey who was working for ITC’s Aashirvaad atta brand. ‘At ITC, I was heading one of the manufacturing units at 26, and thought I had done fairly well for myself. But, I feel humbled and proud when I seeteenagers and really young people getting funding for their ideas and making it big.’ Dubey moved to a startup into a more challenging role.

Working in a start-up gives an opportunity to play big roles with high degree of responsibility and accountability, thus one can impact the functioning which is quite rare in big organisations. It also allows employees to take on more diversified roles: you might be an engineer and worked with machines throughout your life but it gives you a chance to deal with humans also, i.e. recruiting. Moreover, the best thing about a startup is the kind of ownership you get. The sense of accomplishment that you get by creating something relevant and meaningful out of nothing is unmatchable.

However, the startup euphoria does not stay forever, as challenges and risks are always there. Moreover, they are bound to move fast in order to track opportunity and it might be difficult for a big firm’s mid-level executive to cope up with the dynamic environment. And, one thing which big company executives should keep in mind while quitting their jobs is that the impact of their decisions will have enormous and possibly fatal effects on a small business. Larger companies rarely face life-or-death opportunities or threats. Small companies can face them daily with the high-profile entries and exits.