Notes of Note from John F. Ince

Archive for the ‘Investment Trends’ Category

David Verrill: SEC Rules Will Clip the Wings of Angel Investors – WSJ.com

By DAVID VERRILL

Following through on a key provision of last year’s JOBS Act, the Securities and Exchange Commission has ended the ban on the general solicitation of capital for privately offered securities. The agency’s action is being hailed as a boon that will open the door for vast stores of money that entrepreneurs can use to start up new businesses and hire workers. More likely, the SEC’s move could slam the door shut.

That is because the agency’s new rules end the decades-old practice of letting individuals self-certify that they meet the legal rules that allow them to risk their money in a new venture that was not a “public offering.” The SEC has replaced self-certification with a verification scheme that would require most individuals who want to be considered as “accredited investors” to provide detailed personal financial information to entrepreneurs.

This is a huge step backward. Today, more than 200,000 accredited “angel” investors currently put up more than $23 billion per year to fund startups—a sum that amounts to 90% of the equity these startups get from sources other than the entrepreneurs themselves. If these investors are required to give tax documents to entrepreneurs or third parties who act as a “verifying agent,” they will flee rather than agree to this invasion of their privacy.

Under the Jumpstart Our Business Startups Act, the SEC was tasked with allowing general solicitation of capital for non-publicly traded corporations, provided that the issuer takes “reasonable steps to verify” that the investors are “accredited.” Under current rules, an accredited investor is someone with an annual income exceeding $200,000 or a net worth (excluding a primary residence) above $1 million. About 8.7 million U.S. households would qualify.

via David Verrill: SEC Rules Will Clip the Wings of Angel Investors – WSJ.com.

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Online Platforms Link Impact Investors and Triple Bottom Line Companies – The Network: Ciscos Technology News Site

0Email2ShareViews 428FEATUREOnline Platforms Link Impact Investors and Triple Bottom Line CompaniesSocial stock exchanges and match-making services aim to address a gap in a growing market.By Anne FieldView All Contributing WritersMarch 12 , 2012On the one hand, theres a burgeoning interest in a brand-new asset class. Called impact investing, it focuses on for-profit companies with a social mission. Enterprises from J.P. Morgan Chase to the Rockefeller Foundation , which estimate the market could grow to as much as $1 trillion over the next 10 years, have been trying to develop the area for several years now. And, by some accounts, there are thousands of so-called double- and- triple- bottom- line companies–businesses with a financial, social and /or environmental mission – – in operation worldwide.On the other, however, matching impact investors with social enterprises – – another term for these companies – – is another matter entirely. There have been few effective platforms for linking up the two sides. Social enterprises include anything from companies selling wind farm technology to organizations providing micro-finance to villagers in India.That is, until now. Recently, a growing number of efforts, from London to Singapore to New York, have sprung up to address that gap, many incorporating online systems into their platforms. “Its social technology for social change,” says Adam Spence, founder of the Social Venture Exchange SVX, a Toronto-based platform aiming to launch later this year. “Technology is the enabler.”For the moment, most of the activity is taking the form of online matchmaking services. Take SVX. It links via an online platform accredited investors with Ontario-based social enterprises of anywhere from $100,000-$25 million in revenues looking to raise $25,000-$10 million. To be included on the exchange, interested companies first have to go through an exhaustive vetting process thats largely done off-line to make sure theyre not only viable enterprises, but also are the real McCoy, that is, companies with a serious social mission at their core. Then, theyre listed on the platform, with the relevant information of interest to potential investors. After that, it functions much like any online dating service, according to Spence, with prospective investors reading over company profiles and then contacting them. Ultimately, transactions are conducted off-line.Thats only the beginning, according to Spence. With backing from TMX Group, which runs the Toronto Stock Exchange, among others, he aims ultimately to create a fully regulated public social stock market for Ontario for retail investors that would be conducted online. Getting to that point will take some time, according to Spence, due to both the technological complexity and the regulatory hurdles that need to be met. Whats more, for now, most social enterprises are small. For a real public stock exchange to have legs, there needs to be a critical mass of companies large enough to be listed.

via Online Platforms Link Impact Investors and Triple Bottom Line Companies – The Network: Ciscos Technology News Site.

CEOs lay off thousands, rake in millions – msnbc.com

When Hewlett-Packard’s Chief Executive Mark Hurd resigned last month he received something few regular workers see when they quit their jobs under a cloud: A massive payout.

Turns out Hurd is far from the only top executive to be rewarded with a rich package despite a management performance that could be considered less than optimal — especially by rank-and-file workers.

A new report concludes that chief executives of the 50 firms that have laid off the most workers since the onset of the economic crisis in 2008 took home 42 percent more pay in 2009 than their peers at other large U.S. companies.

The report, from the Institute of Policy Studies, found that the 50 layoff leaders received $12 million on average in 2009, compared with an average compensation of $8.5 million for chief executives of companies in Standard & Poor’s 500. Each of the 50 companies examined in the report laid off at least 3,000 workers between November 2008 and April 2010.

“Our findings illustrate the great unfairness of the Great Recession,” said Sarah Anderson, lead author of the study, “CEO Pay and the Great Recession,” the latest in a series of annual “Executive Excess” reports published by the institute, a progressive think tank. “CEOs are squeezing workers to boost short-term profits and fatten their own paychecks.”

via CEOs lay off thousands, rake in millions – Business – U.S. business – msnbc.com.

Grim numbers point to the end of the venture capital era – SiliconValley.com

Excellent analysis of the current state of Venture Capital Investing in Silicon Valley …

How gloomy is this picture for venture capital firms? According to an NVCA survey, 90 percent of venture capitalists who responded expect their industry to contract through 2015.

That trend is well under way. While firms have not started collapsing en masse, they have been quietly shrinking. The number of principals at U.S. venture firms fell from 8,892 in 2007 to 6,828 in 2008. As firms raise smaller funds, they need fewer people to invest.

Some will argue that at least in the area of Web startups, companies can be launched on the cheap, and growing numbers of angel investors — those wealthy individuals who invest at the earliest stages — are stepping in to give these companies a boost. True, but that kind of funding doesn’t work as well for biotechnology, medical devices or cleantech. And these angel-backed companies are small and lean, and don’t create large numbers of jobs.

It’s not just fewer startups, though. When companies don’t go public, they don’t generate the same number of jobs in their later stages. Heesen said the cash raised from an IPO usually triggers an explosion in hiring.

“The real job creation starts far down the road, after they go public,” Heesen said.

Instead of going public, the companies that do show potential now get gobbled up by the Googles and Facebooks of the world. At the same time, valley giants like Hewlett-Packard, Oracle, Intel and Cisco Systems continue their acquisitions of larger tech companies, a consolidation trend that more often than not is accompanied by big job cuts.

So we’re seeing fewer startups and sweeping consolidation. Tie those trends together, and you’ve got a drag on job creation that could weigh down the valley for years to come.

With venture capital in retreat, we must look elsewhere for a new model for startup funding to kick-start the valley’s next era of innovation and the kind of job creation we desperately need.

via O’Brien: Grim numbers point to the end of the venture capital era – SiliconValley.com.

Is Social Finance the ‘Next Big Thing’? – Al Etmanski

Recently the UK Telegraph quoted Sir Ronald Cohen, known as the ‘father’ of the venture capital and private equity industry in the UK, declaring that entrepreneurship should be harnessed as an agent of social change.  Speaking to Harvard business students he advised the next big thing in the business world is social finance.  If I had been leaving Harvard in 2010, this would be the area I would want to be going into, he added.

“I think societies everywhere will come to the conclusion that an important part of the capitalist system is having a powerful social sector to address social issues, because government doesn’t have the resources.”

Ronald Cohen has already played a major role is the growth and development of a social finance infrastructure in the UK. He seems poised for another great roll forward.

Fortunately Cohen is not alone.  Here are quotes from Judith Rodin, President of the Rockefeller Foundation in her speech: Innovative Philanthropy for the 21st Century: Harnessing the Power of Impact Investing.

At the Foundation, we also see an unfolding tale of two globalizations.  One generates

substantial progress for many.  Another leaves many more by the wayside – families and

populations that fall further behind as the pace of change quickens.

Although philanthropists can only muster billions of dollars against the trillions of dollars of

social needs, private investors like you in this room manage more than $100 trillion in for-profit capital markets. So we no longer ask ourselves, ‘why isn’t there enough money to solve social problems?  Instead we ask, How can we tap into these enormous private capital flows to create both financial profit and social return?

via Is Social Finance the ‘Next Big Thing’? – Al Etmanski.

Bear vs. Bear | The Big Money

Star economist and doomsayer Nouriel Roubini thinks inflation’s coming, and it’ll be a big 1970s-style problem. Star investor John Paulson sees it right around the corner and thinks he can make money on it. Bond king Bill Gross has flipped and flopped and again flipped on it. Historian Niall Ferguson believes it will last for years, and there’s nothing we can do about it. New York Times columnist Paul Krugman thinks inflation is a much less pressing danger to the economy than the anti-inflation hawks. Uber-investor George Soros thinks that so many other people are worried about inflation that he’s betting on a bubble in gold driven by inflation fear.

Inflation may be running now at a rate of 2 percent a year—as low as it’s been since the mid-1990s (and before that, the early 1960s)—but investors and pundits are already in the throes of a full-scale inflation war. It’s a raging debate about where the economy is heading—and maybe about how we can stop it from getting there.

We’ve been conditioned to divide economic forecasters into the “bulls,” who think the economy will boom, and the “bears,” who think it will crash. But this is a new kind of battle. Call it “Bear vs. Bear.” It’s between two kinds of worriers: One group  thinks that we’re headed for an extended period of inflation, and another that believes we’re a lot more likely to have a deflationary double-dip recession.

via Bear vs. Bear | The Big Money.

Is democracy the next big business opportunity? Internet Voting Firm Gets $9.2 Million Funding

Is democracy the next big business opportunity? Last week, Omidyar Network gave MySociety $575,000. Today, Scytl, a firm which makes internet-based voting technology, has raised $9.2 million investment funding.

The Barcelona-based company says its technology has been used by 13 of the 16 national governments which have tried electronic public voting, including U.S., France, Norway, Bosnia-Herzegovina and Australia.

Specifically, a Florida county used it in 2008, it’s powered two local authority elections in the UK and several Catalan agencies are using it.

Scytl’s offerings include remote internet voting, tools to facilitate voter engagement in city council politics, election management software and systems to facilitate parliaments’ and assemblies’ own voting, as well as commercial elections in businesses.

The funds are led by Balderton Capital along with previous Scytl investor Nauta Capital. Balderton’s partner Bernard Liautaud joins Scytl’s board.

via Internet Voting Firm Scytl Gets $9.2 Million Funding | paidContent.