I'm fed up with the bad news, the increasingly depressing statistics, so I am thinking of doing something about it. I want to post the idea here and hopefully people will critique it, trash it, think its good or whatever, for all it matters you can rip it off if you think its any good, we can be competitors.


The concept is called 'MicroVenture' (although the name doesn't matter), but the concept is to create a mechanism for bringing small private equity to SME start ups. but doing so in a way that allows average families to be part of the idea rather than the usual venture capital ideas that require huge amounts of money. By lots of people making small investments you can do the same thing and spread the risk but still get the funding necessary.

It involves several market tests which means that any company that starts as a result of the MicroVenture plan will have jumped through a few vital hoops, but these are not stumbling blocks, rather they are rights of passage.

There are several key issues with the Irish Economy

1. Savings is increasing rapidly, taking money out of circulation, individually it is a responsible thing to do but when we all do it at once the paradox of thrift is that it hurts everybody.

2. unemployment is rising, there is literally hundreds of thousands of talented people without

3. a collapse in investment, in particular in ourselves, is making it ever more difficult for companies to start up irrespective of the strength of their ability or plans.

4. SME's are the true driver of an economy, they are part of the solution, but the IDA goes after big firms, government lead departments such as enterprise ireland are primarily interested in export oriented businesses, the reality is that there are lots of great ideas and people with the talent to see them through that don't qualify for their funding, and more importantly the process is too slow (for my liking anyway!). If there was funding available that wouldn't place 100% of the risk on the individual it would decrease risk to an entrepreneur who may otherwise be unable/unwilling to try their business idea.

5. The state is not going to have all the answers, rather, people know what is best for them as individuals. We need to start finding our own answers. the state also doesn't have the money to fund every solution every time.

6. people are not willing to take big risks, but the opportunity to take a smaller risk, and one that will benefit your local economy with transparency would likely attract investment.

7. banks are not lending, most importantly to SME's, individuals however, can pool resources where appropriate and if that is channeled towards entrepreneurs then good ideas can succeed.


How it works: The idea is to allow people to submit business plans for ANY type of business, software, dog grooming, it doesn't matter, the important thing is that the person has a market, and can prove their business plan. People submit a business plan online, stating the normal facts/figures as well as doing a simple personal budget of what remuneration they expect for their efforts. there would need to be a nominal fee involved so that the ideas submitted by promoters are meaningful and that an accountant/business adviser can be paid to vet the plan.

There would be a limit to the plans that can go forward, so that is the first market test, passing the fundamental stage of a business plan.

On the otherside of the idea is that of potential investors being able to register their interest, it would be a set amount of (for instance) €1000 or €2000 and that gets you a ticket to the conference which will be held to show the ideas that passed the business plan test, they'll go into a prospectus in advance of the day. if an attendee invests in a company then the 1-2k is invested, if not, they get their money back minus €100 - so that you pay if you attend and don't invest, but if you do then the conference is free.

the promoters who make it through then present their plan to the room of investor, this is partly a market test as well, that of being able to sell your concept, and of being able to demonstrate publicly your idea and vision.

In the presentation you would say how much you need to start up, this is a market test because looking for too much means you might not clear the level of investment required, your personal budget will also be a market test because if you are looking to pay yourself a lot investors will shy away from investing in your idea.

the idea is to pitch to a room full of c. 200 investors who may or may not be interested, if you have a good idea/plan and are convincing then people might be willing to back the promoter in question, but there is a limited amount of money in the room and everybody is vying for it, this is also a market test, you need to clear the level of funding you say you require in order to launch the business. if a promoter doesn't make it past each stage then their idea will not pass and come into existence.

after the presentations there is an opportunity for investors to meet/greet and ask the promoter questions and this gives an investor the chance to get up close to the person they may potentially invest in.

by doing these types of conferenes in regional areas, you could help put regional privately held savings into regional business start ups. people would be living close to the location of the business they might invest in, they might be happy to support it (for instance, I'd eat at a chipper I held a stake in quicker than I'd go to McD's or something).

If a company does start then the investors take an equity stake of 49%, the promoter gets 49% (but putting up far less capital) and MicroVentures gets 2% the idea being that the MV company holds the swing vote if there are issues further down the line.

When a company starts they have to provide monthly updates via the website and investors can log in, this would provide ongoing transparency, and the idea is that investors get a dividend on their shares. If the promoter wants to get a raise then the dividend goes up too. this would eventually create a secondary market, with increased dividends the value of the shares would increase.

Investors would be taking risk by investing, but the amounts would be small and you could diversify by investing in different types of start ups. not every business succeeds but equally, not every businness goes through several real life market tests before starting.

the basic premise is to circumvent state solutions, to rapidly deploy money to SME startups and to do so in a manner that doens't be the family silver on it, in order to fund SMEs promoted by entrepreneurs that have identified an opportunity and passed several key tests in order to start the company.

I'd love to hear any feed back, I had done a blog on this back in April but I reckon its time to actually do it.

the post is on the mortgage blog microventures

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Will you be changing your name to MicroVenture then?


.... I'll get my coat so

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LOL
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For Ball, not Man playin
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good response

[good=fail]

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Splendid idea, we have a very similar one in the Amhrán Nua policies.

I wonder would it be of benefit to fuse the ideas, they really are very alike...

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they might work? is your idea for providing more capital to existing companies or that of funding start ups? and would there be a secondary market or would it essentially be a private one?

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It was initially envisioned as a grant scheme from a national credit agency, with a broad base and emphasis on startups, then further options for funding based on a lower barrier to entry stock market, although there is no reason why you couldn't just start up and float on the public market immediately, which implies secondary markets as well.

We're still working on the details of whether it would be a national or international effort, largely hinging on the regulatory background of countries it might be open to and the security of identification issues to prevent insider trading.

Your proposal reduces or removes the need for an NCA, and I can see little difficulty with it assuming sufficient controls are in place to intercept fraud.

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No problem with people running small businesses, but the problems of the economy are on a macro level. Respect to all who are getting anything started, but its no substitute for getting rid of this hyperdestructive government and making big changes to the way the economy is run.

Agreed, but thats no reason to neglect the backbone either. Take care of the pennies and the pounds will take care of themselves and all that...

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What about a business credit version of the peer to peer online customer lender zopa?

Getting lots of smaller amounts cheaply through the internet would be easier than getting larger amounts.

Is good to be initiating this kind of discussion - at the very least it gets us thinking about what can be done. I mean, one way or another I reckon we're all going to be here in five years time, so we do need to get out of the 'we're doomed' type of discussion. (At least until the next General Election).

Would this Microventures company be regulated and, if so, how? I know that banking regulation hasn't exactly proven itself as effective. But I take it that the fact banks are regulated means that the authorities could have taken action to stop banks lending so much in property loans so as to protect depositors' funds. What protection would this Microventures company have? You mention that you'd see it be applying quality checks on the business plans of those companies seeking finance. If so, would an investor have any comeback if those quality checks were faulty? I won't labour the point about how the investor can be confident the Microventures tests are worth something - but I take it you see the kind of issue that I mean.

That said, I don't intend these points to be negative - I'm just trying to anticipate angles that would need to be covered.

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However, banks know they have a duty of care to their clients and I'm sure that this should prevent them lending irresponsibly.


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