a plan to help fix the economy, opinions wanted

[eirepreneur]

Very good thoughts here. Though I didn't label it as microventure I had a slightly similar idea recently which I submitted as a comment to the post on the Web2Ireland.or forum about Patrick Collison's 'Grand Plan' article in the Irish Times. I'll just reprint it here for the sake of argument -

“What I’d like to see too is more €6,000-ish grant schemes like the level 1 awards made by Social Entrepreneurs Ireland each year. I was one recipient of such a grant last year and it gave me the opportunity to invest a lot of time getting my project off the ground.

In some terms there’s not a lot you can do with €6k but in other ways there is, as many other alumni of Social Entrepreneurs Ireland have proven over the last few years. And access to the Social Entrepreneurs Ireland network is invaluable.

I often wonder why we don’t create a similar ‘crowdsourced’ grant scheme where we use Pledgebank or similar crowdfunding service to fund (non-social) business ideas IQ-prize style by the group of people donating to the fund… and I do mean donating. We could then provide advice/feedback on an on-going basis in the same way Social Entrepreneurs Ireland do, through an on-line forum/network/twitter.

I for one would be happy to pledge €60 to such a fund and I’m sure we could find 100 other on Twitter, Facebook, LinkedIn and so on. In fact I’d be happy to make such a donation every couple of months. Anyone want to help make it happen?"

[MortgageBroker]

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.

i think your dead right to raise that point, the absence of honesty in many areas of financial innovation (CDO's being rated AAA that shouldn't have been etc.) has probably made a lot of people sceptical.

There are two facets to address this, neither of them perfect. The first is that of doing some background research into the promoter, either via the microventure (collaborator) or the investor can do the same, because people would -i imagine- tend to have a preference for projects in their own back yard (the conferences would be run provincially) they would probably know somebody who knows the person and that would be informal but useful.

regarding investment protection, its a start up situation so there is risk, but the risk to any one individual is decreased because unlike starting a company in the traditional manner, the capital is spread across many investors in smaller parcels, you could diversify risk by spreading an investment across several different start up ideas.

the other thing is that investors might actually know about the type of company they are investing in, and that could result in mentoring being available (although not mandatory)

maybe there are supplementary background checks that might be of use, for instance the applicant providing an ICB might be good, if they have a bad credit history over several years it might not be prudent to put them in control of investor money etc.

it will definitely take some tweaking!

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.

i reckon there are several general credit solutions, but that of capital is a different issue. if you start up a company with a bankloan and you go bang you lose on every front, no income, liquidation with a bank debt remaining - and banks will always want personal guarantees over start up loans as opposed to the company borrowing. and this creates a highly focused level of risk on one person.

capital raising on the other hand means if a project fails that the person loses their income but their isn't a debt remaining to further increase their misery. granted, investors may lose out, but if you were to invest say €4,000 across four companies, especially with the various tests in place - then you would not be as likely to lose out overall.

if you want to start a company in the normal fashion there is nothing stopping you, no market tests to meet, with a microventure type set up you have to have a winning business plan, a winning presentation, then convince a limited amount of capital to invest in your plan.

[cd27]

The economy will fix itself, through the market, if left to do so, once the cuts come and we get competitive again growth will be restored after a short and painful recession (the solution). The government must get out of the way and restore sanity otherwise bankruptcy wil be unstoppable as Morgan Kelly said yesterday.

All other approaches will result in a repeat of 1980s, only worse, long drawn out recession with people on the dole for years. Time to get real and stop engaging in fantasy.

[fiannafailure]

i think your dead right to raise that point, the absence of honesty in many areas of financial innovation (CDO's being rated AAA that shouldn't have been etc.) has probably made a lot of people sceptical.

There are two facets to address this, neither of them perfect. The first is that of doing some background research into the promoter, either via the microventure (collaborator) or the investor can do the same, because people would -i imagine- tend to have a preference for projects in their own back yard (the conferences would be run provincially) they would probably know somebody who knows the person and that would be informal but useful.

regarding investment protection, its a start up situation so there is risk, but the risk to any one individual is decreased because unlike starting a company in the traditional manner, the capital is spread across many investors in smaller parcels, you could diversify risk by spreading an investment across several different start up ideas.

the other thing is that investors might actually know about the type of company they are investing in, and that could result in mentoring being available (although not mandatory)

maybe there are supplementary background checks that might be of use, for instance the applicant providing an ICB might be good, if they have a bad credit history over several years it might not be prudent to put them in control of investor money etc.

it will definitely take some tweaking!



i reckon there are several general credit solutions, but that of capital is a different issue. if you start up a company with a bankloan and you go bang you lose on every front, no income, liquidation with a bank debt remaining - and banks will always want personal guarantees over start up loans as opposed to the company borrowing. and this creates a highly focused level of risk on one person.

capital raising on the other hand means if a project fails that the person loses their income but their isn't a debt remaining to further increase their misery. granted, investors may lose out, but if you were to invest say €4,000 across four companies, especially with the various tests in place - then you would not be as likely to lose out overall.

if you want to start a company in the normal fashion there is nothing stopping you, no market tests to meet, with a microventure type set up you have to have a winning business plan, a winning presentation, then convince a limited amount of capital to invest in your plan.

That is also one of the planks of the S of I proposal, borrow long term finance at utility rates and lend it downwards on a not for profit basis to local wind co-ops who have done their homework. MortgageBroker it seems that many minds are thinking alike

[MortgageBroker]

The economy will fix itself, through the market, if left to do so, once the cuts come and we get competitive again growth will be restored after a short and painful recession (the solution). The government must get out of the way and restore sanity otherwise bankruptcy wil be unstoppable as Morgan Kelly said yesterday.

All other approaches will result in a repeat of 1980s, only worse, long drawn out recession with people on the dole for years. Time to get real and stop engaging in fantasy.

this isn't a fiscal plan that will fix 'the market', it's a plan that will utilise elements of the market available to entrepreneurs and which will be funded through capital that came about as saving.

There is also a zero government requirement, specifically, the state ISN'T involved. can you clarify, given those factors, what you meant in your comment?

[atlantic]

I have been on to some of the local yokal politico's about something similar .

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

[Dreaded_Estate]

i think your dead right to raise that point, the absence of honesty in many areas of financial innovation (CDO's being rated AAA that shouldn't have been etc.) has probably made a lot of people sceptical.

There are two facets to address this, neither of them perfect. The first is that of doing some background research into the promoter, either via the microventure (collaborator) or the investor can do the same, because people would -i imagine- tend to have a preference for projects in their own back yard (the conferences would be run provincially) they would probably know somebody who knows the person and that would be informal but useful.

regarding investment protection, its a start up situation so there is risk, but the risk to any one individual is decreased because unlike starting a company in the traditional manner, the capital is spread across many investors in smaller parcels, you could diversify risk by spreading an investment across several different start up ideas.

the other thing is that investors might actually know about the type of company they are investing in, and that could result in mentoring being available (although not mandatory)

maybe there are supplementary background checks that might be of use, for instance the applicant providing an ICB might be good, if they have a bad credit history over several years it might not be prudent to put them in control of investor money etc.

it will definitely take some tweaking!



i reckon there are several general credit solutions, but that of capital is a different issue. if you start up a company with a bankloan and you go bang you lose on every front, no income, liquidation with a bank debt remaining - and banks will always want personal guarantees over start up loans as opposed to the company borrowing. and this creates a highly focused level of risk on one person.

capital raising on the other hand means if a project fails that the person loses their income but their isn't a debt remaining to further increase their misery. granted, investors may lose out, but if you were to invest say €4,000 across four companies, especially with the various tests in place - then you would not be as likely to lose out overall.

if you want to start a company in the normal fashion there is nothing stopping you, no market tests to meet, with a microventure type set up you have to have a winning business plan, a winning presentation, then convince a limited amount of capital to invest in your plan.

I was suggesting the zopa model as a way to organise it rather than being completely loan based.

The businesses could still be able to raise equity finance rather than debt.

[MortgageBroker]

I have been on to some of the local yokal politico's about something similar .

what did they say? If you didn't get any support don't be surprised, I don't think there is a political win in this, the best thing to do is to circumvent the state altogether, I think it would be faster and less bureaucratic.

I was suggesting the zopa model as a way to organise it rather than being completely loan based.

The businesses could still be able to raise equity finance rather than debt.

apologies! i totally missed the point in that case! I thought you meant as a lending model.

[teach]

Hi, was thinking maybe we could have something of a French solution to our economic woes, whereby we cut working hours (35 hours) to free up work space for those who are unemployed, or who have lost their jobs of late. I'm not just saying this so we can dodge time off of work either! Then again, I am not sure of whether or not such a system should be made compulsary by law, or whether it should be an optional system where, if you want to work that amount of hours, it is your choice on the matter. I'm sure many people would work less for whatever reasons, and this may free up space for some new people to enter the workforce, or former workers now unemployed.

[MortgageBroker]

Hi, was thinking maybe we could have something of a French solution to our economic woes, whereby we cut working hours (35 hours) to free up work space for those who are unemployed, or who have lost their jobs of late. I'm not just saying this so we can dodge time off of work either! Then again, I am not sure of whether or not such a system should be made compulsary by law, or whether it should be an optional system where, if you want to work that amount of hours, it is your choice on the matter. I'm sure many people would work less for whatever reasons, and this may free up space for some new people to enter the workforce, or former workers now unemployed.

you'd be paid less too i assume? If so do you think a lot of people would sign up to it?