Brother Can You Spare A Dime?

It seemed appropriate to use a song title that originated from the Great Depression to open a Blog in these strange and contradictory times.

Clearly investment bankers at a number of firms will be smiling all the way to their banks given either the bonuses they have received or -indeed - the "sign-on" fees that are once again prevalent in the market. And I said in a previous blog that I had a view on such payments - which I do. Honestly, I am generally in favour of rewarding good performance, and doing so via bonuses sits reasonably well with me, but I have three issues about which I am not so comfortable.

First I think we need to be clear that these payments should be performance related and not for some "anticipated future performance". That is hardly an incentive. Secondly they should be paid out over a period of time and not in one lump sum in the quarter, half year, or year in which the job was done. Sure, the largest percentage can be paid first, but let's hold some back to ensure that the deals engineered or the products created are actually genuine and not toxic. A bit like the contingency payments you might hold back on a house construction to ensure the building does not fall apart over a period of time. And thirdly I do have concerns about some of the amounts. I mean is the USD100m claimed by Andrew Hall a reasonable sum? You can feed a heck of a lot of people for a fraction of that amount so I hope any recipients will be at least conscious of their fellow human beings and spare more than a dime. But I wonder.

At the other end of the scale we have the ranks of the unemployed. Some habitually so, but now swollen by the newer unwilling entrants whose numbers continue to rise, despite all the talk of recovery. Job prospects look bleak in developed and developing economies for the foreseeable future. Homeless numbers too, continue to rise. In England the other day I heard a vendor selling the Big Issue, a magazine sold by the homeless to enable them to extract a living shout, "Buy your copy of the Big Issue and get nothing in return". He was poking fun at the "buy one get one free" offers and similar ploys to create interest in a product, and equally was having fun doing so - but underneath it all was a man who understood the realities of a life which held very little positive prospects for his future. Imagine how he feels about even well- paid people, ignoring the mega-rich in the previous paragraph, who would not be prepared to put their hand in their pockets for a serious magazine, which is actually worth reading, sold at the princely sum of GBP1.50 (HK$20), of which the seller receives half the proceeds. Every dime counts here.

Now what about those in the middle - who were the real reason I started this particular blog in the first place, or more precisely those involved in start-ups and SME businesses.

Certainly recessions, depressions, unemployment, and bills to pay focus the mind on alternative sources of income. For a few (relative term) people, venturing into their own small business is often the fulfillment of a long held dream. But start-ups are notoriously high-risk ventures, for a string of good reasons – reasons which are sufficiently good for many banks to ignore SME customers altogether. And in times like these, it is even more difficult to obtain funding. Skittish markets, lack of appropriate business skills, low entry costs that enable anyone to join in are all indicators as to why something like 90% of such ventures fail in the first year.

TV programmes that are now shown around the world, like The Dragon's Den have done something positive towards bringing the harsh realities of running a small business into focus. People are thus becoming better prepared to avoid the pitfalls, but they still can't get the money! So, where do they go? That is where "Brother Can You Spare a Dime" came into its own.

I came across a website the other day by accident (I do that a lot) called cmypitch. It led me to looking for other similar sites and yes, they were out there. Having been an "angel" - theatre investor, (one spectacular success one breakeven and one disaster) I have always been conscious that there were alternative sources of finance out there in small chunks, but I had not realised how far it had spread, and into what businesses. And what a good idea I think it is.

Here you go Hong Kong. You are still entrepreneurial, I hope. I think there is an interesting proposition here - raising small amounts of money from a large number of investors, and placing it wisely in start up businesses. I have a few ideas already!