Fwd: [OK] Re: The Problem Of Early Stage Funding for Social Innovators
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Suresh Fernando
Feb 9, 2011, 4:40:22 PM2/9/11
to Venessa Miemis, openk...@googlegroups.com, uk-gat...@googlegroups.com, Cooperati...@googlegroups.com
Venessa,
I want to draw this activist type thread that I started about a year ago out of sheer frustration at the lack of capital for early stage social entrepreneurs. This is the reason that I was working on getting people together in the UK which was the reason that Jay introduced us.
I would be interested in trying to mobilize people in the space to possibly participate in some way in exploring new and innovative funding models within the larger socio-technological context within which we operate.
Here is the gathering concept document.
What do you think?
Suresh
--
Suresh Fernando
BLOG, YOUTUBE, OK WEBSITE, OK FAN PAGE, OK GROUP, OK-WE, PHILOSOPHY, TWITTER, FACEBOOK, WOTW FAN PAGE LINKEDIN, SLIDESHARE
'The counter cultural revolution was a rhizomatic meshwork of loosely-coordinated, loosely-affiliated struggles. The goals of these struggles weren’t always complimentary, but the struggles were aligned and together they staged a mass offensive to shatter the status quo'. - from The Coalition of the Willing
I want to draw this activist type thread that I started about a year ago out of sheer frustration at the lack of capital for early stage social entrepreneurs. This is the reason that I was working on getting people together in the UK which was the reason that Jay introduced us.
I would be interested in trying to mobilize people in the space to possibly participate in some way in exploring new and innovative funding models within the larger socio-technological context within which we operate.
Here is the gathering concept document.
What do you think?
Suresh
---------- Forwarded message ----------
From: cjen...@googlemail.com <cjen...@googlemail.com>
Date: Sun, Mar 28, 2010 at 5:31 AM
Subject: [OK] Re: The Problem Of Early Stage Funding for Social Innovators
To: OpenKollab <openk...@googlegroups.com>
Hi Suresh
Apologies for the delay in replying: I didn't spot your response to
mine!
The first thing to say is that there is a big difference between 'Peer
to Peer Credit', where no deposits are required, and 'Peer to Peer
Investment', where investors (not lenders) are brought together
directly with investments in productive assets.
This article sets it out
Note here that this difference is difficult to grasp because the
monetised bank credit we are accustomed to using is essentially a
hybrid which is used for both dynamic circulating credit (liquidity)
and static investment credit (through secured loans).
>>
On Mar 24, 3:07 am, Suresh Fernando <sur...@radical-inclusion.com>
wrote:
WIR, or Ecuador's prototype 'FactoRepo', or even Keynes' proposed
Bancor it does not have a central credit issuer or counterparty.
The trade seller and the trade buyer - who extend credit (ie "time to
pay") and receive credit respectively - each /credit an amount to a
"Default Pool" held by a custodian on behalf of the members of the
'Guarantee Society' collectively. The Guarantee Society - like a
Credit Union - has a 'common bond' which may be geographic (the
Smallville Guarantee Society); functional (the Hackers' Guild) or both
(the Connecticut Hackers' Guild).
This charge is not interest (a charge for the use of money as a credit
object), but rather a guarantee charge/provision. You may note that
the fact that a charge is made on BOTH positive and negative balances
gives a Gesellian outcome, as in Keynes' Bancor proposal.
> 2. How does the credit clearing union work?
A charge (probably a subscription) is made to all participants to
cover basic service costs, and then a Guarantee Charge is levied on
seller and buyer.
Credit is granted by sellers to buyers on an undated or 'open' basis,
and both sellers and buyers have limits - within parameters/policies
set by the governing body and managed by a service-provider-formerly-
known-as-a-bank.
For the ex-bank, such banking service provision is pretty much
indistinguishable from banking now, the difference being that it is
not the banks' proprietary capital at risk (which they will love,
because it is scarce) except to the extent of capital needed to cover
operating costs.
For the credit user, the effect is of an open overdraft at their
option, not the bank's option, in respect of which they pay a charge
to cover costs and defaults.
In the event of a default in payment, then the bank operates within
policies laid down by the Guarantee Society.
Actions include:
(a)forgiveness (can't pay) - when the Pool will make good the credit
shortfall.
(b)enforcement action (can but won't pay) when action is taken;
Note here that no dollars need actually change hands, since settlement
of obligations takes place not FOR dollars, but BY REFERENCE TO
dollars as a unit of measure. Ecuador's FactoRepo is about to do just
this, but with the central bank as middleman.
A 'Peer to Peer Credit" credit clearing union is essentially just an
accounting system within a framework of trust - the Guarantee Society
agreement.
Finally, and to me almost the most interesting (sad, I know), there is
the clearing and settlement structure. Conventionally this takes place
via a central counterparty or clearing bank.
In a credit clearing union a 'clearing agent' settlement algorithm or
programme -like Ripple
http://ripplepay.com/about/
- would be used to create 'chains' allowing the 'open' undated
bilateral 'Peer to Peer' credit obligations to be netted and closed
out.
This is exactly how the (dated) Brent North Sea crude oil contracts
which underpin the global market in oil are settled. A 'chain' comes
about on contract expiry, such as A sells to B sells to C sells to D
sells to A and the whole chain is closed out in cash (not oil) with
differences in price being accounted for down the chain.
In our model, clearing agent 'bots' would seek out chains which would
be used to net down the gross debt and credit balances.
The point is that wherever 'money's worth' changes hands on credit
terms then the result IS a monetary system.
The question then is, what would the Units of money's worth which will
be generically acceptable actually look like?
That's where Peer to Peer Investment through capital Partnership comes
in.
> 3. It seems to me that the essence of the structure is that it is based
credit is the performance of people (individually or collectively
within enterprise agreements).
Peer to Peer investment on the other hand is credit based directly
(through a 'capital partnership' agreement) upon the use value created
by productive assets, such as Land/Location; Energy (eg a wind
turbine) or even Knowledge (IP) (see http://www.ipxi.com/ipxi/ ) which
we could do an order of magnitude more simply.
> 4. It seems that as a result of the focus on revenue sharing, there is no
On the one hand, stakeholders (eg managers) will agree 'Equity Shares'
ie proportional rights over the FLOWS of use value.
On the other hand, investors may buy Units redeemable in payment for
use value eg 10 Kilo Watt Hours of electricity or energy equivalent
http://www.kilowattcards.com/template/page.cfm?id=92
> 5. How are agreements enforced? Say an investor is involved in a
the user of finance, and any disputes etc are resolved within the
mechanisms agreed in the parnership protocol eg referees, arbitrators
NEVER courts.
In conventional finance, 'debt' contracts secured by mortgages, and
conventional 'equity' - limited liability shares of $1.00 - both share
risk imperfectly, and indeed these two legal property right claims
come into conflict in a default situation.
> > The Canadians - and the Australians before that - showed how it can be
> > done with the growth of Income Trusts and Royalty Trusts, basically
> > out of nowhere, which spread rapidly throughout their capital markets
> > (until the tax man caught on and throttled them) because pension funds
> > and similar liked the idea of getting their hands on 'unitised' gross
> > corporate revenues before the management does.
>
> I assume that you are referring to the creation of structured product. Yes,
> I actually worked for ScotiaMcleod in the mid 90`s. We led the street in
> Canada in pioneering the income trust space. I`ve sold my share of trusts as
> well. To be frank I was never totally comfortable with how these marketed
> since they were marketed as income products on the strength of their yield.
> That they were businesses was revealed a number of years later when many of
> them lost a lot of value and the income trust market imploded.
Once you get your head around the different partnership-based
enterprise model involved here, you will see that the products which
are the outcome from a 'Capital Partnership' model have very
interesting - and in my view, optimal - attributes and value
propositions. In particular, the relationship with financial service
providers aligns their interests. My understanding re income trusts is
that firstly investors focused more on the reward than the risk (which
only ethical salesmen will prevent) and secondly that, as in
Australia, the tax authorities throttled the product.
> > Over here in Scotland, I've had a bit of seed funding from the
> > Norwegian government to develop new 'Peer to Peer Finance" models
>
> >http://www.policyinnovations.org/ideas/innovations/data/000085
>
> What are you were on that is different from, say,http://www.prosper.com/welcome/how_it_works.aspx
Prosper and others like MyC4 or Zopa is peer to peer lending at
interest.
Ours are not debt products but quasi-equity products, whether as
proportional Equity Shares or redeemable Units.
In the field of real property, I advocate fixing the Credit Crunch by
way of a Debt/Equity swap of secured debt for Units in a new breed of
quasi-REIT 'Rental Pools' which are effectively redeemable in the
right to occupy property. The market for distressed debt is a huge
market.
If you haven't seen it,the video should give you an idea.
There's also potential for reinventing all municipal debt as new forms
of municipal equity.
In the field of energy, we have a completely new means to finance the
transition to renewables.
Nothing ambitious, you understand.... :-)
But strangely enough, there is something in it for everyone, and the
existing players have great incentives to transition to the model.
>>
> > > Just in reference to the zero-coupon model, it would make no sense to
> > > structure this on a deal by deal basis. You would want to raise a fund.
Correct. In relation to energy there are billions of dollars invested
in energy ETFs and getting screwed by the futures markets and
investment banks. We have a product here that wipes the floor with
existing ETFs.
> > > In my days as an investment broker I`ve personally sold millions of
> > dollars worth of structured product of this sort.
>
> > > Typically the structure is based on whatever was the `flavour of the
> > day`. So, for example, when gold prices were low, the investment banks in
> > Canada raised a fund using this structure that guaranteed that principle would
> > be returned in five years and provided upside based on the price of gold by
> > > purchasing gold futures contracts. They were able to sell this because
> > gold was a good story at the time.
We have a different proposition, but in many ways superior. The key
point being that when investors want to get out, they donot
necessarily need other investors to buy. If the Unit price drops below
the price of energy then consumers will buy the units and redeem them
against energy supplied.
Beautiful, and a perfect retail product.
> > > Note that this sort of product is sold to both institutions and retail
> > > investors. In some cases the product better fits the retail market. This
> > is to say that average people are more interested in the investment than
> > > pension funds etc.
We can enable local people to invest directly in local renewable
energy and even energy savings.
> > > So the question is: *are we at a point in history where doing social good
> > is a story people will buy**? *I think that we are!
I believe that I have identified an optimal enterprise model and
financial products based on it. It is serendipitous that it should
also be ethical at a very deep level (in fact these structures are
Islamically sound, which opens up the market in the Middle East.....)
> > > What we should do is put a story together and approach Wall Street, or
> > Bond Street investment bankers and see if they think there might be a market
> > for it.
I know this was a response to Kevin, but it's what is probably needed
here. I approached both UBS (at top level) and West LB concerning it,
but that was before the credit crunch, and the people I approached are
all gone..... :-(
It is necessary to retain control (veto rights) over the development
and marketing, but it does help that the model turns self interest in
a positive direction.
Maybe best if you drop me an email to discuss this? I know this will
be big.
Best Regards
Chris
>
> > > One thing that I know about that side of the street is that if they can
> > sell a deal they will ;-)
>
> > > Suresh
>
> > > On Tue, Mar 23, 2010 at 10:08 AM, Kevin Jones <jo...@goodcap.net> wrote:
> > > > collaboration between mission focused and traditional investors is a
> > matter
> > > > of standing together on the same ground for different reasons. it is
> > not
> > > > easy or simple and takes a lot of effort. we have done it in one deal
> > and it
> > > > is not easy at all, though we have held the mission ground while the
> > > > traditional investors push on different levers. at least that's true in
> > > > venture investing with investors who are moving fast and want to make
> > their
> > > > own goals become real through the vehicle of the company you invest in.
> > > > pursuing rapid and clear investment theses that only overlap on some
> > > > portions is valuable but often filled with a bit of friction. at least
> > > > that's our experience at goodcap.net. we'd rather work with mission
> > > > alligned investors, as we are in a deal that should close this week.
>
> > > > GoodCap
> > > >http://www.goodcap.net
>
> > > > *From:* Suresh Fernando <sur...@radical-inclusion.com>
> > > > *To:* David Hodgson <david.hodg...@gmail.com>; Tamzin Ractliffe <
> > > > tamz...@csrsystems.co.za>; Timothy Freundlich - Giving Assets/Calvert
> > > > Foundatoeion <timothy_freundl...@yahoo.com>; Jill Finlayson <
> > > > jfinlay...@skollfoundation.org>; Pe...@socialactions.com; Christine
> > Egger
> > > > <christ...@socialactions.com>; bgang...@rockfound.org;
> > j...@omidyar.com;
> > > > tbrodh...@mcconnellfoundation.ca; Tim Draimin <tim.drai...@gmail.com>;
> > > > Kevin Jones <jo...@goodcap.net>; Jonathan Jenkins <
> > > > jonathanjenk...@unltd.org.uk>; Geoff Burnand <
> > > > gburn...@investingforgood.org>; Toby Eccles <
> > > > toby.ecc...@socialfinance.org.uk>; Antony Ross <
> > ant...@bridgesventures.com>;
> > > > Derek Gent <derek_g...@vancity.com>; Elizabeth Lougheed Green <
> > > > Elizabeth_LougheedGr...@vancity.com>; Louise Pulford <
> > > > louise.pulf...@youngfoundation.org>; Joel Solomon <
> > > > J...@renewalpartners.com>; Carol Tappenden <Ca...@ggsa.co.za>; Bruno
> > > > Borges <bbor...@ashoka.org>; Arthur Wood <aw...@ashoka.org>; Jesse
> > > > Chancellor <jesse.chancel...@calvertfoundation.org>;
> > > > jsi...@totalimpactadvisors.com; Kyle Salyer <
> > KSal...@grayghostventures.com>;
> > > > b...@socialcapitalpartners.ca; Tonya at CSI Toronto <
> > > > to...@socialinnovation.ca>; Dave McClure <dave.mccl...@gmail.com>;
> > Jerry
> > > > Michalski <je...@sociate.com>; mgood...@shaw.ca; Daniel Epstein <
> > > > dan...@unreasonableinstitute.org>; serv...@ogunte.com; Dean D. Hand <
> > > > d...@ggsa.co.za>; jeanne.murta...@gmail.com; Vincent Molinari <
> > > > vmolin...@glbacc.com>; sah...@gatetechnologies.com; Pradeep Jethi <
> > > > pje...@gmail.com>; Coro Strandberg <cstrandb...@shaw.ca>; Lucy
> > Bernholz <
> > > > l...@blueprintrd.com>; Kate Bahen <kba...@charityintelligence.ca>;
> > Kate
> > > > Ruff <kr...@charityintelligence.ca>; John Kingston <
> > > > jkings...@cafonline.org>; pch...@cafonline.org; Ross Baird <
> > > > RBa...@grayghostventures.com>; Wei Wei Hsing <whs...@acumenfund.org>;
> > > > Patrick Johnston <Patr...@gordonfn.org>; da...@caringcapital.com; Jon
> > > > Ramer <j.ra...@comcast.net>
> > > > *Cc:* openk...@googlegroups.com
> > > > *Sent:* Tue, March 23, 2010 9:52:01 AM
>
> > > > *Subject:* Re: [OK] The Problem Of Early Stage Funding for Social
> > > > Innovators
>
> > > > Hey Folks,
>
> > > > My latest addition to the conversation regarding the lack of capital
> > for
> > > > early stage social ventures is to think about ways that we can *build
> > > > collaborative partnerships between traditional, financially motivated,
> > > > institutional investors, foundations and the social venture finance
> > > > community. *To seed the conversation on this topic, here are a few
> > > > ideas.... I`m wondering if anyone is working on something that is of
> > this
> > > > sort.
>
> > > > *ZERO COUPON BOND STRUCTURES TO RAISE PRIVATE CAPITAL (financially
> > > > motivated investors) for Social Ventures Financings*
>
> > > > One strategy that could be used to approach institutional investors
> > with is
> > > > the following:
>
> > > > 1. Raise, say, $10,000,000
> > > > 2. Invest enough in a government guaranteed 10-year zero coupon bond
> > *to
> > > > guarantee that the principal is returned*
> > > > 3. If the discount rate is roughly 3% (which is comparable to
> > 10-year
> > > > bond rates), then the required amount is roughly $7.400,000
> > > > 4. This leaves $2.6 million for investment fund
>
> > > > This fund could be invested in debt, equity or a combination of both.
> > The
> > > > returns will be hard to model and therefore to make this work we would
> > have
> > > > to market the idea as:
> > > > *
> > > > 'Social Good Bond!',* or something like that.
> > > > *
> > > > The selling point is that we could guarantee that they get their money
> > > > back, that they will contribute to welfare of humanity and that they
> > might
> > > > get a decent financial return!*
>
> > > > In return for this investment, institutions would probably need to be
> > > > provided with some benefit to their brand etc.
>
> > > > Obviously this structure could be modified so that you provide them
> > with
> > > > some nominal guaranteed return,.say 1%
>
> > > > Furthermore, we could provide some financial upside using the following
> > > > strategy to engage foundations...
>
> > > > *
> > > > LEVERAGING FOUNDATION CAPITAL
> > > > *
> > > > *Concept: *The basic idea is to utilize foundation founds to offset the
> > > > risk of financially motivated investors. This could be structured in,
> > at the
> > > > least, the following ways:
>
> > > > 1. *Insurance:** *we could, in theory, utilize foundation capital to
> > > > purchase insurance policies to offset financial risk. The challenge
> > with
> > > > this will be to determine how to quantify the risk in order to price
> > the
> > > > insurance contracts.
> > > > 2. *Loss Offsets: *an easier strategy might to get foundations to
> > > > simply agree to a fixed number that they are willing to provide an
> > offset
> > > > for.
>
> > > > For sake of example lets consider a strategy that involves foundations
> > and
> > > > private institutional investors.
>
> > > > Let's assume that, as per the example above that we raise $10,000,000
> > from
> > > > private institutions and we purchase the zero coupon bond as outlined
> > above.
> > > > Let's also assume that we guarantee private investors a return of 2%
> > > > compounded. This results in a guarantee to private investors of $2.2
> > > > million.
> > > > *
> > > > The question, therefore, is what can foundations do to guarantee $2.2
> > > > million to private investors?
> > > > *
> > > > Since the presumption is that we will conduct effective due diligence
> > in
> > > > selecting projects, actively support projects etc. we can safely assume
> > that
> > > > the whole $2.2 million is not going to evaporate. This is to say that
> > > > (assuming we are talking about a loan fund) the projects that we
> > provide
> > > > loans to will have some repayment rate and this repayment rate will
> > > > determine the the risk profile for the funds that the foundations need
> > to
> > > > guarantee.
>
> > > > This will lead to a *repayment rate probability distribution* that will
> > > > look something like this. I am just guessing at this point...
>
> > > > *Total Capital Commitment - Proportion Repayed* *Percentage Repayed*
> > *Probability
> > > > of Repayment - hypothetical* *Probability Weighed Capital Returned*
> > > > $2,200,000.00 100% 60% $1,320,000.00 $1,980,000.00 90% 63%
> > $1,247,400.00
> > > > $1,760,000.00 80% 67% $1,179,200.00 $1,540,000.00 70% 70%
> > $1,078,000.00
> > > > $1,320,000.00 60% 75% $990,000.00 $1,100,000.00 50% 80% $880,000.00
> > > > $880,000.00 40% 85% $748,000.00 $660,000.00 30% 90% $594,000.00
> > > > $440,000.00 20% 95% $418,000.00 $220,000.00 10% 99% $217,800.00
>
> > > > I am not a mathematician so am not sure how to quantify this risk, but
> > this
> > > > is a relatively trivial problem for a probability theorist.
>
> > > > Thoughts...
>
> > > > Suresh
>
> > > > On Tue, Mar 16, 2010 at 12:28 PM, Sam Putman <atmanis...@gmail.com>
> > wrote:
>
> > > >> Hi all,
>
> > > >> Suresh suggested I might provide an introduction to the open
> > > >> manufacturing space in OpenKollab, and how an ecosystem approach could
> > > >> be of benefit.
>
> > > >> There is a lot of buzz and excitement in open manufacturing / open
> > > >> hardware, and a ton of good work being done, more than I could fairly
> > > >> summarize. The intersection with OpenKollab and the idea of a pooled
> > > >> fund is broad and deep.
>
> > > >> A lot of the work being done at present is organized around garages or
> > > >> collective hackerspaces, with the first successful commercial ventures
> > > >> being founded arguably within the last five years. It is decentralized
> > > >> in the extreme, which has its benefits but can make people hard to
> > > >> find, even for each other.
>
> > > >> My project, MakerBeam, decided to experiment with crowdfunding our
> > > >> pilot work through Kickstarter, and we were rather successful.
> > > >> Kickstarter is fantastic for all sorts of endeavors, but there are
> > > >> probably a larger number of projects in open hardware and certainly in
> > > >> OM that need a different approach, either something more traditional
> > > >> or something new that differs from Kickstarter in important ways.
>
> > > >> I know of at least a dozen solid open
>
> > > ...
>
> > > read more »
>
> > --
> > This is a message from the OpenKollab Google Group located at
> >http://groups.google.com/group/openkollab?hl=en
> > To post to this group, send email to openk...@googlegroups.com
>
> > To unsubscribe from this group, send email to openkollab+
> > unsubscribegooglegroups.com or reply to this email with the words "REMOVE
> > ME" as the subject.
>
> --
> Suresh Fernando
> WEBSITE:http://radical-inclusion.com
> WEBSITE:http://openkollab.com
> FAN PAGE:http://www.facebook.com/openkollab.
> BLOG:http://sureshfernando.wordpress.com
> TWITTER:http://twitter.com/sureshf
> FACEBOOK: facebook.com/suresh.fernando
> 604-889-8167
--
From: cjen...@googlemail.com <cjen...@googlemail.com>
Date: Sun, Mar 28, 2010 at 5:31 AM
Subject: [OK] Re: The Problem Of Early Stage Funding for Social Innovators
To: OpenKollab <openk...@googlegroups.com>
Hi Suresh
Apologies for the delay in replying: I didn't spot your response to
mine!
The first thing to say is that there is a big difference between 'Peer
to Peer Credit', where no deposits are required, and 'Peer to Peer
Investment', where investors (not lenders) are brought together
directly with investments in productive assets.
This article sets it out
Note here that this difference is difficult to grasp because the
monetised bank credit we are accustomed to using is essentially a
hybrid which is used for both dynamic circulating credit (liquidity)
and static investment credit (through secured loans).
>>
On Mar 24, 3:07 am, Suresh Fernando <sur...@radical-inclusion.com>
wrote:
> Hi Chris,
>
> Thanks for the detailed post! I have some specific questions about the LLC
> structure which seems very interesting as it is a collaborative structure
> designed to align stakeholder interests in a formal manner:
>
> 1. I don`t understand how trade credit is guaranteed by a payment into a>
> Thanks for the detailed post! I have some specific questions about the LLC
> structure which seems very interesting as it is a collaborative structure
> designed to align stakeholder interests in a formal manner:
>
> Default Pool. Can you explain in more detail how this is structured.
>>
We are talking about a 'Credit Clearing Union' here, but unlike the>>
WIR, or Ecuador's prototype 'FactoRepo', or even Keynes' proposed
Bancor it does not have a central credit issuer or counterparty.
The trade seller and the trade buyer - who extend credit (ie "time to
pay") and receive credit respectively - each /credit an amount to a
"Default Pool" held by a custodian on behalf of the members of the
'Guarantee Society' collectively. The Guarantee Society - like a
Credit Union - has a 'common bond' which may be geographic (the
Smallville Guarantee Society); functional (the Hackers' Guild) or both
(the Connecticut Hackers' Guild).
This charge is not interest (a charge for the use of money as a credit
object), but rather a guarantee charge/provision. You may note that
the fact that a charge is made on BOTH positive and negative balances
gives a Gesellian outcome, as in Keynes' Bancor proposal.
> 2. How does the credit clearing union work?
A charge (probably a subscription) is made to all participants to
cover basic service costs, and then a Guarantee Charge is levied on
seller and buyer.
Credit is granted by sellers to buyers on an undated or 'open' basis,
and both sellers and buyers have limits - within parameters/policies
set by the governing body and managed by a service-provider-formerly-
known-as-a-bank.
For the ex-bank, such banking service provision is pretty much
indistinguishable from banking now, the difference being that it is
not the banks' proprietary capital at risk (which they will love,
because it is scarce) except to the extent of capital needed to cover
operating costs.
For the credit user, the effect is of an open overdraft at their
option, not the bank's option, in respect of which they pay a charge
to cover costs and defaults.
In the event of a default in payment, then the bank operates within
policies laid down by the Guarantee Society.
Actions include:
(a)forgiveness (can't pay) - when the Pool will make good the credit
shortfall.
(b)enforcement action (can but won't pay) when action is taken;
Note here that no dollars need actually change hands, since settlement
of obligations takes place not FOR dollars, but BY REFERENCE TO
dollars as a unit of measure. Ecuador's FactoRepo is about to do just
this, but with the central bank as middleman.
A 'Peer to Peer Credit" credit clearing union is essentially just an
accounting system within a framework of trust - the Guarantee Society
agreement.
Finally, and to me almost the most interesting (sad, I know), there is
the clearing and settlement structure. Conventionally this takes place
via a central counterparty or clearing bank.
In a credit clearing union a 'clearing agent' settlement algorithm or
programme -like Ripple
http://ripplepay.com/about/
- would be used to create 'chains' allowing the 'open' undated
bilateral 'Peer to Peer' credit obligations to be netted and closed
out.
This is exactly how the (dated) Brent North Sea crude oil contracts
which underpin the global market in oil are settled. A 'chain' comes
about on contract expiry, such as A sells to B sells to C sells to D
sells to A and the whole chain is closed out in cash (not oil) with
differences in price being accounted for down the chain.
In our model, clearing agent 'bots' would seek out chains which would
be used to net down the gross debt and credit balances.
The point is that wherever 'money's worth' changes hands on credit
terms then the result IS a monetary system.
The question then is, what would the Units of money's worth which will
be generically acceptable actually look like?
That's where Peer to Peer Investment through capital Partnership comes
in.
> 3. It seems to me that the essence of the structure is that it is based
> on revenue or production sharing agreements. This is to say that stakeholder
> interests are aligned by dividing up revenues or having stakeholders
> participate in whatever is produced.
What I just described was Peer to Peer Credit, where the BASIS of> interests are aligned by dividing up revenues or having stakeholders
> participate in whatever is produced.
credit is the performance of people (individually or collectively
within enterprise agreements).
Peer to Peer investment on the other hand is credit based directly
(through a 'capital partnership' agreement) upon the use value created
by productive assets, such as Land/Location; Energy (eg a wind
turbine) or even Knowledge (IP) (see http://www.ipxi.com/ipxi/ ) which
we could do an order of magnitude more simply.
> 4. It seems that as a result of the focus on revenue sharing, there is no
> real notion of equity. Is this correct?
We are totally revinventing equity and actually making it equitable.On the one hand, stakeholders (eg managers) will agree 'Equity Shares'
ie proportional rights over the FLOWS of use value.
On the other hand, investors may buy Units redeemable in payment for
use value eg 10 Kilo Watt Hours of electricity or energy equivalent
http://www.kilowattcards.com/template/page.cfm?id=92
> 5. How are agreements enforced? Say an investor is involved in a
> windturbine project and the return expected is in the form of energy. What
> happens is the project fails?
That's why it's equity. The risk is shared between the provider and> happens is the project fails?
the user of finance, and any disputes etc are resolved within the
mechanisms agreed in the parnership protocol eg referees, arbitrators
NEVER courts.
In conventional finance, 'debt' contracts secured by mortgages, and
conventional 'equity' - limited liability shares of $1.00 - both share
risk imperfectly, and indeed these two legal property right claims
come into conflict in a default situation.
> > The Canadians - and the Australians before that - showed how it can be
> > done with the growth of Income Trusts and Royalty Trusts, basically
> > out of nowhere, which spread rapidly throughout their capital markets
> > (until the tax man caught on and throttled them) because pension funds
> > and similar liked the idea of getting their hands on 'unitised' gross
> > corporate revenues before the management does.
>
> I assume that you are referring to the creation of structured product. Yes,
> I actually worked for ScotiaMcleod in the mid 90`s. We led the street in
> Canada in pioneering the income trust space. I`ve sold my share of trusts as
> well. To be frank I was never totally comfortable with how these marketed
> since they were marketed as income products on the strength of their yield.
> That they were businesses was revealed a number of years later when many of
> them lost a lot of value and the income trust market imploded.
enterprise model involved here, you will see that the products which
are the outcome from a 'Capital Partnership' model have very
interesting - and in my view, optimal - attributes and value
propositions. In particular, the relationship with financial service
providers aligns their interests. My understanding re income trusts is
that firstly investors focused more on the reward than the risk (which
only ethical salesmen will prevent) and secondly that, as in
Australia, the tax authorities throttled the product.
> > Over here in Scotland, I've had a bit of seed funding from the
> > Norwegian government to develop new 'Peer to Peer Finance" models
>
> >http://www.policyinnovations.org/ideas/innovations/data/000085
>
> What are you were on that is different from, say,http://www.prosper.com/welcome/how_it_works.aspx
interest.
Ours are not debt products but quasi-equity products, whether as
proportional Equity Shares or redeemable Units.
In the field of real property, I advocate fixing the Credit Crunch by
way of a Debt/Equity swap of secured debt for Units in a new breed of
quasi-REIT 'Rental Pools' which are effectively redeemable in the
right to occupy property. The market for distressed debt is a huge
market.
If you haven't seen it,the video should give you an idea.
There's also potential for reinventing all municipal debt as new forms
of municipal equity.
In the field of energy, we have a completely new means to finance the
transition to renewables.
Nothing ambitious, you understand.... :-)
But strangely enough, there is something in it for everyone, and the
existing players have great incentives to transition to the model.
>>
> > > Just in reference to the zero-coupon model, it would make no sense to
> > > structure this on a deal by deal basis. You would want to raise a fund.
in energy ETFs and getting screwed by the futures markets and
investment banks. We have a product here that wipes the floor with
existing ETFs.
> > > In my days as an investment broker I`ve personally sold millions of
> > dollars worth of structured product of this sort.
>
> > > Typically the structure is based on whatever was the `flavour of the
> > day`. So, for example, when gold prices were low, the investment banks in
> > Canada raised a fund using this structure that guaranteed that principle would
> > be returned in five years and provided upside based on the price of gold by
> > > purchasing gold futures contracts. They were able to sell this because
> > gold was a good story at the time.
point being that when investors want to get out, they donot
necessarily need other investors to buy. If the Unit price drops below
the price of energy then consumers will buy the units and redeem them
against energy supplied.
Beautiful, and a perfect retail product.
> > > Note that this sort of product is sold to both institutions and retail
> > > investors. In some cases the product better fits the retail market. This
> > is to say that average people are more interested in the investment than
> > > pension funds etc.
energy and even energy savings.
> > > So the question is: *are we at a point in history where doing social good
> > is a story people will buy**? *I think that we are!
financial products based on it. It is serendipitous that it should
also be ethical at a very deep level (in fact these structures are
Islamically sound, which opens up the market in the Middle East.....)
> > > What we should do is put a story together and approach Wall Street, or
> > Bond Street investment bankers and see if they think there might be a market
> > for it.
here. I approached both UBS (at top level) and West LB concerning it,
but that was before the credit crunch, and the people I approached are
all gone..... :-(
It is necessary to retain control (veto rights) over the development
and marketing, but it does help that the model turns self interest in
a positive direction.
Maybe best if you drop me an email to discuss this? I know this will
be big.
Best Regards
Chris
>
> > > One thing that I know about that side of the street is that if they can
> > sell a deal they will ;-)
>
> > > Suresh
>
> > > On Tue, Mar 23, 2010 at 10:08 AM, Kevin Jones <jo...@goodcap.net> wrote:
> > > > collaboration between mission focused and traditional investors is a
> > matter
> > > > of standing together on the same ground for different reasons. it is
> > not
> > > > easy or simple and takes a lot of effort. we have done it in one deal
> > and it
> > > > is not easy at all, though we have held the mission ground while the
> > > > traditional investors push on different levers. at least that's true in
> > > > venture investing with investors who are moving fast and want to make
> > their
> > > > own goals become real through the vehicle of the company you invest in.
> > > > pursuing rapid and clear investment theses that only overlap on some
> > > > portions is valuable but often filled with a bit of friction. at least
> > > > that's our experience at goodcap.net. we'd rather work with mission
> > > > alligned investors, as we are in a deal that should close this week.
>
> > > > GoodCap
> > > >http://www.goodcap.net
>
> > > > *From:* Suresh Fernando <sur...@radical-inclusion.com>
> > > > *To:* David Hodgson <david.hodg...@gmail.com>; Tamzin Ractliffe <
> > > > tamz...@csrsystems.co.za>; Timothy Freundlich - Giving Assets/Calvert
> > > > Foundatoeion <timothy_freundl...@yahoo.com>; Jill Finlayson <
> > > > jfinlay...@skollfoundation.org>; Pe...@socialactions.com; Christine
> > Egger
> > > > <christ...@socialactions.com>; bgang...@rockfound.org;
> > j...@omidyar.com;
> > > > tbrodh...@mcconnellfoundation.ca; Tim Draimin <tim.drai...@gmail.com>;
> > > > Kevin Jones <jo...@goodcap.net>; Jonathan Jenkins <
> > > > jonathanjenk...@unltd.org.uk>; Geoff Burnand <
> > > > gburn...@investingforgood.org>; Toby Eccles <
> > > > toby.ecc...@socialfinance.org.uk>; Antony Ross <
> > ant...@bridgesventures.com>;
> > > > Derek Gent <derek_g...@vancity.com>; Elizabeth Lougheed Green <
> > > > Elizabeth_LougheedGr...@vancity.com>; Louise Pulford <
> > > > louise.pulf...@youngfoundation.org>; Joel Solomon <
> > > > J...@renewalpartners.com>; Carol Tappenden <Ca...@ggsa.co.za>; Bruno
> > > > Borges <bbor...@ashoka.org>; Arthur Wood <aw...@ashoka.org>; Jesse
> > > > Chancellor <jesse.chancel...@calvertfoundation.org>;
> > > > jsi...@totalimpactadvisors.com; Kyle Salyer <
> > KSal...@grayghostventures.com>;
> > > > b...@socialcapitalpartners.ca; Tonya at CSI Toronto <
> > > > to...@socialinnovation.ca>; Dave McClure <dave.mccl...@gmail.com>;
> > Jerry
> > > > Michalski <je...@sociate.com>; mgood...@shaw.ca; Daniel Epstein <
> > > > dan...@unreasonableinstitute.org>; serv...@ogunte.com; Dean D. Hand <
> > > > d...@ggsa.co.za>; jeanne.murta...@gmail.com; Vincent Molinari <
> > > > vmolin...@glbacc.com>; sah...@gatetechnologies.com; Pradeep Jethi <
> > > > pje...@gmail.com>; Coro Strandberg <cstrandb...@shaw.ca>; Lucy
> > Bernholz <
> > > > l...@blueprintrd.com>; Kate Bahen <kba...@charityintelligence.ca>;
> > Kate
> > > > Ruff <kr...@charityintelligence.ca>; John Kingston <
> > > > jkings...@cafonline.org>; pch...@cafonline.org; Ross Baird <
> > > > RBa...@grayghostventures.com>; Wei Wei Hsing <whs...@acumenfund.org>;
> > > > Patrick Johnston <Patr...@gordonfn.org>; da...@caringcapital.com; Jon
> > > > Ramer <j.ra...@comcast.net>
> > > > *Cc:* openk...@googlegroups.com
> > > > *Sent:* Tue, March 23, 2010 9:52:01 AM
>
> > > > *Subject:* Re: [OK] The Problem Of Early Stage Funding for Social
> > > > Innovators
>
> > > > Hey Folks,
>
> > > > My latest addition to the conversation regarding the lack of capital
> > for
> > > > early stage social ventures is to think about ways that we can *build
> > > > collaborative partnerships between traditional, financially motivated,
> > > > institutional investors, foundations and the social venture finance
> > > > community. *To seed the conversation on this topic, here are a few
> > > > ideas.... I`m wondering if anyone is working on something that is of
> > this
> > > > sort.
>
> > > > *ZERO COUPON BOND STRUCTURES TO RAISE PRIVATE CAPITAL (financially
> > > > motivated investors) for Social Ventures Financings*
>
> > > > One strategy that could be used to approach institutional investors
> > with is
> > > > the following:
>
> > > > 1. Raise, say, $10,000,000
> > > > 2. Invest enough in a government guaranteed 10-year zero coupon bond
> > *to
> > > > guarantee that the principal is returned*
> > > > 3. If the discount rate is roughly 3% (which is comparable to
> > 10-year
> > > > bond rates), then the required amount is roughly $7.400,000
> > > > 4. This leaves $2.6 million for investment fund
>
> > > > This fund could be invested in debt, equity or a combination of both.
> > The
> > > > returns will be hard to model and therefore to make this work we would
> > have
> > > > to market the idea as:
> > > > *
> > > > 'Social Good Bond!',* or something like that.
> > > > *
> > > > The selling point is that we could guarantee that they get their money
> > > > back, that they will contribute to welfare of humanity and that they
> > might
> > > > get a decent financial return!*
>
> > > > In return for this investment, institutions would probably need to be
> > > > provided with some benefit to their brand etc.
>
> > > > Obviously this structure could be modified so that you provide them
> > with
> > > > some nominal guaranteed return,.say 1%
>
> > > > Furthermore, we could provide some financial upside using the following
> > > > strategy to engage foundations...
>
> > > > *
> > > > LEVERAGING FOUNDATION CAPITAL
> > > > *
> > > > *Concept: *The basic idea is to utilize foundation founds to offset the
> > > > risk of financially motivated investors. This could be structured in,
> > at the
> > > > least, the following ways:
>
> > > > 1. *Insurance:** *we could, in theory, utilize foundation capital to
> > > > purchase insurance policies to offset financial risk. The challenge
> > with
> > > > this will be to determine how to quantify the risk in order to price
> > the
> > > > insurance contracts.
> > > > 2. *Loss Offsets: *an easier strategy might to get foundations to
> > > > simply agree to a fixed number that they are willing to provide an
> > offset
> > > > for.
>
> > > > For sake of example lets consider a strategy that involves foundations
> > and
> > > > private institutional investors.
>
> > > > Let's assume that, as per the example above that we raise $10,000,000
> > from
> > > > private institutions and we purchase the zero coupon bond as outlined
> > above.
> > > > Let's also assume that we guarantee private investors a return of 2%
> > > > compounded. This results in a guarantee to private investors of $2.2
> > > > million.
> > > > *
> > > > The question, therefore, is what can foundations do to guarantee $2.2
> > > > million to private investors?
> > > > *
> > > > Since the presumption is that we will conduct effective due diligence
> > in
> > > > selecting projects, actively support projects etc. we can safely assume
> > that
> > > > the whole $2.2 million is not going to evaporate. This is to say that
> > > > (assuming we are talking about a loan fund) the projects that we
> > provide
> > > > loans to will have some repayment rate and this repayment rate will
> > > > determine the the risk profile for the funds that the foundations need
> > to
> > > > guarantee.
>
> > > > This will lead to a *repayment rate probability distribution* that will
> > > > look something like this. I am just guessing at this point...
>
> > > > *Total Capital Commitment - Proportion Repayed* *Percentage Repayed*
> > *Probability
> > > > of Repayment - hypothetical* *Probability Weighed Capital Returned*
> > > > $2,200,000.00 100% 60% $1,320,000.00 $1,980,000.00 90% 63%
> > $1,247,400.00
> > > > $1,760,000.00 80% 67% $1,179,200.00 $1,540,000.00 70% 70%
> > $1,078,000.00
> > > > $1,320,000.00 60% 75% $990,000.00 $1,100,000.00 50% 80% $880,000.00
> > > > $880,000.00 40% 85% $748,000.00 $660,000.00 30% 90% $594,000.00
> > > > $440,000.00 20% 95% $418,000.00 $220,000.00 10% 99% $217,800.00
>
> > > > I am not a mathematician so am not sure how to quantify this risk, but
> > this
> > > > is a relatively trivial problem for a probability theorist.
>
> > > > Thoughts...
>
> > > > Suresh
>
> > > > On Tue, Mar 16, 2010 at 12:28 PM, Sam Putman <atmanis...@gmail.com>
> > wrote:
>
> > > >> Hi all,
>
> > > >> Suresh suggested I might provide an introduction to the open
> > > >> manufacturing space in OpenKollab, and how an ecosystem approach could
> > > >> be of benefit.
>
> > > >> There is a lot of buzz and excitement in open manufacturing / open
> > > >> hardware, and a ton of good work being done, more than I could fairly
> > > >> summarize. The intersection with OpenKollab and the idea of a pooled
> > > >> fund is broad and deep.
>
> > > >> A lot of the work being done at present is organized around garages or
> > > >> collective hackerspaces, with the first successful commercial ventures
> > > >> being founded arguably within the last five years. It is decentralized
> > > >> in the extreme, which has its benefits but can make people hard to
> > > >> find, even for each other.
>
> > > >> My project, MakerBeam, decided to experiment with crowdfunding our
> > > >> pilot work through Kickstarter, and we were rather successful.
> > > >> Kickstarter is fantastic for all sorts of endeavors, but there are
> > > >> probably a larger number of projects in open hardware and certainly in
> > > >> OM that need a different approach, either something more traditional
> > > >> or something new that differs from Kickstarter in important ways.
>
> > > >> I know of at least a dozen solid open
>
> > > ...
>
> > > read more »
>
> > --
> > This is a message from the OpenKollab Google Group located at
> >http://groups.google.com/group/openkollab?hl=en
> > To post to this group, send email to openk...@googlegroups.com
>
> > To unsubscribe from this group, send email to openkollab+
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> > ME" as the subject.
>
> --
> Suresh Fernando
> WEBSITE:http://radical-inclusion.com
> WEBSITE:http://openkollab.com
> FAN PAGE:http://www.facebook.com/openkollab.
> BLOG:http://sureshfernando.wordpress.com
> TWITTER:http://twitter.com/sureshf
> FACEBOOK: facebook.com/suresh.fernando
> 604-889-8167
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'The counter cultural revolution was a rhizomatic meshwork of loosely-coordinated, loosely-affiliated struggles. The goals of these struggles weren’t always complimentary, but the struggles were aligned and together they staged a mass offensive to shatter the status quo'. - from The Coalition of the Willing
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