Desigualdad y como buscar un cambio

Desde hace 10 años, la compañía Credit Suisse publica el Global Wealth Report, cuyo objetivo es proporcionar las mejores estimaciones disponibles de las tenencias de riqueza de todo el mundo.

Gracias al equipo de research de Credit Suisse podemos saber que en Estados Unidos se encuentran el 40% de los millonarios de todo el mundo y el 40% de los que se encuentran en el 1% superior de la distribución de la riqueza mundial.

Si bien la riqueza en China comenzó desde una base más baja, creció a un ritmo mucho más rápido.

También podemos saber sobre la evolución de la desigualdad.

La mitad inferior representa menos del 1% de la riqueza global
El 10% más rico posee el 82% de la riqueza global
El 1% superior posee el 45%

Como resultado, el 1% de las personas con mayor patrimonio del mundo aumentó su participación en la riqueza mundial.

Si analizamos en profundidad porque se produce esto, podemos encontrar que hay algunas reglas que están “preparadas” para beneficiar al porcentaje que más recursos y riqueza tiene.

Para entender por qué digo esto, tenemos que repasar brevemente la historia financiera de USA.

En 1933, luego de la crisis bursátil o gran depresión, se aprobó la ley que regula el Mercado de Valores con el objetivo de proteger a los inversores frente a la pérdida de dinero. Aseguró la transparencia en los estados financieros y restringió el acceso a las inversiones denominadas de “alto riesgo”.

Solo quienes entren en la calificación de “inversor acreditado”, podrían invertir en determinados activos de los catalogados como “riesgosos”.

En aquel momento se esperaba que los inversionistas acreditados tuvieran conocimientos financieros y, por lo tanto, no necesitaban protección alguna a la hora de invertir su capital. O visto de otra manera, la única condición que cumplian estas personas es que tenían que ser educados e inteligentes sobre las inversiones, conscientes de los peligros y estar preparados para manejar las posibles pérdidas.

Por el otro lado encontrábamos una segunda creencia, las personas con ingresos más bajos se mantenían más seguras al no aventurarse en las potenciales pérdidas, incertidumbre y riesgo de este tipo de inversiones.

La SEC (el regulador de los mercados de USA) requiere que un inversionista acreditado tenga un patrimonio neto de U$S 1.000.000.- o un ingreso anual mínimo de U$S 200.000.- durante los últimos dos años o U$S 300.000.- en ingresos anuales combinados para los cónyuges.

Adicionalmente existen compañías de la industria financiera que también son consideradas inversores acreditados, como bancos y compañías de seguros, entre otros.

Todo quien no pudiera cumplir con estos requisitos se lo consideraba un inversor “no acreditado”, es decir aproximadamente el 90% de la población de USA.

Como demuestra el estudio de Credit Suisse, Estados Unidos tiene la mayor cantidad de miembros del grupo de riqueza global del top 1%, y actualmente representa el 40% de los millonarios del mundo. El número de personas de UHNW (Ultra High Net Worth) con una riqueza superior a U$S 30 millones es aproximadamente cuatro veces mayor que el del país que lo sigue en el ranking, China.

El número de personas con más de U$S 1.000 millones de patrimonio en Estados Unidos ha aumentado en la última década, de 267 en 2008 a 607 en 2018. La quinta parte más rica de los estadounidenses posee el 88% de la riqueza del país.

No solo que los ricos se han vuelto más ricos, sino que también más rápido.

A pesar de que el objetivo principal de la SEC es proteger a los inversores de la pérdida de dinero, también fueron una parte necesaria para lograr esta desigualdad. Persiguiendo este objetivo lograron que las inversiones en emprendimientos o startups, que es una de las inversiones que mejores resultado demostraron a lo largo de la historia, sea una clase de activos únicamente para personas “ricas” o de alto patrimonio.

No solo se le incrementó la dificultad para obtener el capital necesario a los emprendedores sin redes de networking o redes de contactos que facilitasen el acceso a inversores ángeles. De esta forma los emprendedores se encontraron limitados con las opciones para hacer “fundraising” y de quienes podrían obtener ese capital necesario.

La ley fue efectiva para ayudar a los ricos a enriquecerse más (a través del acceso a mejores oportunidades de inversión de mayor rendimiento y consecuentemente de mayor riesgo) y a los “pobres” seguir siendo pobres al no tener acceso a inversiones que generan múltiplos de retorno por encima de la media del mercado. Inversiones que pueden significar un cambio en la vida de los inversores que son parte de las mismas.

Si no puede participar en las oportunidades de inversión de mayor riesgo, pero que a su vez son las que generan mayores retornos … ¿cómo se puede crear riqueza?

Hoy en día gracias a la tecnología y las nuevas regulaciones podemos utilizar un concepto no tan nuevo (pueden leer sobre esto en ambos posteos previos – Breve historia sobre el crowdfunding o financiamiento colectivo y La breve (o no tan) historia del Equity Crowdfunding -) como el crowdfunding.

El análisis pasa por cómo aprovechar el poder de los pequeños inversores, el gran impacto que tienen a la hora de construir nuevas empresas y, gracias a esto, generar resultados positivos y riqueza en las partes intervinientes.

La inversión en startups o emprendimientos está evolucionando, atravesando un crecimiento natural que se traduce en nuevas alternativas para inversores “micro-ángeles” y que les brinda a los fundadores nuevas alternativas a la hora de recibir inversión, más allá de los actores tradicionales del ecosistema emprendedor, como lo son las incubadoras, aceleradoras, fondos de capital emprendedor o venture capital.

Coronavirus, Economic Impact, Startups & Venture Capital

At the time of this writing, COVID-19 (aka Coronavirus) has infected more than 525.000 people and has killed more than 23.000.

Two students at Carnegie Mellon University developed Covid Visualizer to provide a simple, interactive way to visualize the impact of COVID-19. You can check each country or territory to see cases, deaths, and recoveries.

China’s experience so far shows that the right policies make a difference in fighting the disease and mitigating its impact through containment, but at a significant economic cost.

Coronavirus is having a profound and serious impact on the global economy, public markets and leading corporations.

The S&P, FTSE and Dow Jones Industrial Average have all seen huge falls since the beginning of the year.

And because of that, central banks in several countries have cut interest rates trying to encourage spending, and of course, to boost economy.

Travel and tourism industry is having an enormous impact, ranging from hotel and cruise ship quarantines to airlines halting flights in some regions. According to the World Travel and Tourism Council (WTTC), the sector could shrink by up to 25% in 2020.

For example, the USA travel and tourism industry could lose at least U$S 24 Bn. in foreign spending this year because of the rapidly spreading coronavirus and up to 50 million jobs could be lost in the industry worldwide because of the pandemic.

One of the well-known Venture Capital firms in USA, Sequoia Capital, sent a memo to the portfolio companies advising them to prepare for the worst.

It refers to Coronavirus as “the Black Swan of 2020” and give founders & managers some insights of the challenges that companies in frontline countries are facing:

Drop in business activity.
Supply chain disruptions.
Curtailment of travel and canceled meetings.

It also advise the portfolio companies to “question every assumption about your business.”

Cash runway. Do you really have as much runway as you think?
Fundraising. Private financings could soften significantly, as happened in 2001 and 2009.
Sales forecasts. Even if you don’t see any direct or immediate exposure for your company, anticipate that your customers may revise their spending habits.
Marketing. With softening sales, you might find that your customer lifetime values have declined, in turn suggesting the need to rein in customer acquisition spending to maintain consistent returns on marketing spending.
Headcount. Given all of the above stress points on your finances, this might be a time to evaluate critically whether you can do more with less and raise productivity.
Capital spending. Until you have charted a course to financial independence, examine whether your capital spending plans are sensible in a more uncertain environment.

“Having weathered every business downturn for nearly fifty years, we’ve learned an important lesson — nobody ever regrets making fast and decisive adjustments to changing circumstances,”
Sequoia Capital`s Memo

And of course that after the Sequoia Capital memo founders all around the world are, understandably, freaking out. It’s hard enough to raise money in a healthy economy, let alone when the stock markets are tanking globally.

It’s obvious that VCs will not stop investing, but it’s also true that VCs will become more selective on their deals, they will take a bit more time to get to know and diligence the business, and the “investing grade bar” will be higher.

According to CB Insights forecasts, funding will slow down during the next quarters, with some even feeling that “disinvestment” will be heard more often in the countries that have been hit hardest.

Due to the lockdown of Universities, support offered by academic accelerators and incubators will be off the cards.

Public grants and funding from national and supranational organisations may be a more stable route to follow.

For example, the French government has announced a U$S 4.3 Bn. plan to support a startup ecosystem struggling to survive the COVID-19 pandemic that has shut down the nation’s economy.

Startups will also need to focus on their own sustainable model and bootstrap. Most of them will need to find a way to keep on growing even if they can’t access fresh capital.

Is Latin America the “NEW CHINA”?

Early this year, SoftBank Innovation Fund was announced as “the largest-ever technology fund focused exclusively on the fast-growing Latin American market”.

This SoftBank decision makes total sense once we realize the economic development of Latin America in the last years. The region is now regarded as “the new China” when it comes to venture investing, business startups, and venture funds because of rapid growth taking place in the economy.

In fact, the Association for Private Capital Investment in Latin America stated that in the first half of 2019, venture funds investments in Latin America summed USD 2.6 Bn. across 160 transactions, which is a big improvement to the USD 2 Bn. raised in 463 transactions for 2018.

Just think about this fact:

Do you know that in 2016, all startups in Latin American just raised USD 500 million combined?

In other words, venture funding in Latin America in the first 6 months of 2019 summed more than 5 times the amount raised in the whole of 2016.

This clearly proves that:

Venture funding is taking over at a fast rate and the stats are there to prove it .
Rounds are getting bigger which shows how the market is maturing quickly.
More money was raised over fewer transactions which means that larger amounts of cash are being invested.

We’re now seeing a noticeable improvement in activities in the early stage from seed all the way to growth capital.

Big deals haven’t been left out of this as more and more investments have been rewarded like:

Colombian on-demand delivery unicorn Rappi raised USD 1 Bn. in April.
Gympass raised USD 300 million in June in Brazil.
Brazilian Real estate unicorn QuintoAndar raised USD 250 million in a Series D.

In recent years, Brazil has had the largest share of venture funding in Latin America but this has come to change because in the first 6 months of 2019, Colombia has surpassed Brazil in terms of venture dollars raised thanks to the recent Rappi’s investment round.

According to the Association for Private Capital Investment in Latin America, Colombian startups raised over USD 1.06 Bn. in venture funding in 13 transactions.

Now, compare this figure to the USD 989 million raised by 88 Brazilian startups over 88 deals and you would clearly see that the difference and margin is really large.

Next in the list is Mexico with USD 310 million invested in 34 deals. Collectively, the three markets made up 91.9 percent of the dollars invested and 84.9 percent of the deals during the first half of 2019.

Also, Kaszek Ventures founded in 2011, has recently closed two funds totaling USD 600 million in August as reported by Techcrunch. This made them one of the primary architects of the rapid boom startup financing and growth in Latin America.

In the words of Nicolas Szekasy, the co-founder and managing partner of Kaszek Ventures: “Every year it’s one step ahead. In the last few years, in particular, we have seen the pace accelerating and an increase in quality of the founding teams”.

2018´s Industry Recap and 2019 hottest industries for Venture Capital

2018 was a historical year. Last year saw the highest level of venture capital funding since 2000, the last year of the dot-com bubble.

According to data published by PitchBook and the National Venture Capital Association, Venture Capital firms spread roughly U$S 131 Bn. across 8.949 deals.
The previous record was a $100 million total notched in the year 2000.

More than a half of the total capital invested came from U$S 50 M (or more) deals. This boosted the average deal size and valuations across every investment stage and series last year. But because venture investors are paying so much up front, it’s becoming harder to profit.

382 fundings were U$S 100 M (or more) “megarounds,” up from 266 in 2017, with 184 of those coming from the U.S.
In terms of “unicorns,” companies with a valuation of at least U$S 1 Bn., the U.S. saw the creation of 53 new ones in 2018 versus 29 in 2017.
The fourth quarter alone saw 21 “unicorn births,” the highest ever recorded in a single quarter.

Venture capital investments in Asia rose 42% in 2018 versus 2017 with an 11% increase in the amount of money invested. Asia broke records with a 35% in “megarounds”, to 162, and a 60% jump in the creation of unicorns, with 40 coming of age during the year.

California, Massachusetts, and New York continue their dominance of venture investment activity, attracting 79% of total U.S. capital invested and 53% of the number of U.S. deals completed last year.
VC funding in the San Francisco region jumped 55%, to U$S 28 Bn., and New York funding reached U$S 13 Bn.
Venture Capital firms and investors point to increasing operating costs and higher valuations in those three states, signaling optimism for more investment in emerging ecosystems, which also have the benefits of a growing talent pool, maturing networks and ecosystems, and more favorable pricing.

VC Trends

Artificial intelligence, digital health and financial technology companies led the investment portfolios, with AI-related funding jumping 72%, to U$S 9.3 Bn.

Software continues to eat the world but life science activity has seen significant growth.
More than U$S 23 Bn. was invested across 1,308 deals in life science startups, a record high for both metrics.
Healthtech drew a significant portion of angel/seed investing in 2018Q4, highlighting investor interest in funding groundbreaking technologies to meet some of the biggest challenges and opportunities in the sector.

National Currencies last breath?

The world of digital currency has gained massive popularity in the past couple of years.

Bitcoin has moved over $19,000, whereas, Ethereum is increasing in value every day and its price has crossed over $700. The continuing boom of cryptocurrencies might eventually lead to the next big step, i.e., the end of cash currencies.

Yes, you heard it right. Even the director and founder of Bitt, Gabriel Abed, is of the opinion that cash has been in the market for too long, and all the currencies will eventually be digitized.

Rise of the New Economic Age

All the cryptocurrencies, including Ether and Bitcoin, are basically issued by private organizations, groups, and individuals, they mine it through cryptographic protocols and more and more countries are gradually heading in that direction.

Russia has recently announced its plans for a national digital currency called Crypto-Ruble.
China and Kyrgyzstan are following the lead.
In Japan, over 200,000 stores have been accepting bitcoin as a legal tender and some of the big banks are planning to create their own version of these cryptocurrencies.

In a highly innovative environment, efforts are being made to circulate digital currency in various economies. The Federal Reserve in the United States however, has no such plans of nationalizing the cryptocurrency.

Crypto-Ruble – A New Start for Better Russian Economy?

Putin is very strict about following law and order and despite the advantages of having a national digital currency, it has gray areas when it comes to its legal status. This is why he is a little skeptical about cryptocurrencies. Therefore, the aim of Russian official crypto-policy is to eliminate the chances of illegal transactions such as, human-trafficking, terrorism financing, and money laundering, while at the same time using this technology to modernize the internal capital management of Russia. This is the main strategy behind crypto-ruble.

The crypto-ruble will serve as a connection between the real world and the crypto-world, which would enable the efficient tracking of capital flow in the Russian economy. Those who won’t be able to provide a paper trail of ownership will have to pay tax on crypto-ruble at the capital gain rates. It will encourage the development of low-cost crypto-payment systems, which allows the exchange of rubles for goods only in digital currencies where ownership can be tracked.

China Taking a Step to Cryptocurrency Implementation

People’s Bank of China has already created a prototype of a digital currency that may be circulating in the market in times to come, alongside Yuan. The country is testing possible scenarios in a simulated environment and running dummy transactions using digital currency with a few commercial banks in China.

Making Quantitative Easing Easier with National Cryptocurrency

The rise of new economic age with cryptocurrency as a national currency will make quantitative easing much easier. Quantitative easing is an economic concept, whereby the central bank purchases predefined amount of financial assets and government bonds to give a boost to the economy. By having a national cryptocurrency, it will be easier to execute the concept of quantitative easing.

Why is National Digital Currency a Better Idea?

Abed further added that nationalizing the digital currency is a better option as it is more transparent, immutable, and efficient. In fact, there have been talks between the Central Bank of Jamaica and Bitt to enable testing this technology. At the same time, the company has been running the active pilot programs in other Caribbean countries.

Jamaica is encouraging the FinTech startups by enabling them to operate in the country. The main reason behind these efforts is to foster innovation. A representative of the Caribbean Development Bank said that they do not want to be in a situation where regulatory authorities have a strong and dominant hand initially. He further said that the Caribbean can be used as a virtual space to test the new technology in a secure environment. These efforts will eventually enable them to take bigger steps in the future.

China Government and Venture Capital

In emerging nations, governments have greater influence over markets than ever due to regulations and political control. The ubiquity of a government can be seen in every economy through indirect or direct ownership of investment vehicles. China is no different.

The Chinese government started relaxing its grip on the economy during 70’s, which resulted in the escalation of investment and private entities. Since 1979, private and foreign investments have contributed a major role in making China one of the fastest growing economy in the world. Despite that, the country struggled to have standard financing mechanisms for businesses, including the availability of debt finance for smaller firms or presence of efficient equity markets. Although, it gave rise to a number of challenges, yet, it created opportunities for Venture Capital (VC) in China.

Rise of VC firms in China

The VC firms started making their way in the Chinese market during the early 80’s, and the impetus for this development was public policies, because the government still plays a dominant role in the country. The National Research Center of Science and Technology for Development suggested in 1984 that China should set up a VC system to encourage high technology market development. A number of local governments in the country supported and sponsored VC funds so that they could be invested in State Owned Enterprises (SOE) so as to level them up at a global standard in terms of quality and productivity. An example of such organization was China New Technology Venture Investment that was formed in 1985. Some of them were established for years, while others were formed only to make an investment in firms, especially the SOEs.

During 80’s, the primary focus of VC firms was to invest in property and infrastructure as there was an increasing popularity in hotel development and tourism sector. However, many of these investments couldn’t perform well and private equity investors lost interest in such investments. By the end of 1980s, interest in the Chinese market started brewing again. Due to steady economic growth and the government’s interest in such investments, VC was encouraged. But it wasn’t without a conflict as the government wanted to invest in high technology market and private investors wanted to keep their focus on low risk investments.

Evolution of VC in the Chinese Market

There was a lot of investment failure in the beginning as tourism and hotel development business couldn’t produce sufficient return. Moreover, a sudden proliferation of VC also turned out to be a failure, because the government officials and entrepreneurs didn’t have that experience.

As a result of such failures, a new body was formed in 2002, called the China Venture Capital Association, to improve the professionalism in this sector. Since then, the VC ecosystem has not only evolved but also shown tremendous growth.

Current Status of VC in China

While the investors in the developed nations are cutting their stakes in startups and golden age of unicorns is reaching the end, the venture capital fund backed by the Chinese government has brought together the biggest pool of startups in the world. It has reached 10 times the amount invested by VC in startups in 2015 ($32.2 billion).

Beijing Initiative

The country recently announced the formation of a $30 billion state-backed VC fund for encouraging the reform of SOEs and bolstering innovation. The fund is backed by the State Council and China Reform Holdings Corps, and it is established to find out the market-friendly ways to combine state assets and easily channel investments toward specific projects. It can turn out to be an effective move by the government in the long run despite the concerns regarding inefficient distribution and governance of assets. With the help of this initiative, if Beijing successfully upgrades its SOEs through effective investment in promoting high-tech companies, it can be helpful in rebalancing the economy of China by taking its reliance away from investments that focused on consumption based growth.

Other Investments Made by the Local Governments

China is struggling with economic difficulties as a result of ever increasing corporate debt, skyrocketing home price and reducing trend in exports. To combat such issues, local governments in China are also entering the VC sector, investing a total of ¥30 trillion. The purpose of this investment is to trigger the development of high-end manufacturing firms, internet and bio-technology so that it replaces the eroded economic growth of stumbling sectors.

Around 780 local government funds are competing to seed the upcoming multibillion dollar startups, including online emporium Alibaba Group Holding Ltd, Xiaomi, and SZ DJI Technologies Co. (Drone maker company), as China is striving to create at least one Silicon Valley in more than 20 provinces.

If China is able to achieve a desired outcome of such investments, it will not only enable the country to avoid the middle income trap, but also scale the entrepreneurship and innovation at a massive level.