A Young Angel’s Take on the SFA

Sometimes, I look back in my journey as an entrepreneur since I was 16, and I realized that there are so much that I have learnt from my failures. And because of that, I understand why many entrepreneurial guys don’t want to start their own business; the risk might just be too great for them. I strongly believe that entrepreneurship will be the way to go, to be encouraged. Sometimes, as angels, we learn from the entrepreneurs as they learn from us; it is a learning ecosystem. Entrepreneurship is about figuring things out.

I was speaking with a Grab driver when I was traveling home yesterday, and he mentioned that he had a dream to start out on his own, but had too much of a risk that he had to take if he had done so. It struck a chord in me as a young angel investor/venture capitalist that such a bright (pretty young) person had been deprived of the opportunity to grow his own business. How I wished the government had not placed so much regulations, especially when they claim to be promoting entrepreneurship (as with many governments around the world).

Personal take: The governments of the world should remove Regulation D on the SFA because it reduces the entrepreneur’s ability to grow. I understand that it is meant to protect investors, but if the investor himself/herself believes that he/she can stomach the risk knowing that it is a risky move to take, then it should be a green light. The government shouldn’t interfere with how people deploy their money: it’s not the government’s money anyways. Regulations might be good to get people to think twice and evaluate whether they could stomach that investment, but seriously, Reg D deprives of so many entrepreneurs and investors of opportunities to join the ride of the next Uber, Grab, Instagram etc.

Look, let’s be honest. I have reached the point of no return. I know that I have 2 courts that I will play in (and 2 courts only): the first being entrepreneurship, and the second being investments. I don’t need the government to say “Lance, you can’t deploy your money here because we say that you can’t.” I’m not doing anything immoral or unethical, I am trying to tell everyone to keep their dreams and goals alive, and blaze a trail along the way. The worst thing that could happen is for you to do something that you love doing, and the best thing is that you could make it a big business that becomes the next unicorn. I simply couldn’t comprehend the logic behind such absurd laws, rules and regulations made by the SEC or equivalent government bodies to restrict investors who find that they have got promising startups to come in and say, “I believe in you. You can do it!”

In this day and age, entrepreneurship is going to be the driving force of the economy. If you want to promote entrepreneurship, I think you need to come in from multiple angles, one from the point of view of the entrepreneurs, as well as loosening the grip on how investors deploy their cash (as long as we know what we are doing and we are not involved in insolvency cases).

P.S. I’m going to follow Sir Richard Branson’s motto: Screw it, let’s do it.

The Financial Round Table of Knights

Sometimes, when a company is in deep trouble, various things might happen – hostile takeovers, premium raids, knights in shining armor coming in to save you, you name it, it could potentially happen. Now, there are 4 knights in the game: white, black, gray and yellow. Let’s go through them from the most familiar, to the least familiar one, so that we get a feel of the financial round table of knights.

A white knight is an individual or corporation that acquires a corporation on the verge of a hostile takeover (which means the management has to kiss goodbye to their salaries). While the target company doesn’t remain independent, a white knight is viewed as a preferred option to the hostile company completing their takeover. Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares. White knights are known for turning around such companies after taking over the company. A prominent example of this was Deutsche Borse AG, which blocked $17 billion merger with NYSE Euronext in 2011 and Clorox’s rejection of Carl Icahn’s $11.7 billion takeover bid in 2011.

A black knight is an individual or corporation that initiates the hostile takeover. This can happen via a tender offer, a proxy fight or by purchasing shares on the open market. Well known hostile takeover deals, though uncommon to go through, include AOL’s $164 billion purchase of Time Warner in 2000 and Sanofi-Aventis’ $24.5 billion purchase of biotech company Genzyme in 2010.

A gray knight, as the color of his armor suggests, is in between a white knight and a black knight. In order of preference would be white knights, gray knights and lastly black knights. These are groups that take advantage of any failed mergers and acquisitions from the first bidder (usually a black knight) to get good terms for themselves. Think of them as vultures circling around for dying prey. However, gray knights may not reveal their true intentions until after the merger and acquisition is completed.

Now, what about a yellow knight? A black knight changes his armor to one of a yellow knight when he realizes that they are unable to battle it out with a white knight and/or a gray knight. As the old saying goes, if you can’t beat them, join them. And that is exactly what they did. Under such circumstances, a change in tactics is required as the black knight turned yellow knight might have underestimated the target’s acquisition cost or takeover defenses. This might leave the yellow knight in a weak bargaining position, but a friendly merger might still yield results if there is a real financial rationale for the merger.

The world of business is indeed more complicated than black and white. It’s so much more colorful…

Source of Information: Investopedia

Thoughts on Social Venture Capitalism – A Personal Story

Recently, I wrote two emails to raiSE, a social enterprise funding platform by the Singapore government, and NTU’s Office of Student Community Engagement, which operates the NTU CoLab4Good Fund, a grant fund for students and alumni to apply for to start/run their social enterprises.

Even as a college student, having went through some storms in life, I have seen some things when I go on with my investing and entrepreneurship journey. One thing, that Jeremy, my good friend and partner in The Precession Effect, pointed out on his post (which I strongly agree), is what we truly stand for, to inspire value creation across the globe through business, investment and education. Such a beautiful vision.

I discovered the game of value investing in September 2017, and this is one of the games that changed how I do things. In the past, my game was only dividends, blue chips and all that sorta stuff. However, today, I am vested in about 8 businesses that has been generating me good returns because of the fundamentals I have learnt. The beauty of the stock market is its liquidity and its transparency (though for me, the first isn’t my concern as I plan to hold it for the long term).

I got interested in the game of private equity in March 2018, and decided to do some investment in the field using value investing principles through equity crowdfunding and friends-and-family-fund (meaning I give them the money for an equity stake because I know them personally). Now, I am processing my membership with Angels Central, which is a business angel network in Singapore (though I will still be using value investing principles there).

Then, Angels of Impact came into my life. This is a group of angel investors who invest in social enterprises for poverty eradication. Then it came back to my mind during my first meeting with Jeremy at NUS (after attending a PhD defense there), where he shared with me his vision of inspiring value creation across the globe, which is in line to mine – to globally inspire people in living privileged lives through creating value (maybe there’s some quantum mechanics at work). He shared with me his story of “Can Brands be Good?”, which then sparked me at this point that I wanted to go into the impact investing space (I know my value investing friends will ask me ‘are you nuts?’). An irony to my belief in value investing, isn’t it? Well, not really, in my opinion.

I strongly believe that when we invest in a company, there is unforseen side effects into the future. It is more than making money, it’s a vote on the future course of mankind. This sparked me to start my own social venture capital firm (which I am still in the process of talks with them). People ask me “Are you crazy? Throwing money just like that?” Of course I won’t throw my money just like that, for I determine who is deserving of my money from both the social and financial standpoint. Sometimes, we have to be a little crazy to achieve great things.

I like what billionaire Mark Cuban said in his speech to students in Mount Lebanon High School. And I would like to pose the same question and advise to all the young people out there: “Who here has a business idea?…I want you all to think, who’s next? And what are you going to do to get there? Try different things, because there is absolutely nothing that can possibly stop you guys!”

If you ever want to start to learn how to understand businesses and invest but unsure of how and where to begin – you can reach out to me through direct message on Instagram @kirayamato149_2. A whole new world undiscovered awaits.

So why do all these? For a simple reason: To inspire value creation in the younger people around the world.