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Entrepreneurs aren’t making money. The system is broken.

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If you think your business is worth millions but no one will buy it, is it actually worth anything?

There is something very fundamentally broken with the entrepreneur / small business model. What that means, is that if you are a ‘successful’ small business owner you will probably never be fully rewarded for the time, money and heartache that you have poured into your business. Surely the lack of sleep and the fact you remortgaged your house to keep the business going has got to be worth millions, hasn’t it?

In fact, while every day your employees, suppliers, landlords and a whole ecosystem of partner companies extract value from your business. You, as a founder, would have made more money in the last decade if you had just worked your way up the corporate ladder. Depressing isn’t it?

The trouble lies with the way value is exchanged. Your business may very well be worth millions to the economy and society, but unless you can convince someone to part with some cash for shares of that business, it is actually worth very little to you.

Back in the good old days, the answer was simple, grow the business, list it on a stock exchange, the founder finally gets to pocket some cash, the company gets an infusion of capital to help it scale and everyone’s a winner. Can’t make it to the main market? Well there is probably a secondary market happy to take your fees.

Yet somewhere along the way, this ultimate ambition of getting listed started to lose it’s allure. In the last 20 years public listings have halved. Last year there were less listings then at the height of the global financial crisis.

There are 2 key drivers to this.

The first is the process, the second is the outcome.

1. Process

The process of getting listed is excruciating for entrepreneurs. Most Investment Banks concur that the average listing will take you 18 months, cost you in the region of $3m+ and will tie up your senior team for at least the last 12 months before you list.

James Freeman, the Founder of Blue Bottle Coffee summed it up very astutely ‘It seems like a way of living in hell without dying’

He’s not wrong. And so he decided not to list.

2. Outcome

And then there is the result. Get listed and while you do suddenly find yourself with an asset you can trade you have entered a completely alien world and are now at the beck and call of thousands of investors who believe that owning a share of your stock gives them the right to question your every decision. In fact, you will soon find the people that question your decisions the loudest often don’t even own your stock.

Those that do own your stock are generally playing a very very different game from the one that you are playing. As an entrepreneur you have spent the last decade of your life making decisions around how you can create more value for others. Your team, your clients, your partners. All the things that you needed to do to build the company and in almost every case the results that you saw from these decisions took years. Yet suddenly you are faced with an army of investors who may buy and sell your stock dozens of times within a single day! The vast majority of your shareholders are traders, they don’t care about long term value they want to make money when the shares go up and when the shares go down. And if that means spreading false rumours on the Internet then so be it.

Yet for all that the market has many flaws, in many cases it is still the best option for finally releasing some liquidity and ‘unlocking’ the value that you know is in your business.

A new way to solve these problems

Fortunately for us, where there are problems there are opportunities and where there are opportunities, entrepreneurs inevitably follow. Here is a quick look at 3 of the solutions being put forward to help entrepreneurs get liquid.

Chamath Palihapitiya, a US based VC investor has listed an empty shell company on to the New York Stock Exchange and is offering it up to companies to let them ‘reverse in’. In effect being acquired by the shell to give them all of the benefits of a listing but without the pain and cost of the process. His target is the multitude of tech Unicorns ($1B+ valuation) that are flush with investor capital and so don’t need the headaches associated with traditional listing but would like to reward staff, founders and early investors.

Eric Ries (he of Lean Startup fame) is not just trying to hack the system like Chamath, he is actually trying to reinvent the whole market place. He is building his own marketplace called LTSE (Long Term Stock Exchange) and one of the tenants of his new system is that the longer you own stock, the more rights you are granted. Hence founders keep control and day traders can do what they like but have less sway over the company direction.

You will notice that the first two of these options come out of Silicon Valley, but if you are like the vast majority of small business owners you will have also realised that whilst Silicon Valley is great for disruption and buzzwords, most of what goes on over there has very little impact on you, your business or anyone you know.

The third option I’m going to talk about did not come out of Silicon Valley, is not aimed at Unicorns and doesn’t need a whole new exchange to make it work.

Concept of Agglomeration.

Similar in concept to Chamath’s model, an ‘Agglomeration’ is a listed vehicle exclusively for the use of other companies to allow them to get the benefits of listing. However, in this case the target companies are small to mid size across any sector. These are solid, debt free, profitable companies run by industry leaders. The founders swap their private stock for public stock and then carry on running the business as they were. They get all of the advantages of a PLC with none of the time and costs associated with a traditional listing.

The best way to think of this is to think of Warren Buffet’s Berkshire Hathaway. A holding company that owns many others but doesn’t interfere in the running of each.

While it has never been a better time to be an entrepreneur there are still some huge hurdles to overcome. The vast majority of government and media attention is not on those companies that have figured out how to solve problems and create value in the world, but on those that are in the glamourous world of ‘startups’. A weird parallel-dimension where fundamentals such as generating revenue, profit and cashflow play second fiddle to finding an investor to bankroll you. Yet eventually, some good businesses will emerge from there and before long the founders will look around and realise that they too might have a business worth millions on paper and yet have nothing to pay school fees with.

The capital markets may be broken but they are the best we have right now for rewarding entrepreneurs and allowing investors to benefit from scaling businesses.

All innovation in this area is to be applauded. Anything that can serve to reconnect entrepreneurs and changemakers with the liquidity needed to both inspire and fuel their ambitions is a good thing. We would then, finally, have a system that truly rewards those that take the risk and create the value in our society.

Callum Connects

Denise Mossis Kipnis, Founder & Principal of ChangeFlow Consulting

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Denise Mossis Kipnis’ curiosity in people and the world, lead her to set up ChangeFlow Consulting.

What’s your story?
I’m driven by curiosity. Having been the only one in a room who looks like me for most of my life, I developed a curiosity about who stays, who leaves and who thrives in minority/majority situations including when and how connection and collaboration happen. I was a systems thinker long before I knew what that was, always asking why and so what; and seeing the pieces, the whole, and the places in between. So helping people and organisations move through the complexity of transformation feels natural to me.

What excites you most about your industry?
I see change and inclusion as two sides of the same thing; I don’t practice one without the other. Some people see change as death, as loss, as exhausting. And it can be. But I see in the work I do as an opportunity for something new or hidden to emerge. When an organisation understands that it is first a group of people, who themselves represent and belong to groups of people, and it begins to tackle what it would mean to understand and learn from all that talent, all that diversity, to have them all working for and not against the organisation, to truly unleash all that their people have to offer; that’s magic.

What’s your connection to Asia?
Change and inclusion are personal values as well as professional strengths. For me, living and working outside of the States was a bold experiment to see whether any of the stuff I’d learned about change and inclusion would work outside of the US. My husband and I targeted Asia specifically: it would be the greatest contrast, culturally speaking, for me; and a unique career springboard for him.

Favourite city in Asia for business and why?
Although I’ve practiced in other cities, I am biased towards Singapore. In some ways it’s what Los Angeles is to the rest of the United States, a microcosm of sorts. The regional/global nature of it means that so many different nationalities and cultures are represented. As a result of this mix, you never know what you might get. In some situations, cultural dynamics are obvious, sometimes subdued. The variability is compelling.

What’s the best piece of advice you ever received?
“Never ask anyone to do anything you wouldn’t do yourself.” Michael Rouan.

Who inspires you?
Often it’s a “what” not a “who.” I can get inspiration from a passage in a book or a situation in a movie, as well as a turn of a phrase or watching people interact. I often make the biggest connections between the various threads I’m working on when I’m sitting in someone else’s event.

What have you just learnt recently that blew you away?
I’m honestly not blown away by much. Instead, I’m struck how circular things can be: ideas often come back around with a slightly different twist and I watch the way it shakes things loose for people. I recently sat through a workshop on Self as Instrument, and despite being thoroughly versed already, I learned something. In preparing for a panel on design thinking, I unearthed a new language to describe things.

If you had your time again, what would you do differently?
You’ve caught me at a good time. I’m sitting in appreciation and gratitude for all my experiences, because I wouldn’t be who I was today if all that has happened, didn’t. And yet one thing comes to mind: It wasn’t until I redesigned my website two years ago (shout out to Brew Creative!) that I realised I hadn’t made explicit agreements with my past clients as to what I could share publicly about our engagement, or whether I could use their logos in my promotional materials. In my business, confidentiality is so important, and yet I need to be able to talk about the work as reputation and experience leads to the next success, and so on. It turned out a lot of the contacts I had known had left the organisations where the work was done, so they couldn’t help at that point. So the practice I’m carrying forward is to get those agreements up front, and to make sure my relationships in client systems are broad as well as deep.

How do you unwind?
Science fiction, puzzles, wine.

Favourite Asian destination for relaxation? Why?
Home. I don’t travel to relax, I travel to learn and explore.

Everyone in business should read this book:
Built to Change, by Ed Lawler and Chris Worley. To my knowledge, it’s the first pivot from advising organisations away from stability and toward dynamism, from strategic planning to strategizing as an action verb; to blow up the traditions and rigidity that impede organisations from developing change capability.

Shameless plug for your business:
We’re taught that there are two kinds of people: those who see forests, and those who see trees. There is a third type, my type, and we see the ecosystem. Worms, climate, birds, the spaces in between. This is the perspective organisations need to be successful in solving complex problems and thriving in change.
ChangeFlow uniquely blends four disciplines (two of which are multi-disciplinary in themselves): organisation development, culture and inclusion, change management and project management.

How can people connect with you?
Facebook: https://www.facebook.com/ChangeFlowConsulting/
LinkedIn: https://www.linkedin.com/in/dmorriskipnis/
LinkedIn Company page: https://www.linkedin.com/company/4862954/
Email: [email protected]
Website: http://www.changeflowconsulting.com

Twitter handle?
@ChangeFlow

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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Callum Connects

Agnes Yee, Legal & Compliance Recruiter of Space Executive

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Agnes Yee started Space Executive in Singapore, which is a hub for businesses in some of the world’s fastest growing economies.

What’s your story?
After graduation, I joined a design media company as a Business Development Executive, during the era when ‘reading a magazine online’ was unheard of. I believe that laid the foundation for being unfazed by rejections.

I fell into recruitment pre-GFC and rode the highs and lows in the early years. A decade later, I decided to set up my own recruitment company, partly because I could. I’m acutely aware of the face that being an Asian female in Singapore is sometimes a privilege, and that many women in the world are living a very different existence.
Thereafter, we joined Space Executive as part of a merger. I am currently the Partner of Space Executive, a recruitment company focused specialist disciplines, including Legal, Finance, Digital, Sales and Marketing and Change. We also run Space Ventures, a venture capital business, which invests in seed and pre-series A businesses.

What excites you most about your industry?
On a daily basis, we’re influencing how one spends a third of their day. It is interesting how the Internet has transformed the industry, and I’m excited to see how we can harness technology to bring us to the next phase of this business.

The VC is an extension of applying our skills and experience in reading people. We very much invest in the people as much as the idea. Being a native Singaporean, it’s been exhilarating watching Southeast Asia becoming a hotbed of ideas; and young entrepreneurs simply daring to dream.

What’s your connection to Asia?
I’m a born and bred Singaporean. I love that I speak both English and Mandarin, grew up playing with Indian friends and eating Malay food.

Favourite city in Asia for business and why?
Singapore for the low barriers of entry to set up a business, but has to be China (and Hong Kong) for their hunger and constant innovation.

What’s the best piece of advice you ever received?
青春不要留白 which translates to ‘Don’t waste your youth.’

Who inspires you?
Anyone who has gone against the grain.

What have you just learnt recently that blew you away?
It wasn’t recent but reading the article on https://waitbutwhy.com/2015/12/the-tail-end.html never fails to blow my mind how little time we have left. Charting our lives in weeks, and realising I only have enough time left to enjoy 60 Christmas turkeys, read 300 books (all if I’m lucky); and mostly, I’m left with the last 5% of the time that I spend in-person with my parents.

If you had your time again, what would you do differently?
I’m cognisant that every decision I made in life has brought me to where I am today, and I wouldn’t change one thing. But I’d really like to have had more time to travel.

How do you unwind?
Exercise and wine.

Favourite Asian destination for relaxation? Why?
Trekking any mountain in Asia. It brings us back to the most basic. To overcome elements of nature and our own mind.

Everyone in business should read this book:
Start with Why, Simon Sinek

Shameless plug for your business:
Space Executive started in Singapore, a hub for businesses in some of the world’s fastest growing economies. We assist organisations in accessing a targeted and specialised, and often times transient talent pool.

Out of Singapore, we have recruited across 14 countries; and have embarked on our global expansion plans with offices in Hong Kong and London this year, and US, Japan and Europe in the following years.

Space Ventures provides funding, management and financial guidance to young businesses with original ideas. We have invested in peer to peer lending platforms, credit scoring, social media education, and other start-ups spanning diverse industries. We are always interested in hearing more about new ideas.

How can people connect with you?
https://www.linkedin.com/in/agnesyee/

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

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