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Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
Informal Investment
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Informal Investment

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  • 1. Presented by Group 2 Nancy Minnie Allen
  • 2. Outline
  • 3. ? What can I do? Situations faced by start-ups…….. No capital ! No fund !
  • 4. ? No fund ! No capital ! Common methods for raising fund……..
  • 5.
    • Banks
    • * usually ask for collateral or personal guarantees
    • Venture capital funds
    • * the only formal investment vehicle for financing start-ups
    • aim at later stages but show little interest to start-ups
    • Government funding programs
    • * limited capability
    • ……
    Formal investors ? (╯╰) …….
  • 6. business angels !
  • 7. Informal investor
    • An affluent individual who provides capital and fund for a business start-up / beginner
    • including immediate family, friends, colleagues
    • and strangers
    Definitions “ F F F” (family, friend and ? ) High risk ! “ fool”
  • 8. More details
    • Informal investors need to undertake high risk.
    • “ F F F” (family, friend and “fool”)
    • Many would like to choose those companies that have potential to develop and promise the greatest return.
    • Informal investors generally use their own money.
    • The capital is in small amount.
  • 9. Importance
    • Informal investors provide much more investment than venture capitalists.
    • informal capital 34.2%
    • venture capital 0.01%
    -Increase capital liquidity -Benefit a large number of enterprises
  • 10. Importance
    • Informal investors usually aim at start-ups or early growth companies, providing seed fund and capital.
    -Stimulate the development of early growth enterprises -Strengthen the market confidence for start-ups
  • 11. Importance
    • Good combination of capital and experience
    • Informal investors always sit on board and even take part in business operation.
    • - help in strategy
    • -find appropriate managers
    • -provide valuable advice on management, finance and other matters
    • -link distributors and suppliers
    -Give enormous encouragements -Mean a lot to those start-ups that often lack experience
  • 12. High risk! Why they come?
    • Angel investors are not only those that want to maximize their wealth in a “high risk” “high return” way......
    • but often include retired entrepreneurs or executives, who are interested in angel investment for reasons that go beyond pure monetary return......
  • 13.
    • Other purposes:
    • * keep pace of current developments in a particular business area
    • *mentor another generation of entrepreneurs
    • *make use of their experience and networks to help flourish an industry
    • …… .
    • Much can be done by community associations, school networks, religious groups and charitable organizations.
    not only “angels” for business, but also meaningful to the country and the society High risk! Why they come?
  • 14.
    • Individual Investor
    • Gender composition / Age / Education level / Labor force status / Occupation / Household monthly income / ···
    • Features of Investment
    • Informal investment VS Classic venture capital / Average amount of investment / Industries / Relationship between investors & investees / ···
    Different Roles of Informal Investors in HK & SZ
  • 15. HK SZ Prevalence Rate of Informal Investors (2004)
  • 16. Individual Investor- Gender Composition
    • Informal investors in Hong Kong share nearly the same number of males and females;
    • while in Shenzhen, about 2/3 of them are males.
    • Sources: GEM Hong Kong and Shenzhen 2004, Centre for Entrepreneurship, the Chinese University of Hong Kong
    Male (%) Female (%) Hong Kong 50 50 Shenzhen 66.7 33.3
  • 17. Individual Investor- Age HK vs SZ informal investors by age (2003-2004)
  • 18.
    • We can see from the graph:
    • 1/3 of informal investors in Hong Kong are between the age of 35-44, similar to other countries around the world.
    • Shenzhen’s informal investors are generally younger than Hong Kong’s.
    • possible reasons :
    • in Shenzhen, the younger generation the rich willing to invest in new venture make informal investments
    Individual Investor- Age
  • 19. Individual Investor- Education Level Education level of informal investors in Hong Kong (2004)
  • 20. Individual Investor- Education Level Education level of informal investors in Shenzhen (2004)
  • 21. Individual Investor- Education Level
    • From the graph,
    • Informal investors in Hong Kong are mostly secondary-school educated .
    • Informal investors in Shenzhen are mainly university- educated .
    • Explanations for this phenomenon:
    • -entrepreneurial tradition in Hong Kong push ordinary people into informal investment
    • -less educated entrepreneurs in Hong Kong
    • -Shenzhen entrepreneurs with higher education
  • 22. Individual Investor- Labor Force Status
    • Most informal investors, no matter in Hong Kong or Shenzhen, have a full-time job (7+ hrs/day).
    • -> more stable income
  • 23. Individual Investor- Occupation (2004)
  • 24. Individual Investor- Occupation Occupation of informal investors in Shenzhen (2004)
  • 25. Individual Investor- Occupation
    • By comparison,
    • Shenzhen informal investors
    • highest income group in society
    • Hong Kong informal investors
    • less educated less privileged jobs
    • Hong Kong housewives
    • more active
    • (the long-existing custom of “everybody-do-investment” in Hong Kong)
  • 26. Individual Investor- Household Income Household Monthly Income of Informal Investors in Hong Kong (2004)
  • 27. Individual Investor- Household Income Household Monthly Income of Informal Investors in Shenzhen (2004)
  • 28. Individual Investor- Household Income Monthly income per year GDP per capita (2003) RICH people!!
  • 29. Characteristics of investment- Informal Investment vs Classic Venture Capital Important!
  • 30. Characteristics of investment- Average amount of investment
  • 31. Characteristics of investment- Average amount of investment
  • 32. Characteristics of investment- Average amount of investment
    • Similar trend of distribution
    • Size of investment mostly not large
    • The largest division of invested amount is below $50,000 in Hong Kong and Shenzhen. (33% vs 41%)
    • Possible causes:
    • Higher income level in Hong Kong than in Shenzhen
    • Lower start-up costs in Shenzhen than in Hong Kong
  • 33. Characteristics of investment- Industries of Investment
  • 34.
    • The most popular invested industry:
    • consumer oriented sector
    • i.e., retail, hotels and / or restaurants
    • The least invested industries:
    • extractive industries & business services
    • The profile of invested industries largely resembles that of start-up businesses.
    Characteristics of investment- Industries of Investment
  • 35. Characteristics of investment- Relationship between Investors & Investees Hong Kong Shenzhen
  • 36. Characteristics of investment- Relationship between Investors & Investees Relationships between Informal Investors and Investees in All Nations (2003-4)
  • 37.
    • Compared with other nations, both in HK & SZ,
    • More friends or neighbors;
    • Less family members or relatives.
    Characteristics of investment- Relationship between Investors & Investees
  • 38.
    • Some likely causes:
    • Friendship is particularly important to Chinese.
    • Investees lack support from other sources.
    • The population composition of Shenzhen--0nly 30% Shenzhen permanent residents
    • Inadequate legal support and incentives to facilitate wealthy individuals to make investments
    Characteristics of investment- Relationship between Investors & Investees
  • 39.
    • The role informal investors play is much like “angels”:
    • They provide funds to start-up SMEs.
    • Almost half of HK informal investors
    • Just over 1/3 of SZ informal investors
    • Generally, HK investors expect returns from their investments much less eagerly than SZ investors.
    • They stimulate the informal investment -> stimulate the entrepreneurship.
    Expect zero returns !
  • 40. How to increase informal investment
    • Informal investment is important
    • Based in the characteristics
    • Suggestions to increase in both Shenzhen and Hong Kong
  • 41. Common Suggestions
    • Educators, Public Media can give more attention to informal investment.
    • e.g. Details about Informal Investment
    • -importance
    • -information
    • -guidance
  • 42. Common Suggestions
    • Professionals help to bridge the gap between entrepreneurs and informal investors
    • e.g. Banks, Lawyers
    • -professional knowledge
    • -wide span of networks
  • 43. Common Suggestions
    • Informal investors associations and committees
    • Both in Hong Kong and the Pearl Delta, people seldom invest to strangers.
    • - culture
    • - risk
    • Associations can share risk and learn from each other.
    • Informal investors at most organize a handful of associations and networks
    • e.g. Bands of Angels in the U.S
  • 44.  
  • 45. Suggestions to Shenzhen
    • Improve the legal system
    • - enough legal support
    • - powerful institutional supervision
    • Improve business ethics
    • -moral education
    • -self discipline
    • -public media’s strong influence
  • 46.
    • Make a closer family tie
    • -- In other countries, investment from family is important.
    • -- It is low in Shenzhen and Hong Kong, especially in Shenzhen.
  • 47.
    • Encourage more people to invest
    • - In Hong Kong, the percentage of high-educated invest is low.
    • Steer more high-educated people into investment in Hong Kong
    Suggestions to Hong Kong
  • 48. Suggestions to Hong Kong
    • Develop potential industries * Hi-tech industry
    • About 50% of informal investors in Hong Kong invested in consumer oriented sectors.
    • Try to make them invest in other industries
    • Government policy
  • 49. Reference
    • Kevin Au and Michael Kwan (2005). Informal Investors in Hong Kong and Shenzhen ─ Findings of the Global Entrepreneurship Monitor. Hong Kong: Chinese University of Hong Kong
    • Global Entrepreneurship Monitor ─ Hong Kong and Shenzhen 2004. Hong Kong: Center for Entrepreneurship, Chinese University of Hong Kong
    • Liu TC and Chen PC (2007). Business Angel Investment in the China Market. Singapore Management Review, Vol 29 No.2, pp 89-101
    • http://en.wikipedia.org/wiki/Business_angel
    • http://www.businessangels.com.au/about.php
    • http://tutor2u.net/business/finance/business_angels.htm
  • 50.
    • The end.
    • Thank you for your kind attention!
    • Q & A

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