TECH STARTUPS CHASE SOMETHING OTHER THAN PROFITS

At a demo day in San Francisco on Wednesday, Joyce Kim’s presentation of her financial tech startup sounded a lot like a tech startup pitching venture capitalists for funding. She scrolled through a slide deck and stood at a podium, sporting a t-shirt of her startup.

Until she came to her financials. In a pilot, people around the world used her tech to complete 6 million transactions country to country, she said. The fees she collected came out to approximately 20 cents.

Ms. Kim’s venture is not a typical tech startup. It is not trying to join the billion dollar club, and its goal is not to make money.

Her startup, Stellar.org, is one of a new breed of tech non-profits whose ambition is for technology to help solve some of the world’s most intractable problems such as global poverty and climate change. Ms. Kim participated in Fast Forward, an accelerator funded in part by Google.org, the philanthropic arm of Alphabet Inc.Google+0.64%, and investment management corporation BlackRock Inc.

Also this week, startup accelerator Y Combinator announced a new research lab, YC Research, designed to tackle work that requires a long time horizon and seeks to answer very open-ended questions.

These non-profit startups are doing everything their for-profit peers are doing: modeling themselves on lean startups, writing scalable business models and attending accelerators.

“We’re not doing this with the goal of helping YC’s startups succeed or adding to our bottom line. At the risk of sounding cliché, this is for the benefit of the world,” wrote Y Combinator president Sam Altman.

The problems these startups take on resonate with what many in Silicon Valley see as their mission to solve the world’s ills.

The demo day in San Francisco was the culminating event of Fast Forward’s 13-week accelerator program. Started in 2014 by software entrepreneur Kevin Barenblat, founder of social-marketing company Context Optional and social entrepreneur Shannon Farley, founding executive director of Spark, the largest network of Millennial philanthropists, Fast Forward provides workshops, mentoring and $25,000 in seed money to a cohort of tech non-profits. Google.org and BlackRock pitched in $1 million.

“The non-profits said they felt like weirdos because they didn’t fit into tech accelerators as a non-profit, and they also didn’t fit into non-profit communities as tech companies. This program is designed to bridge these connections,” Mr. Barenblat said.

In addition to Stellar.org, eight other startups also presented. They included TalkingPoints, a platform for parents who don’t speak English to text a child’s teacher and Callisto, a confidential way to document and report sexual assault. The founders were more diverse than those at most pitch events. Of the nine founders on stage Wednesday evening, just two were white men.

The approximately 60 angel investors at the demo day opened their wallets after the presentations ended, handing out about $150,000 in funding, according to Mr. Barenblat.

“People can see the passion in the entrepreneurs, they understand what their challenges are,” said Mr. Barenblat.

At the pitch event, held in warehouse-style San Francisco office of Alphabet Inc., Ms. Kim played up her site’s technical chops. “Under the hood, it’s a decentralized, distributed database,” she said. Before pursuing this startup, Ms. Kim worked in venture capital before launching the startup a year and a half ago.

Instead of measuring profits, Ms. Kim determines her success by how many people her startup is able to impact. Her goal is to create the financial system for the world’s poor. There are currently 2 billion “unbanked” people in the world, so she has her work cut out for her.

Citation from Wall Street Journal (blog) : http://goo.gl/5cSvLo

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Internet Future Growth Opportunity

The Internet Economy in the G-20

The $4.2 Trillion Growth Opportunity

The Internet accounted for 21 percent of GDP growth over the last five years among the developed countries

Most of the economic value created by the Internet falls outside of the technology sector, with 75 percent of the benefits captured by companies in more traditional industries.

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The Internet economy in the world's G20 nations will grow by more than 10 percent annually surpassing the size of the German economy at $4.2 trillion by 2016.

As a proliferation of Web-enabled Smartphone’s is expected to help a total of 3 billion people access the Internet by 2016, online retail, banking, advertising, IT services.

In developed markets, the Internet economy will grow at about 8 percent annually, while in developing markets it will grow more than twice as fast.

Ideas Entrepreneurship Venture Art

The UK has retained its position as the largest internet economy in the G-20, according to research by the Boston Consulting Group.  The internet is now the UK’s second-biggest economic contributor behind the property sector, having overtaken manufacturing and retail.

By 2016, the Internet economy will be contributing 12.4% of GDP in the UK, compared with a G-20 average of 5.3%.

It has reached a scale and level of impact that no business, industry, or government can ignore. And like any technological phenomenon with its scale and speed, it presents myriad opportunities, which consumers have been quick and enthusiastic to grasp. Businesses, particularly small and medium enterprises (SMEs)—the growth engine of most economies.

Mobile Economy - The Future of Entrepreneurship

Mobile Economy is Future

The Internet is a vast mosaic of economic activity, ranging from millions of daily online transactions and communications to Smartphone downloads of TV shows.

An extensive study by the McKinsey Global Institute (MGI)—Internet matters:

The Net’s sweeping impact on growth, jobs, and prosperity—includes these findings:

The Internet accounts for 3.4 percent of overall GDP in the 13 nations studied. The Internet economy, now larger than that of Spain, surpasses global industry sectors such as agriculture and energy.

Over the last five years of that period, its contribution to GDP growth in these countries doubled, to 21 percent.

Mobile Economy 

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Kuwait Internet Economy Outperforms EMs

A new report by The Boston Consulting Group (BCG), reveals that Kuwait boasts a globally competitive Internet economy.   The 2015 BCG e-Friction Index highlights that, on a global level, Kuwait is ranked 40th — ahead of a number of strong emerging economies such as Brazil, China, India, South Africa, and Turkey. On a regional level, Kuwaitis ranked fourth after Qatar, the UAE, and Bahrain.

The Mobile Internet Takes off—everywhere

There are currently almost 7 billion mobile phone subscriptions globally, or one for every person on Earth.

 Research firm eMarketer expects that in 2017, seven of the top ten countries for Smartphone penetration will be in Europe (the U.S. will rank 11), and in three European nations (Norway, Demark, and Finland), Smartphone penetration will exceed 90 percent.

Mobile Economy

In Western Europe, demand for such services will drive data traffic up sixfold by 2017, from 187,000 terabytes to 1.1 million terabytes a month, supported by more 4G networks coming online and existing operators increasing their speed, coverage, and capacity.

A Revolution in Behavior

Of Facebook’s 829 million active daily users in June 2014, 654 million (almost 80 percent) were mobile users.

Travelers today use their phones to board planes, unlock hotel rooms, monitor devices at home (temperature settings, for example), and check in via live video with their families. Mobile payments are common in many economies; mobile apps are transforming banking. The lines between traditional retail, e-commerce, and m-commerce have blurred almost to the point of in-distinction in some markets, as consumers research online, offline, and on the go and buy wherever and however they find the best selection, service, and deals.

Entrepreneurship Ideas

Businesses Are Benefiting, Too

There have been more than 200 billion cumulative downloads from the various app stores since 2008. The rate of growth is mind-boggling: more than 100 billion downloads took place in 2013 alone, of which around 20 billion were in the EU.

·         There are more mobile bank accounts in Kenya than in the UK,

·         Banks in Europe are using mobile apps to transform the banking experience for consumers (you can deposit a check by taking a picture)

Mobile commerce in the EU5 reached €23 billion in 2013 (up 76 percent from 2012) and accounts for 13 percent of all e-commerce. Nearly two-thirds of EU5 e-commerce purchases occur on tablets; the analogous figure for the U.S. is about 50 percent.

The Impact of the Mobile Economy

In the EU5, the mobile economy generated about €90 billion ($120 billion) in revenue in 2013, and it is responsible for approximately half a million jobs, of which about half are physically in EU5 countries. In the 13 countries surveyed for this report, the mobile Internet is already generating some €512 billion ($682 billion) in revenues annually—the equivalent of almost €585 ($780) for every adult in the surveyed countries. The mobile Internet economy employs approximately 3 million people in those countries.

Mobile Internet Revenues Are Growing Fast

The revenues generated by the mobile Internet ecosystem are a substantial contributor to global GDP as well—€512 billion ($682 billion) across the 13 countries that account for 70 percent of global GDP. The mobile Internet is driving significant and growing revenues across Europe—€90 billion ($120 billion) in the EU5 in 2013. Put another way, adult Europeans in these countries each spend €555 a year on phones, tablets, data plans, apps, digital content, and m-commerce.

By 2017, EU5 mobile Internet revenues will have more than doubled to about €230 billion ($300 billion)—an annual growth rate of 25 percent, which is comparable to the growth of these revenues in both China and the U.S. The single largest contributor to this growth will be the apps, content, and services component of the ecosystem, driven by the rapid expansion of mobile shopping and advertising. By 2017, we estimate that mobile Internet revenues will have grown to €1.16 trillion ($1.55 trillion) across the 13 countries surveyed an annual increase of 23 percent.

The App Economy Soars

Mobile apps—the software programs that perform designated functions on a mobile device—may be the fastest growth story in recent history. Originally designed primarily to facilitate productivity and information retrieval (mobile calendars and e-mail, for example), mobile apps quickly expanded into numerous other fields, including gaming, navigation, health and fitness, media consumption, communication, and commerce, to name a few.

 App developers have made 1.3 million apps available through both the App Store and Google Play, some 255,000 through the Windows Store, 240,000 through Amazon, and 130,000 through BlackBerry World. In 2013 alone, apps were downloaded 102 billion times globally (of which 9.2 billion downloads were of paid apps), a 60 percent increase over 2012. Downloads are forecast to rise to 269 billion (15 billion paid) by 2017.

Advertising-Supported and “Freemium” Revenue Models

More and more advertiser spending will shift to mobile over time, as consumer usage continues to increase and targeting technology improves. Global mobile advertising revenues will reach $18 billion in 2014, up from $13.1 billion in 2013, and this growth will continue until 2017, when spending will exceed $41 billion.

Building Apps for Others

One area where developers are demonstrating success is building apps for other businesses. Developers are finding new opportunities to connect, monitor, and control IT devices remotely. Some 25 billion new devices (including cars, heating and air-conditioning units, lighting systems, farm equipment, wearable’s, and security systems) will come online from 2015 to 2020, doubling the current number.

THE NEXT BIG THING: THE INTERNET OF THINGS

A big area of potential growth is machine-to-machine (M2M) communication—networked devices of all kinds, in such industries as automotive, consumer goods, and utilities that exchange information and perform functions without the physical assistance of humans.

An aircraft engine that monitors and reports operating data in-flight is one example; buses and trucks that continually report their location, speed, and other information is another. Research organization IDATE expects the M2M market to reach €40 billion by 2017.

OUSTED CEO SHOWS RISKS OF SOFTBANK STARTUP SPLURGE

Failure is an unpleasant fact for most startups. One in three new companies lose most of the capital that investors have put into them. SoftBank is a bit closer to that reality with Housing.com. The Indian property listings firm has fired co-founder and chief executive Rahul Yadav six months after the Japanese conglomerate became its largest investor. It’s a reminder of the inherent risks in a rapidly growing part of SoftBank’s business.

Yadav was a liability and the board had no choice but to remove him. The 26-year old was in open conflict with his investors. In April, he wrote a resignation letter attacking the board as intellectually incapable, which he later retracted and apologised for. Then he pledged to give away his entire stake in the company – worth up to $32 million – to employees. Yadav also taunted some of the country’s most prominent business leaders through his Facebook page.

Housing.com may benefit from Yadav’s removal. But it will be harder for the company to succeed now that it has been forced to cut all ties to its founder. The fallout raises the broader question of how many of SoftBank’s similar investments will deliver a positive return.

The Japanese company boasts of an impressive average 45 percent internal rate of return on its internet company investments over the past decade. That includes its enormously successful investment in Chinese e-commerce giant Alibaba, where a total investment of just 10.5 billion yen ($85 million) is now worth $66 billion.

SoftBank is ploughing ever larger sums into startups. It invested $627 million in Indian marketplace Snapdeal in October. Last month, it bet $1 billion on South Korean e-commerce group Coupang. Yet there is no assurance that bigger bets are less likely to fail. And SoftBank’s returns on those that succeed are almost certain to be smaller.

Unlike most venture capital investors, SoftBank is a listed company. Its $70 billion market capitalisation owes more to its telecom businesses and its holdings in listed companies than to potential new hits. Yet the drama at Housing.com underscores that SoftBank’s startup splurge is not without risks.

Citation From Reuters : http://goo.gl/qHvZXr

VENTURE CAPITAL FUNDS TOTAL TO RS 15,600 CRORE INTO INDIAN STARTUPS THIS YEAR; SURPASSES INFLOW IN ALL OF 2014

MUMBAI: Risk capital investments in India in the first half of this year have surpassed the money inflow in all of 2014, setting the stage for another record funding year as global interest in domestic technology startups peaks.

But the frenetic pace of dealmaking, on the back of increasing smartphone adoption and Internet penetration, is also dragging down funding benchmarks as investors jostle to place bets on the next potential UnicornBSE 0.00 % — industry jargon for a billion-dollar valuation firm.

 Venture capital investors funnelled Rs 15,600 crore, or $2.46 billion, into Indian startups this year till June 26, compared with Rs 14,850 crore, or $2.34 billion, in 2014. They closed 197 deals between January and now, as against 297 last year, at significantly higher average deal sizes, show data from financial research firm VCCEdge.

 "We have just seen a cycle where people are very excited to invest in India Internet, especially mobile, which has unprecedented availability of capital," said Shailendra Singh, managing director at venture capital firm Sequoia Capital India.

"Even for most parts of the world, so much capital has never been available, where a $50-million round is impressive but not surprising. Five years ago, it was a rare event."The expanding deal sizes are driven by the increasing competition in emerging high-demand segments such as local services, online budget stays, food technology and express delivery, where at least half-a-dozen startups are getting venture funded in hopes of becoming market leaders.

"The biggest hope is that you raise so much money that the competition goes out of business, but then you need to grow at a higher pace of over 100% to raise these rounds," said a venture capital investor on condition of anonymity. Entrepreneurs say their aggressive capital raise is a function of the scale they are chasing. For online food delivery application Swiggy, its number of orders has grown 25 times between January and May, reaching more than 2,000 orders a day earlier this month. It plans to expand to 12 cities by the end of this year.

 "Hyper-local deliveries are largely a city-centric concept and no one has expanded beyond 5-10 neighbourhoods or a city, let alone go across double-digit number of cities in one year. In order not to slow down and continue to scale, fundraising continues to be necessary," said Swiggy's CEO Sriharsha Majety. The Bengaluru-based company raised two successive funding rounds in less than seven months, Rs 12 crore and then Rs 105 crore earlier this month.

 Entry valuations have surged

 Overall, 60 technology startups have raised VC funds twice or more in the past 12 months, according to startup research firm Tracxn. With these segments becoming essential components of an investor's checklist, the entry valuations of early-stage consumer Internet and mobile companies have surged 2-4 times in the past two years. Companies offering software-as-a-service solutions have seen relatively moderate valuation increases of 30-50%.At later stages, this is being driven by the rising valuation of US and Chinese companies such as Uber ($41 billion — online cabs), Instacart ($2 billion — grocery delivery) and Blue Apron ($2 billion — ready-to-cook meals).

 "What has changed is that the valuation of global comparables of Indian startups have increased significantly over the last year," said Mohan Kumar, executive director of Norwest Venture Partners India. As a result, the size of the first major institutional investment in a startup, a series-A deal, has increased from $2-3 million to $5-10 million, even as revenue and growth targets a startup needs to achieve to reach this stage have dropped. "Even companies which have 15,000 (mobile application) downloads are getting series A, and 100,000 downloads are getting series B. Earlier, 100,000 was the bare minimum benchmark for a series A," said a venture capitalist with a seed-stage investment firm.

Citation from Economic Times : http://goo.gl/hjLMbK

STARTUPS SERVING THE 99 PERCENT WILL BE THE NEXT BILLION-DOLLAR COMPANIES

Many fast-growing companies in Silicon Valley have one thing in common: they cater to a small, affluent, urban population — the 1 percent. Residents in high-cost cities like San Francisco, New York and Los Angeles can order an array of goods and services from their mobile phones.

These startups, including Uber, Instacart and a host of food delivery apps like Munchery, GrubMarket, Blue Apron, and Postmates, eventually have plans to broaden their offerings to attract middle-income consumers. This is the classic trickle-down business model.

As Farhad Manjoo wrote in The New York Times, “The rich subsidize the rest of us — were it not for the suckers who spent more than $10,000 on early versions of the Mac, Apple might not have survived to build the iPhone.”

As a venture capitalist who has invested in both Chinese and U.S. startups since 2005, I’ve backed several companies leveraging the trickle-down model, such as GrubMarket. But, now I see it also makes sense for some founders to take the opposite approach: mass market first.

Going Mass Market First

Attacking a mass market from day one may seem daunting, but it’s not impossible — just ask startups in China. Many Chinese startups go after the mass market right out of the gate, as hundreds of millions of consumers there fall into the middle class. There also are many high-net-worth individuals in China, with plenty of companies chasing them, but the sheer size of the Chinese middle class makes the mass-market-first business model viable. Companies like Alibaba, Tencent, Baidu and YY all went after the mass market right away.

Founders with a global vision to serve the world’s middle class have the chance to create billion-dollar companies with lasting growth potential.

The huge growth in global smartphone adoption will now make this approach more common outside of China. Unlike the first wave of late 1990s (Internet companies that targeted higher-income consumers who could afford expensive computers), today’s startups can quickly reach billions of middle-income consumers who only need a simple smartphone and low-cost data plan to get online.

My favorite current example of the mass-market-first model is Xiaomi, one of the world’s most valuable private companies. Like Apple, Xiaomi makes high-quality, coveted smartphones. Unlike Apple, Xiaomi’s phones are priced very affordably. Companies like Xiaomi with mass-market appeal not only grow faster, but survive market downturns better than companies catering to the 1 percent.

Sectors Ripe For Mass Market First

Consumer Hardware. We already have the ultimate example of a successful mass-market-first company: Xiaomi. And not only is Xiaomi creating low-cost, high-quality hardware, it’s putting customers at the center of the entire design process. Xiaomi collects tons of usage data and customer feedback, and integrates these findings into future products. Xiaomi now has a massive customer base; the company sold 61 million phones in 2014 and recently broke a world record by selling more than 2 million phones in one day. With that scale, a whole startup ecosystem has sprung up to sell mass-market accessories and home appliances controlled by Xiaomi phones, including Zimi (battery packs), 1More (headphones) and Huami (activity trackers).

E-Commerce. When it comes to e-commerce, Chinese companies like Alibaba and JD.comnailed the mass-market-first approach, and similar models are beginning to emerge in the U.S. Whereas U.S. e-commerce startups tend to go after high-end consumers first (including Etsy, Gilt Groupe and monthly subscription boxes like Birchbox), Chinese e-commerce startups often target middle-income consumers first.

In China, Mogujie and Meilishuo.com have achieved mass reach selling low-cost items like clothes, baby goods and household goods. In the U.S., a great example of a mass-market-first startup is Wish, a smartphone shopping platform offering low-cost products shipped directly from China and elsewhere. It has a massive following of U.S. and European shoppers looking for bargains across its four apps (Wish, Geek, Mama and Cute).

Emerging e-commerce giants in India, such as Flipkart and Snapdeal, are also succeeding with mass market first. Companies that sell every-day items to millions of people, not those selling special treats and luxury goods to the 1 percent, will have staying power when the next economic downturn hits.

On-Demand Services. Though most mobile apps for on-demand services cater to tech-savvy early adopters, some can and will succeed with the mass market. In China, that’s already the case. For example, while Uber perfected the top-down approach, starting with luxury town cars and expanding into shared cars with UberX, Didi Dache in China and GrabTaxi in Southeast Asia started with the mass market first. These companies recruited existing taxi drivers for low-cost rides, and are only now expanding into luxury services.

Meituan, a daily deals site, and Wuba, the ‘Craigslist of China’, also offered their services via mobile app to the mass market first. Some on-demand mobile apps that could appeal to middle-income consumers in the U.S. include Boxed, which delivers a low-cost ‘club store’ shopping experience, and any other services that offer affordable necessities,

While it’s perhaps more natural to build a mass-market startup in China and even India, it’s far from impossible in the U.S. More importantly, the best startups taking the mass-market-first approach know they must go global from day one. Catering to the 1 percent in San Francisco and New York may deliver revenue and high margins in the short term, but founders with a global vision to serve the world’s middle class have the chance to create billion-dollar companies with lasting growth potential.

 

 Citation from TechCrunch:  http://goo.gl/ZrG1Jd

2015 FEMALE ENTREPRENEURSHIP INDEX

The Female Entrepreneurship Index (formerly known as the Gender GEDI) is the world’s most comprehensive diagnostic tool that measures high potential female entrepreneurship by analyzing entrepreneurial ecosystems, business environments, and individual aspirations across 77 developed and developing economies. Spanning multiple regions, FEI provides a systematic approach that allows cross-country comparison and benchmarking. The goal of the research is not to provide a headcount of female entrepreneurs worldwide, but rather to serve as a future-oriented tool to guide leaders, policymakers, and law-makers in identifying country-wide strengths and weaknesses and in developing strategies to create more favorable conditions in their countries to enable businesses founded by women to thrive.

  

2015 Female Entrepreneurship Index Research Shows More Support Needed to Enable Female Entrepreneurship Development Worldwide

• The United States, Australia, and the United Kingdom named top three places for female entrepreneurs
• Globally:

1. The percentage of female entrepreneurs who are highly educated has increased 9%
2. The percentage of business gazelles (those who intend to grow their businesses by 50% and employ 10 people within 5 years) among female entrepreneurs has increased 7%
3. The percentage of female businesses that are in the tech sector has decreased 19%
4. Among female businesses innovativeness has decreased 13%

• The 2015 Female Entrepreneurship Index is the most comprehensive diagnostic tool for high potential female entrepreneurship
• The 2015 Female Entrepreneurship Index contains 77 countries, expanding upon the 30 countries in its predecessor – the Gender GEDI

The FEI names the following countries in its top ten for female entrepreneurs:

Rank	Country	Score
	United States	82.9
2	Australia	74.8
3	United Kingdom	70.6
4	Denmark	69.7
5	Netherlands	69.3
6	France	68.8
7	Iceland	68.0
8	Sweden	66.7
9	Finland	66.4
10	Norway	66.3

 The analysis reveals opportunities for improvement within several geographic regions.

• Europe can improve Opportunity Recognition – whether women recognize good opportunities to  start a business in the area where they live
• Latin America can improve Export Focus – female entrepreneurs that have at least some   customers outside the country
• Sub-Saharan Africa can improve Access to Finance – women’s access to bank accounts and financial training programs
• East Asia can improve Skill Perception – whether women believe they have the required knowledge and skills to start a business

About the Female Entrepreneurship Index

The 2015 Female Entrepreneurship Index includes 77 countries. The Index focuses on high potential female entrepreneurs who are defined as ‘innovative, market-expanding, and export-oriented.’ The Index combines variables that measure agency and institutions in a composite index in order to capture the multi-dimensional aspects of female entrepreneurship development. Data comes from existing internationally recognized sources such as the Global Entrepreneurship Monitor (GEM), World Economic Forum (WEF), World Bank, United Nations Educational, Scientific and Cultural Organization (UNESCO), International Labour Organization (ILO), etc. The GEDI Institute is a research and consulting organization based in Washington, D.C. that assists governments, donor agencies, foundations, international assistance providers, and global companies expand economic opportunities for individuals, build future markets for societies, and propel economic development for nations. It uses an innovative methodology to advance entrepreneurship, thereby accelerating economic growth.

Methodology

The Female Entrepreneurship Index’s unique methodology brings together variables that measure individuals and institutions in a composite index that highlights issues relevant for high potential female entrepreneurship development and growth. Thirty individual-level and institutional-level dimensions are paired together into fifteen pillars that are further divided into three main sub-indices: Entrepreneurial Environment, Entrepreneurial Eco-System, and Entrepreneurial Aspirations. The novel Penalty for Bottleneck methodology is applied to the pillar scores so that the ‘bottleneck’ (i.e., pillar with the lowest score) penalizes the final country ranking. This approach encourages countries to address their weakest areas first since it will have the greatest effect on their final score.

Citation from GEDI - Global Entrepreneurship and Development Institute : http://goo.gl/VDAL4T

STOCKS ON SME BOURSES TURN MULTIBAGGERS

In a high risk-high return market, companies listed on the small and medium enterprises (SME) platforms have turned out to be multibaggers, notching up returns ranging from 300 per cent to 2,500 per cent.

The BSE SME IPO index, a representative of all the SME stocks listed on BSE, has risen over nine times in just two years to 947 from a base of 100.

Out of the 101 companies listed on the BSE SME platform, 60 have given positive returns ranging from 200 per cent to 2,500 per cent, while 41 others are currently trading in the red.

“The BSE SME index presents a broader picture of the companies listed on the platform. Some of them have done very well while a few others have given average returns. Overall, this segment has put up a good show,” said Ajay Thakur, head of BSE SME Exchange.

Both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have SME platforms, where trading is restricted mainly to large investors as the lot size is of Rs 1,00,000. The NSE platform has seen just seven listings so far.

Out of the 94 companies listed on the BSE SME platform, seven have already moved to the main board. As on date, the BSE SME platform has a total market-capitalisation of Rs 8,202 crore.

Companies listed on the SME platform are allowed to migrate to the main board when they grow in size and are able to meet the criteria for listing on the main board.

Existing norms need firm to complete two years on SME platform and achieve post-issue paid-up capital of Rs 10 crore or above to qualify for listing on the main board.

Also, if the paid-up capital of a company exceeds Rs 25 crore, it would be compulsorily required to migrate to the main board. “SME stocks provide significant opportunity to investors. It is a high risk-high return instrument, which has yielded superb returns to long-term investors,” said Mahavir Lunawat, managing director of Pantomath Capital Advisors, a leading merchant banker in the SME market. The firm claims to have lead-managed most SME IPOs in terms of value during 2014-15. “It’s heartening to note that ultra-HNIs and institutional investors have also started looking at the SME market... ” Lunawat said. Pantomath SMEX-30, an index for SME scrips, saw over 188 per cent rise in last calendar alone. The SME platforms are for meant for small-sized companies, to facilitate raising of equity capital under relaxed regulatory and disclosure requirements compared with those for the main platform.

Many investors on the SME platforms are domestic high networth individuals (HNIs). Institutional players like banks and brokerages have also begun to take interest in this segment.

“Several investors have gained by investing in these companies. Many of them have huge potential for growth and investors gain by taking exposure to them at an early stage,” said Gaurav Jain, director of Hem Securities, a Mumbai brokerage.

More than 20 SMEs have filed draft red herring prospectus with the BSE SME platform this year, seeking permission to get listed. Seeing the success of companies listed on the SME platform, many small firms are showing interest in listing on the BSE SME platform, Thakur said.

“We are also creating awareness among SMEs about the benefits of listing on this platform, which can help them not only raise funds but also improve corporate governance practices apart from improving operational efficiencies,” he said.

“The SME exchange is a never-before opportunity for stakeholders. It enables emerging companies to unlock value, raise growth capital and reduce debt burden,” Lunawat said.

Citation from Deccan Chronicles : http://goo.gl/ggKjXN