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this is not something i wrote, but hey haven’t found a more entertaining explanation đŸ˜€

Heidi is the proprietor of a bar in LA.

In order to increase sales, she decides to allow her loyal customers – most of whom are unemployed alcoholics – to drink now, but pay later.

She keeps track of the drinks consumed on a ledger (thereby, granting the drunks loans).

Word gets around and as a result, a large numbers of drunks (read: customers) flood into Heidi’s bar.

Taking advantage of extending liberal credit facilities to her customers, Heidi increases prices of wine and beer, the most-consumed beverages. Her sales volumes increase rapidly.

A young and dynamic Customer Service Consultant of the local Investment Bank recognizes these customer debts as valuable future assets (being receivables) and increases Heidi’s borrowing limit. He sees no reason for undue concern since he has the debts (receivables) of the alcoholics as collateral.

At the Bank’s Corporate Headquarters, expert Investment Bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices climb continuously, the securities become top-sellers.

One day, although the prices are still climbing, a (spoilsport) Risk Manager of the bank (subsequently of course fired, due to his negativity) decides that slowly the time has come to demand payment of the debts incurred by the drunks at Heidi’s bar.

However they cannot pay back the debts.

Facing high borrowing costs, poor cash flow and ‘nil’ repayment capability, Heidi cannot fulfil her loan obligations and files for bankruptcy.

DRINKBOND and ALKBOND drop in price by 95%. PUKEBOND performs better, stabilizing in price after dropping by 80%.

The suppliers to Heidi’s bar, having granted her extended credit facilities, and having invested in the securities too, are faced with a credit crunch.

With liquidity being restrictive, and at hard terms, making it difficult to raise money to keep afloat, her wine supplier claims bankruptcy, and her beer supplier is taken over by a competitor through a share-swap deal (that did not involve any cash transaction).

The cash strapped Investment Bank on the verge of collapse, is saved by a Government bailout (can also be read as ‘Obama stimulus package’) following dramatic round-the-clock parleys between leaders of political parties and the corporate elite. To give a fillip to the faltering economy, they reasoned…..

The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Cheers !

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Disclaimer – I am talking about the Indian landscape here.


money-tap1

The one question that any entrepreneur looking at raising outside capital asks himself/herself is “when do i approach investors?” Tonnes and tonnes of material has already been written about this.

Why don’t Investors invest in my plan?  What should i be prepared with? what is expected of my company?

The answer to all these questions is to Time the investment so you can be prepared for it.

1. Do Venture investors invest in Business Plans? ….NO!!

Not unless you were an integral part of some wildly successful firm and have a track record to flaunt.  If someone says otherwise, I’d like to meet them

2. I have a prototype ready, is now a good time?…hmmm., Maybe

Depends on how much money is required to convert the prototype into a business and more importantly the market opportunity for the business, for instance if the venture requires 5 Million Dollars to be a Business, but can be next best thing to sliced bread….well people might take their chances.

So is there a right time?

Basically Early stage investing is an art rather than a science and there are no hard and fast rules.But what entrepreneurs CAN do is try to address the concerns of an early Investors.

And there is primarily one main concern…”Will this Business deliver on its promise???”

Now how can you address that?

There are a few things

1. Have some semblance of a product/service ready.

Early stage investors do not expect you to have a uber cool product that rivals the best in the market, heck if you had that, you wouldn’t be looking at investments in the first place. But a product/service that actually performs what its supposed to do, can go a long way in addressing concerns.

Seeing is believing, and Investors need to see what your product/service is today to visualize what it can become.

2. Get some customers

You have customers? they paid for it and they are happy? wow!! that conveys, oh yea!…there is a market for this, in other words, thats market validation.

Remember that everyone sees the world differently, things that you see as no-brainers might seem strange to me. Do not expect Investors to understand your business. It is your job to make them understand it, and nothing can convey it quite as much as customers using your product/service.

If you do have these, most times, Investors will return your call and you will land that meeting.

Or Death And All His Friends

I have always been a rock fan and Coldplay has been one of those bands that i used to listen to in those deeply introspective moods much like U2, but Coldplay has always been more more non threating  and conventional.

I took a break from following rock music, what with all the hip hop playing in all the places that i visit. Recently i decided to check the scene and the latest i got my hands on was Coldplay’s new album Viva la Vida or Death and All His Friends.

And i should say that it is pretty darn good. I feel older and wiser after these years and so does Coldplay. With hits like Viva la Vida and Violet hill, Viva la Vida or Death and All His Friends is an exhilarating album, and a No. 1 in 30 countries. and a huge hit in the US for the British band.

I love the album, Coldplay rocks!!! Go buy this one.

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