On Our Radar: Deals we are paying attention to, for their impact on industry.

Impact investing isn’t on the radar of some family offices yet, but it seems it may be soon as a new generation of investors take over.

“We have a pretty common generational divide,” Elizabeth Browne, vice president and head of business development of Chicago-based DNS Capital, said at the Association for Corporate Growth’s Intergrowth conference in Florida today in response to a question by Karma Network.

DNS is one of several hundred family offices in the country. These private wealth management advisory firms are growing in number and influence, even competing with private equity firms as capital becomes more widely available and investors compete for businesses with promising returns.

Browne explained that Michael A. Pucker and Gigi Pritzker founded DNS four years ago primarily to benefit their three adult daughters, known collectively at the office as “G2.”

“G2 is millennial. They’re very focused on having social impact be at the heart of how they see the world in very positive ways, and the prior generation is much more accustomed to the traditional investing 1.0 model,” Browne said. Indeed, an estimated 77% of affluent millennials have made an impact investment, according to a 2018 Fidelity Charitable study.

As DNS discusses the possibility of having an explicit impact investing mandate in the future, Browne’s team office has been getting up to speed on the area to prepare for what may be an increased focus for the firm in the future.

Vaibhav Saraiya, a co-panelist and principal at Solamere Capital, a multi-family office founded in partnership with Mitt Romney, said that environmental, social and corporate governance (ESG) investing isn’t a particular focus for his firm, but families are hesitant to back anything that could be seen as “anti-ESG.”

“Reputational concerns I think for family offices are really top of mind because it is so tightly associated with the founder or family associated with the business,” he said.

The panel, which also included Rick Blank, managing director of Stephens Capital Partners, focused on other ways that family offices differ from private equity firms as well.

The speakers agreed that family-owned business in particular prefer investments from family offices because of their longer-term focus and interest in preserving existing management. They emphasized that each family office is unique, with Browne noting how the culture of DNS has really shaped its investment partnerships.

“Our intangible is really culture. It is so immediately discernible,” she said.

Ambreen Ali is a freelance writer and editor based in the New York City area who specializes in business and technology. She has 15 years of reporting experience, including covering Capitol Hill and reporting from South Asia.

The post What’s Fueling Family Offices’ Interest in Impact Investing appeared first on Karma Impact.

So, let’s consider what happens when a company decides that they want to sell goods abroad. As it turns out, it can be quite expensive to achieve financing because there are so many risks involved in trade.

So what drives up the costs of trade finance? In order to mitigate the risk of non-payment, sellers want to get paid as soon as they ship. But, buyers, on the other hand, want to mitigate the risk of non-delivery and wish to pay only after receipt. And, along the way are a host of risks ranging from natural disaster, piracy and outright fraud to contend with.

In order to adequately underwrite these various risks appropriately, an army of people must do a number of manual tasks to verify the existence of the goods, verify that the goods are being shipped, verify when they go arrive and go into customs and verify when they get out of customs and make it to the final destination warehouse. This heavily manual process takes time and costs money.

Historically, banks only disintermediate approximately 36% of total trade finance transactions with the remainder as cash-in-advance transactions or open account transactions ¹. These other methods shift the risk to either the buyer or the seller. Bank disintermediation is a way to reduce these risks by bridging the gap between the shipment and the receipt of goods. By providing credit, payment guarantees, and insurance, suppliers of trade finance facilitate trade. Currently, there are two primary forms of trade finance: intercompany credit and letters of credit.

Intercompany credit accounts for open account transactions where one company provides credit to another company based on their relationship or ability to extend credit. Letters of credit require a bank. This segment of the market has grown over the years, primarily because most trade credit is short term in nature. It is less than 90 days and carries a lower risk of default and a higher recovery rate. But, while this business model is attractive, the ability of banks to service the growing needs of the market has been hindered by regulatory and compliance limitations. Specifically, because of the way that Basel III continues to treat trade finance on the balance sheet, banks are less able to provide this relatively low risk service, pushing other institutions and shadow banks to step in to provide this important service ².

A 2017 survey by the Asian Development Bank suggested a gap in global trade finance of $1.6 trillion annually, which would be needed to service the growing volume of trade ³.

The post Client Challenges of Trade Finance appeared first on Karma Impact.

The main pain points of trade finance today include manual processes, outdated tracking systems, multiple international platforms for trade, and money laundering and fraud prevention.

Distributed ledger technology, more broadly known as blockchain, offers solutions for several of these challenges ¹. To begin with, contract creation and invoice factoring are currently manual process that require the trading entity to provide financials and other documentation to the bank, which must then be reviewed and validated. Blockchain can effectively record and validate contracts such that the manual validation efforts should be dramatically reduced along with the associated costs. Moreover, because the blockchain is decentralized and disintermediated, it can also reduce fraud risk, such as bills of lading, which can currently be financed multiple times.

A 2015 survey by the International Chamber of Commerce showed that almost 20% of banks reported an increase in fraud, driving the major international banks to evaluate blockchain for use in trade finance and other banking applications ². In addition, tracking and validation of delivery can reduce the time delay in payment because blockchain can provide proof of delivery and ownership.

Finally, blockchain can help solve the issue of regulatory transparency for the purposes of anti-money laundering enforcement. This push to adopt blockchain has driven the world’s largest banks to form investible consortiums such as R3, which launched in May of 2017. R3 successfully launched its trade finance platform Marco Polo in partnership with TradeIX and seven major banks. A rival trade finance platform called we.trade has partnered with nine banks to offer a “faster-to-market” solution built on Hyperledger Fabric. Marco Polo is focused on ensuring that new systems can talk to each other in order to fulfill their promise to remove frictions from global trade created by the multiple platform problem. We.trade is focused on the need for speed in order to bring new banks onto the platform more quickly. This allows the platform to be more nimble.

The post Simplifying Trade Finance with Blockchain appeared first on Karma Impact.

Historically, banks only disintermediate approximately 36% of total trade finance transactions with the remainder as cash-in-advance transactions or open account transactions. In addition, these transactions are lower risk, with an average duration of less than 90 days and very low default rates with high recovery rates for defaults. This particular form of finance yields a low, but steady margin in the range of 4% with relatively low risk. While this certainly leaves the opportunity set wide open and makes the operation an attractive one from a risk perspective, the reality is that slim margins, lack of balance sheet, and other regulatory issues limit how large the trade finance market can grow.

Trade finance is a traditional banking service that generates fee revenues. However, the high cost of manual contract creation, verification, validation, fraud prevention, and regulatory and compliance make trade finance margins quite thin. In addition, the high fixed costs associated with regulation and compliance limit banks from working with smaller clients.

Distributed ledger technology, also known as blockchain, offers the ability to reduce costs and increase margins, as well as increase access to trade finance. In doing so, blockchain platforms such as R3 and we.trade promise not only to expand the trade finance market, but also to expand global GDP and help to reduce inequality. In fact, the World Economic Forum in partnership with Bain and Co. estimates that blockchain can potentially add $1 trillion in trade finance transactions that would not otherwise be possible under the traditional trade finance model. And, this added supply of trade finance would likely be entirely consumed by the estimated $1.5 trillion gap of unmet trade finance demand generated in the emerging markets. A 2017 Greenwich Associates report called “Trade Finance: A Market Eager for Disruption’ suggests that trade finance is an outlier in the world of finance for having so little technological innovation.

The biggest challenge is not whether or not to make an investment in this growing trade finance market, given the massive unmet need that will likely survive the current bout of de-globalization by directly addressing the inequality issues currently presented by the current policy regime that favors corporations over workers. The real question is, how?

Currently, R3 and we.trade have attracted large banks as partners and have attracted initial capital to launch. But the big difference is their approach: a slow and steady focus on system-wide integration proffered by R3 versus the more nimble and faster-to-market approach offered by we.trade. Since we believe that network effects will be the largest value creation of these platforms, we see the R3 approach as the one with the best longevity over time because it will ensure that all intermediaries are on a platform that can effectively connect them all with a process that re-establishes trust, verification, and authenticity at a lower cost.

In conversations with market participants, the biggest problem is that there are so many parties beyond banks that must participate in a platform in order to make it ultimately successful. Manufacturers, insurers, ports, customs brokers, etc. This is not a small ecosystem to cultivate, so the first to achieve a real network quickly will likely attract the largest network in the end. Think Facebook versus MySpace. In that regard, We.Trade may be able to leap frog participants onto the platform.

The post The Profitability of Trade Finance appeared first on Karma Impact.

While economist Adam Smith pioneered the concept of “absolute advantage” in 1776 and David Ricardo expanded the field of economics to include comparative advantage in 1817, international trade has influenced economic growth and reduced global poverty for centuries. Trade, which is the sum of imports and exports of goods and services, accounts for over half of global GDP, according to the World Bank and its impacts are measurably higher when taking into account wealth creation and poverty reduction.

There are also harder to measure effects such as social impact through improved international relations and cultural exchange, which can, in turn, contribute to world peace. However, without trade finance, there would be no trade activity, as evidenced by recent World Trade Organization statistics. In 2017, trade finance facilitated over 80% of world trade.

Moreover, most of the companies that have access to trade finance tend to be larger multinational corporations. According to the United Nations Conference on Trade and Development, 80% of trade is linked to transnational corporations, which tend to be larger in size. There are multiple reasons for this skew in participation such as the high costs of payments, upfront collateral requirements, and delays resulting from cross-border payment and settlement latencies. That said, micro-, small- and medium-sized enterprises (MSMEs) in high-income countries contribute as much as 50% to overall GDP on average.

In developed economies, that contribution can be substantially higher, as is the case with India, which contributes 95% of total industrial units produced. MSMEs also pack an outsized punch in their impact in regards to employment opportunity creation, accounting for 50-70% of employment across regions.

Finally, lack of access to a simple bank account and formal identification requirements is also a barrier for smaller entrepreneurs in poorer countries to access the global trade market. Improving and disintermediating access to trade finance for smaller companies and entrepreneurs has the power to transform the world.

The post The Secret to GDP Growth: Making Trade Finance More Accessible appeared first on Karma Impact.

Were it not for the power of irrationality, cryptocurrencies would likely be an obscure asset class circling the extreme fringes of the financial world and anarchist chat rooms. But thanks to early adopters willing to gamble on the unknown and newcomers ignoring the risk of a market bubble, no conversation about the future of finance — and well, anything — is complete without mentioning cryptocurrencies and their underlying distributed ledger technologies (DLT), such as blockchain.

DLT and the human creative power driving Web 3.0 could radically transform economies and societies, provided there’s mass uptake. But the bubbles and bad behavior that feed on irrational behavior could undermine faith in DLT and crush its promise. Karma Insider Chris White, the CEO of ViableMkts, which provides strategic guidance for building financial market technology, had some thoughts on what’s been driving that dynamic. “What the market’s really looking for en masse holistically is how do we properly apply this technology in such a way that it can be additive to the growth process around the global economy.” He adds, “The mania, I would call it more of the irrationality, it’s more of a testing phase. And you know what happens when you’re testing something? Some people are going to get hurt. There are going to be some mistakes. But I think we’re learning as we go.”

The Promise
Breaking down institutional barriers is the essence of Distributed Ledger Technology. Much has been written about its potential for positive, disruptive applications, such as:

* Lowering financial transaction costs to lift people and even nations out of poverty.

* Spurring competition: By decoupling large networks from big players, DLT allows smaller players to integrate more easily into those networks.
* Furnishing the estimated 1.1 billion people globally who lack identities with digital blockchain IDs that they control and that are secured cryptographically against theft, abuse or alteration.

Startups with arguably the greatest potential for disruptive impacts are developing DLT platforms that are infrastructural in nature and scope. Keep in mind that there are different kinds of DLT data structures that inform DLT platforms and that distributed applications are built on top of those platforms. The most popular DLT data structure is currently blockchain. Platforms built on blockchain include Bitcoin, Ethereum, Ripple, Stellar, and EOS. One of Ethereum’s most popular applications is CryptoKitties (collectible digital cats). Another notable DLT data structure is DAG – Directed Acyclic Graphs (the technology underlying IOTA’s Tangle)- which was designed to become the backbone of the Internet of Things. Also garnering buzz is Hashgraph and its platform Holochain.

The Perils of FOMO
For all that’s happening in the DLT space, its highest-profile creations are Bitcoin and other major blockchain-based cryptocurrencies, which have been less-than-stellar poster children for rational investing. Bitcoin’s Yuletide mini bubble ‘n‘ pop saw prices peak December 17 at $20,089 only to plunge 22% by Christmas Eve. Bitcoin wasn’t the only cryptoasset to hit the stratosphere in 2017. Ethereum gained 9162% while Ripple gained 36,018%. But things have turned bearish since then. The market cap for the top three cryptoassets have fallen sharply since the start of 2018. At the end of August, Bitcoin was off by 66%, Ethereum by 81% and Ripple by 91%. Yet investors persist. The total market cap for all cryptocurrencies excluding unlisted ICOs was around $220 billion at that same time period.

Karma Insider Olivier Oullier is a neuroscientist, DJ, and President of EMOTIV, the maker of Brainwear®, which specializes in understanding the human brain using electroencephalography (EEG), chalks the behavior up to classic herd mentality. “There is a lot of herding, and in some cases one could say that this is a very usual behavior. You know there is a trend that is being set. It could have been clothing or it could have been a song. It’s crypto. People want to jump on the bandwagon. There is the fear of missing out.”

FOMO is also a driving force behind ICOs, which allow startups to bypass rigorous and regulated systems of raising capital by issuing digital tokens in exchange for legal tender or cryptocurrencies. Sure, on the one hand, ICOs offer startups and small businesses a more frictionless outlet for raising funds.

That does not, or course, come without risks. ICOs are like penny-stock crowdfunding on steroids with a half-life to match. A recent study found ICO token holders receive an average return of 179%, but that fiat value has a two-to-three-month sell-by date. The same study showed less than half of startups are still in business 120 days after their ICO. 83% of ICOs that do not report capital and do not list on an exchange can be pronounced “deceased” after 120 days, according to researchers from the Boston College Carroll School of Management. DeadCoins.com listed 669 deceased coins at the time of writing, not including scams, hacks or parodies. The vast majority were startups focused on the financial sector.

Cleaning Up Crypto
Talk of regulating crypto is on the rise. But the devil, as always, is in the details. After all, blockchain and Bitcoin were designed to undermine the concentration of power in a few hands. If regulations are too anemic, fraudsters and bubbles could continue to sully the reputation of blockchain and other DLTs. But if the rules are too heavy-handed, it could choke innovation.

So far, governments have taken different views on what it is they wish to regulate in the DLT space. China has banned cryptocurrency trading, but it’s very enthusiastic about DLT powering its smart cities. In the US, Intercontinental Exchange is partnering with Microsoft to form a new open and regulated trading platform, Bakkt, with the “aim to build confidence in the asset class on a global scale.” The launch date is set for November, subject to Commodity Futures Trading Commission (CFTC) approval. At the end of the day, though, regulation is still a great unknown in most jurisdictions.

The Karma Factor
DLT could potentially lead humanity into Industry 4.0, the M2M economy, and a more prosperous, more equitable future, but only if the good actors have the power and will to weed out the bad.

The post Picks and Shovels in the Crypto-Economy appeared first on Karma Impact.

Were it not for the power of irrationality, cryptocurrencies would likely be an obscure asset class circling the extreme fringes of the financial world and anarchist chat rooms. But thanks to early adopters willing to gamble on the unknown and newcomers ignoring the risk of a market bubble, no conversation about the future of finance — and well, anything — is complete without mentioning cryptocurrencies and their underlying distributed ledger technologies (DLT), such as blockchain.

DLT and the human creative power driving Web 3.0 could radically transform economies and societies, provided there’s mass uptake. But the bubbles and bad behavior that feed on irrational behavior could undermine faith in DLT and crush its promise. Karma Insider Chris White, the CEO of ViableMkts, which provides strategic guidance for building financial market technology, had some thoughts on what’s been driving that dynamic. “What the market’s really looking for en masse holistically is how do we properly apply this technology in such a way that it can be additive to the growth process around the global economy.” He adds, “The mania, I would call it more of the irrationality, it’s more of a testing phase. And you know what happens when you’re testing something? Some people are going to get hurt. There are going to be some mistakes. But I think we’re learning as we go.”

The Promise
Breaking down institutional barriers is the essence of Distributed Ledger Technology. Much has been written about its potential for positive, disruptive applications, such as:

* Lowering financial transaction costs to lift people and even nations out of poverty.

* Spurring competition: By decoupling large networks from big players, DLT allows smaller players to integrate more easily into those networks.

* Furnishing the estimated 1.1 billion people globally who lack identities with digital blockchain IDs that they control and that are secured cryptographically against theft, abuse or alteration.

Startups with arguably the greatest potential for disruptive impacts are developing DLT platforms that are infrastructural in nature and scope. Keep in mind that there are different kinds of DLT data structures that inform DLT platforms and that distributed applications are built on top of those platforms.

The most popular DLT data structure is currently blockchain. Platforms built on blockchain include Bitcoin, Ethereum, Ripple, Stellar, and EOS. One of Ethereum’s most popular applications is CryptoKitties (collectible digital cats). Another notable DLT data structure is DAG – Directed Acyclic Graphs (the technology underlying IOTA’s Tangle)- which was designed to become the backbone of the Internet of Things. Also garnering buzz is Hashgraph and its platform Holochain.

The Perils of FOMO
For all that’s happening in the DLT space, its highest-profile creations are Bitcoin and other major blockchain-based cryptocurrencies, which have been less-than-stellar poster children for rational investing.

Bitcoin’s Yuletide mini bubble ‘n‘ pop saw prices peak December 17 at $20,089 only to plunge 22% by Christmas Eve. Bitcoin wasn’t the only cryptoasset to hit the stratosphere in 2017. Ethereum gained 9162% while Ripple gained 36,018%. But things have turned bearish since then. The market cap for the top three cryptoassets have fallen sharply since the start of 2018. At the end of August, Bitcoin was off by 66%, Ethereum by 81% and Ripple by 91%. Yet investors persist. The total market cap for all cryptocurrencies excluding unlisted ICOs was around $220 billion at that same time period.

Karma Insider Olivier Oullier is a neuroscientist, DJ, and President of EMOTIV, the maker of Brainwear®, which specializes in understanding the human brain using electroencephalography (EEG), chalks the behavior up to classic herd mentality. “There is a lot of herding, and in some cases one could say that this is a very usual behavior. You know there is a trend that is being set. It could have been clothing or it could have been a song. It’s crypto. People want to jump on the bandwagon. There is the fear of missing out.”

FOMO is also a driving force behind ICOs, which allow startups to bypass rigorous and regulated systems of raising capital by issuing digital tokens in exchange for legal tender or cryptocurrencies. Sure, on the one hand, ICOs offer startups and small businesses a more frictionless outlet for raising funds.

That does not, or course, come without risks. ICOs are like penny-stock crowdfunding on steroids with a half-life to match. A recent study found ICO token holders receive an average return of 179%, but that fiat value has a two-to-three-month sell-by date. The same study showed less than half of startups are still in business 120 days after their ICO. 83% of ICOs that do not report capital and do not list on an exchange can be pronounced “deceased” after 120 days, according to researchers from the Boston College Carroll School of Management. DeadCoins.com listed 669 deceased coins at the time of writing, not including scams, hacks or parodies. The vast majority were startups focused on the financial sector.

Cleaning Up Crypto
Talk of regulating crypto is on the rise. But the devil, as always, is in the details. After all, blockchain and Bitcoin were designed to undermine the concentration of power in a few hands. If regulations are too anemic, fraudsters and bubbles could continue to sully the reputation of blockchain and other DLTs. But if the rules are too heavy-handed, it could choke innovation.

So far, governments have taken different views on what it is they wish to regulate in the DLT space. China has banned cryptocurrency trading, but it’s very enthusiastic about DLT powering its smart cities. In the US, Intercontinental Exchange is partnering with Microsoft to form a new open and regulated trading platform, Bakkt, with the “aim to build confidence in the asset class on a global scale.” The launch date is set for November, subject to Commodity Futures Trading Commission (CFTC) approval. At the end of the day, though, regulation is still a great unknown in most jurisdictions.

The Karma Factor
DLT could potentially lead humanity into Industry 4.0, the M2M economy, and a more prosperous, more equitable future, but only if the good actors have the power and will to weed out the bad.

The post Logic and Infrastructure in the Crypto Craze appeared first on Karma Impact.

China’s economic engagement in Africa has expanded over the past two decades to encompass raw materials, agriculture, infrastructure and other business ventures once considered the near exclusive preserve of Western corporations and U.S.-dominated multilateral institutions. As Beijing’s footprint has grown, so too have Cold War-esque warnings that the opaque nature of China’s financial dealings in Africa mask an effort to exert control over the continent’s politics and resources.

Cold war goggles obscure the nuanced nature of China’s engagement with Africa, the agency of African nations and businesses to choose their own partners, and the opportunities that exist on the continent for non-Chinese investors. As Karma Insider Thando Mhlambiso, Director of Allan Gray Proprietary Limited, puts it, “We’re yearning to modernize and develop our countries… So part of that requires capital and we would love for that capital to come from the U.S., from Europe, from wherever. And even from other African countries.”

It’s Complicated
China has evolved from a bit player in Africa at the turn of the century, to its biggest trading partner and infrastructure investor. China’s trade surplus with Africa has grown as Beijing has shifted focus from resource rich countries to rising consumer economies. But the West is not sidelined. The U.S. remains the largest net donor to Africa and has sent more FDI into the continent than China in all but three of the last 15 years. Britain and France rank second and third.

Critics accuse Beijing of engaging in imperialist practices in Africa, including land grabs, failing to employ and train locals on its African-based enterprises, and predatory lending practices. However, it turns out most land grab stories are fake. Researchers at Johns Hopkins SAIS investigated 57 reports of alleged large scale land purchases or negotiations by Chinese firms in Africa. Nearly one-third of the reports were untrue, while the remainder had grossly exaggerated the amount of land acquired.

89% of employees at Chinese-owned enterprises in Africa surveyed by McKinsey were locals, while nearly two-thirds of those firms provided some level of skills training. But less than half the managers at the surveyed firms were African.

Debt is a worry. According to SAIS-CARI, between 2000 and 2015 the Chinese government, banks and contractors extended U.S. $94.4 billion worth of loans to African governments and state-owned enterprises. And China has seized plum assets in other parts of the world when governments have defaulted on loan repayments. After Sri Lanka defaulted on a Chinese loan, Beijing took a 99-year lease on a naval facility strategically located along the long and vulnerable shipping lanes Persian Gulf oil must navigate to power China’s economy.

Which might explain why U.S. Treasury Secretary Steven Mnuchin told participants attending the IMF’s 2018 Spring Meetings that the U.S. would not allow IMF bailouts to be used to repay non-transparent excessive loans from Chinese entities. And also why the Trump administration recently announced “Connect Africa,” a $1 billion investment credit plan. The money, pending congressional approval, would buy down risk through the U.S. Overseas Private Investment Corporation (OPIC), targeting sub-Saharan Africa’s infrastructure, communications and supply chain projects.

The Opportunities
Though extremely diverse and impossible to frame with sweeping generalizations, Africa – and SSA in particular – is home to some of the fastest growing economies in the world with a rapidly expanding consumer class. Growth looks sustainable despite lingering political and sovereignty risks.

Backing this up, consumer spending in SSA is projected to reach $2.1 trillion by 2025, up from just $800 billion in 2012, according to McKinsey. And China’s infrastructure efforts do not meet SSA’s infrastructure demand, estimated by Ernst & Young Global Limited as a $90 billion annual gap if Africa is to reach global norms.

Thoughts from The Karma Network
Speaking with insiders in The Karma Network, there was no shortage of opinions on China’s work in Africa to date. Aubrey Hruby is a senior fellow at the Atlantic Council and longtime advisor to companies doing business in Africa. “The SSA startup ecosystem is thriving,” said Aubrey, and often focused on helping Africans to adapt digital technology to overcome the lack of indigenous banking or urban infrastructure. But there’s a paucity of VC funding. “I put it up over 500 million but that 500 million is like a drop in the bucket for a billion people especially compared to the venture capital penetration in India or China.” And China is not really taking advantage of VC opportunities, according to Hruby. “There aren’t that many Chinese venture into venture firms going into Africa.”

Steven Grin is Managing Partner at Lateral Capital, which accelerates and invests in early-stage and growth ventures in SSA. “You have 70 million legitimate, small, high growth businesses in these [SSA] markets not being served by traditional capital… DFIs and large sort of household name private equity funds.”

Charles Robertson is Chief Economist at Renaissance Capital. “Every African country should be growing at least 3 to 4 percent a year just because of the number of kids coming into the labor market. The average age in Nigeria is about 18 or 19. Half of the 190 million people are children. And millions are coming into the labor market every year. So that’s already a huge opportunity.” He adds that China is not alone in their efforts to industrialize Africa. “If there’s a next country rival for China [in Africa] it’s probably India because India too is now on its industrializing path.”

Thando Mlambiso continues, “Don’t be afraid to go into places because of perceived risk. Really try to assess whether or not the actual risk is what you believe.”If he had to choose a country, Mlambiso’s pick would be South Africa. “There are companies which I think are still pretty good as South African players… some of them have the potential to grow into other parts of Africa and perhaps globally as well.

The Risks
All in all, Africa is a frontier market where the ground can shift quickly under investors’ feet, and the risks very much reflect this. Coups and uprisings still occur, but with far less frequency than in the past. Africa’s rule-of-law rankings are far below other regions, according to The Global Rule of Law and Business Dashboard, an annual journal published by the U.S. Chamber of Commerce. Contract enforcement can be challenging and political patronage can put a license to operate at risk when the head of government or even just the leader of a particular ministry changes. And SSA debt-to-GDP topped the 50 percent mark in 2017 for the first time in decades. While alleviated with sweeping forgiveness by the West in 2005, debt has crept northward again, often propelled by opaque Chinese loans.

The Karma Factor
Prudent investments in Africa that leverage the money both China and many others are pouring in can bring what impact investors call “a double bottom line” – great ROI and the satisfaction of directing capital to one of the places where humanity needs it most.

The post The Complexity of Chinese Influence in Africa appeared first on Karma Impact.

Were it not for the power of irrationality, cryptocurrencies would likely be an obscure asset class circling the extreme fringes of the financial world and anarchist chat rooms. But thanks to early adopters willing to gamble on the unknown and newcomers ignoring the risk of a market bubble, no conversation about the future of finance — and well, anything– is complete without mentioning cryptocurrencies and their underlying distributed ledger technologies (DLT), such as blockchain.

DLT and the human creative power driving Web 3.0 could radically transform economies and societies, provided there’s mass uptake. But the bubbles and bad behavior that feed on irrational behavior could undermine faith in DLT and crush its promise. Karma Insider Chris White, the CEO of ViableMkts, which provides strategic guidance for building financial market technology, had some thoughts on what’s been driving that dynamic. “What the market’s really looking for en masse holistically is how do we properly apply this technology in such a way that it can be additive to the growth process around the global economy.” He adds, “The mania, I would call it more of the irrationality, it’s more of a testing phase. And you know what happens when you’re testing something? Some people are going to get hurt. There are going to be some mistakes. But I think we’re learning as we go.”

The Promise
Breaking down institutional barriers is the essence of Distributed Ledger Technology. Much has been written about its potential for positive, disruptive applications, such as:

* Lowering financial transaction costs to lift people and even nations out of poverty.
* Spurring competition: By decoupling large networks from big players, DLT allows smaller players to integrate more easily into those networks.
* Furnishing the estimated 1.1 billion people globally who lack identities with digital blockchain IDs that they control and that are secured cryptographically against theft, abuse or alteration.

Startups with arguably the greatest potential for disruptive impacts are developing DLT platforms that are infrastructural in nature and scope. Keep in mind that there are different kinds of DLT data structures that inform DLT platforms and that distributed applications are built on top of those platforms. The most popular DLT data structure is currently blockchain. Platforms built on blockchain include Bitcoin, Ethereum, Ripple, Stellar, and EOS. One of Ethereum’s most popular applications is CryptoKitties (collectible digital cats). Another notable DLT data structure is DAG – Directed Acyclic Graphs (the technology underlying IOTA’s Tangle)- which was designed to become the backbone of the Internet of Things. Also garnering buzz is Hashgraph and its platform Holochain.

The Perils of FOMO
For all that’s happening in the DLT space, its highest-profile creations are Bitcoin and other major blockchain-based cryptocurrencies, which have been less-than-stellar poster children for rational investing.

Bitcoin’s Yuletide mini bubble ‘n‘ pop saw prices peak December 17 at $20,089 only to plunge 22% by Christmas Eve. Bitcoin wasn’t the only cryptoasset to hit the stratosphere in 2017. Ethereum gained 9162% while Ripple gained 36,018%. But things have turned bearish since then. The market cap for the top three cryptoassets have fallen sharply since the start of 2018. At the end of August, Bitcoin was off by 66%, Ethereum by 81% and Ripple by 91%. Yet investors persist. The total market cap for all cryptocurrencies excluding unlisted ICOs was around $220 billion at that same time period.

Karma Insider Olivier Oullier is a neuroscientist, DJ, and President of EMOTIV, the maker of Brainwear®, which specializes in understanding the human brain using electroencephalography (EEG), chalks the behavior up to classic herd mentality. “There is a lot of herding, and in some cases one could say that this is a very usual behavior. You know there is a trend that is being set. It could have been clothing or it could have been a song. It’s crypto. People want to jump on the bandwagon. There is the fear of missing out.”

FOMO is also a driving force behind ICOs, which allow startups to bypass rigorous and regulated systems of raising capital by issuing digital tokens in exchange for legal tender or cryptocurrencies. Sure, on the one hand, ICOs offer startups and small businesses a more frictionless outlet for raising funds.

That does not, or course, come without risks. ICOs are like penny-stock crowdfunding on steroids with a half-life to match. A recent study found ICO token holders receive an average return of 179%, but that fiat value has a two-to-three-month sell-by date. The same study showed less than half of startups are still in business 120 days after their ICO. 83% of ICOs that do not report capital and do not list on an exchange can be pronounced “deceased” after 120 days, according to researchers from the Boston College Carroll School of Management. DeadCoins.com listed 669 deceased coins at the time of writing, not including scams, hacks or parodies. The vast majority were startups focused on the financial sector.

Cleaning Up Crypto
Talk of regulating crypto is on the rise. But the devil, as always, is in the details. After all, blockchain and Bitcoin were designed to undermine the concentration of power in a few hands. If regulations are too anemic, fraudsters and bubbles could continue to sully the reputation of blockchain and other DLTs. But if the rules are too heavy-handed, it could choke innovation.

So far, governments have taken different views on what it is they wish to regulate in the DLT space. China has banned cryptocurrency trading, but it’s very enthusiastic about DLT powering its smart cities. In the US, Intercontinental Exchange is partnering with Microsoft to form a new open and regulated trading platform, Bakkt, with the “aim to build confidence in the asset class on a global scale.” The launch date is set for November, subject to Commodity Futures Trading Commission (CFTC) approval. At the end of the day, though, regulation is still a great unknown in most jurisdictions.

The Karma Factor
DLT could potentially lead humanity into Industry 4.0, the M2M economy, and a more prosperous, more equitable future, but only if the good actors have the power and will to weed out the bad.

The post The Power of Irrationality in Cryptocurrency appeared first on Karma Impact.

Were it not for the power of irrationality, cryptocurrencies would likely be an obscure asset class circling the extreme fringes of the financial world and anarchist chat rooms. But thanks to early adopters willing to gamble on the unknown and newcomers ignoring the risk of a market bubble, no conversation about the future of finance — and well, anything– is complete without mentioning cryptocurrencies and their underlying distributed ledger technologies (DLT), such as blockchain.

DLT and the human creative power driving Web 3.0 could radically transform economies and societies, provided there’s mass uptake. But the bubbles and bad behavior that feed on irrational behavior could undermine faith in DLT and crush its promise. Karma Insider Chris White, the CEO of ViableMkts, which provides strategic guidance for building financial market technology, had some thoughts on what’s been driving that dynamic. “What the market’s really looking for en masse holistically is how do we properly apply this technology in such a way that it can be additive to the growth process around the global economy.” He adds, “The mania, I would call it more of the irrationality, it’s more of a testing phase. And you know what happens when you’re testing something? Some people are going to get hurt. There are going to be some mistakes. But I think we’re learning as we go.”

The Promise
Breaking down institutional barriers is the essence of Distributed Ledger Technology. Much has been written about its potential for positive, disruptive applications, such as:

* Lowering financial transaction costs to lift people and even nations out of poverty.

* Spurring competition: By decoupling large networks from big players, DLT allows smaller players to integrate more easily into those networks.

* Furnishing the estimated 1.1 billion people globally who lack identities with digital blockchain IDs that they control and that are secured cryptographically against theft, abuse or alteration.

Startups with arguably the greatest potential for disruptive impacts are developing DLT platforms that are infrastructural in nature and scope. Keep in mind that there are different kinds of DLT data structures that inform DLT platforms and that distributed applications are built on top of those platforms.

The most popular DLT data structure is currently blockchain. Platforms built on blockchain include Bitcoin, Ethereum, Ripple, Stellar, and EOS. One of Ethereum’s most popular applications is CryptoKitties (collectible digital cats). Another notable DLT data structure is DAG – Directed Acyclic Graphs (the technology underlying IOTA’s Tangle)- which was designed to become the backbone of the Internet of Things. Also garnering buzz is Hashgraph and its platform Holochain.

The Perils of FOMO
For all that’s happening in the DLT space, its highest-profile creations are Bitcoin and other major blockchain-based cryptocurrencies, which have been less-than-stellar poster children for rational investing.

Bitcoin’s Yuletide mini bubble ‘n‘ pop saw prices peak December 17 at $20,089 only to plunge 22% by Christmas Eve. Bitcoin wasn’t the only cryptoasset to hit the stratosphere in 2017. Ethereum gained 9162% while Ripple gained 36,018%. But things have turned bearish since then. The market cap for the top three cryptoassets have fallen sharply since the start of 2018. At the end of August, Bitcoin was off by 66%, Ethereum by 81% and Ripple by 91%. Yet investors persist. The total market cap for all cryptocurrencies excluding unlisted ICOs was around $220 billion at that same time period.

Karma Insider Olivier Oullier is a neuroscientist, DJ, and President of EMOTIV, the maker of Brainwear®, which specializes in understanding the human brain using electroencephalography (EEG), chalks the behavior up to classic herd mentality. “There is a lot of herding, and in some cases one could say that this is a very usual behavior. You know there is a trend that is being set. It could have been clothing or it could have been a song. It’s crypto. People want to jump on the bandwagon. There is the fear of missing out.”

FOMO is also a driving force behind ICOs, which allow startups to bypass rigorous and regulated systems of raising capital by issuing digital tokens in exchange for legal tender or cryptocurrencies. Sure, on the one hand, ICOs offer startups and small businesses a more frictionless outlet for raising funds.

That does not, or course, come without risks. ICOs are like penny-stock crowdfunding on steroids with a half-life to match. A recent study found ICO token holders receive an average return of 179%, but that fiat value has a two-to-three-month sell-by date. The same study showed less than half of startups are still in business 120 days after their ICO. 83% of ICOs that do not report capital and do not list on an exchange can be pronounced “deceased” after 120 days, according to researchers from the Boston College Carroll School of Management. DeadCoins.com listed 669 deceased coins at the time of writing, not including scams, hacks or parodies. The vast majority were startups focused on the financial sector.

Cleaning Up Crypto
Talk of regulating crypto is on the rise. But the devil, as always, is in the details. After all, blockchain and Bitcoin were designed to undermine the concentration of power in a few hands. If regulations are too anemic, fraudsters and bubbles could continue to sully the reputation of blockchain and other DLTs. But if the rules are too heavy-handed, it could choke innovation.

So far, governments have taken different views on what it is they wish to regulate in the DLT space. China has banned cryptocurrency trading, but it’s very enthusiastic about DLT powering its smart cities. In the US, Intercontinental Exchange is partnering with Microsoft to form a new open and regulated trading platform, Bakkt, with the “aim to build confidence in the asset class on a global scale.” The launch date is set for November, subject to Commodity Futures Trading Commission (CFTC) approval. At the end of the day, though, regulation is still a great unknown in most jurisdictions.

The Karma Factor
DLT could potentially lead humanity into Industry 4.0, the M2M economy, and a more prosperous, more equitable future, but only if the good actors have the power and will to weed out the bad.

The post Why ICOs Are a Powerful Fundraising Method appeared first on Karma Impact.