#early HNW perhaps?

[librawritesstuff]

Come on, show us the rest…

[thefirstknife]

The Observatory

I've been rotating a piece of the TFS CE lore in my brain so long I forgot to write about it. There's no transcript yet that I can find (I might do it myself tbh if nobody else does), but here's the scans with the whole text.

So, there's a lot going on in that CE, but the main gist of it is that the whole CE is written like a report from Eido. She investigated information about the Witness and the Collapse to try and help prepare us for our inevitable fight against it. Through her investigation, she found old Eliksni databanks that contain ancient records of past civilisations; main one being discussed is the civilisation that would eventually end up becoming the Witness.

There was a lot going on with them, shown to us through discussions between two specific individuals; they're only identified through code as HNW047622 and RS6243199. I'll call them HNW and RS. I've mentioned this before because we could see one of the pages in the preview of the Collector's Edition.

These individuals talked a lot and gave us insight into the Witness' civilisation. In short, they were super advanced and had something they described as the "Gardener's tools" which they apparently used to terraform other planets. They also talk about the concept of "the final shape" a lot and lead philosophical debates about its meaning and whether or not they have a responsibility to bring that concept to others in the universe. I'll probably go into their civilisation in-depth at some point, but for now I want to go off about something that appears to be a minor detail.

As part of their conversations, In the 5th image from the scans, they extensively talk about the final shape. The RS individual mentions something called "the Observatory." It is apparently some sort of a prediction machine. Full transcript of the relevant conversation and the rest of the post under:

[RS6243199]: I agree with you, in theory, but we do not exist purely in the theoretical. This suffering is already happening now, all the time, everywhere we look. Come see me, and I will show you the Observatory's readings. Such sights as we have seen, my friend, make me sick to my soul. [HNW047622]: I thought that the Observatory could only see possibilities. The future-branches of past visible-light readings. [RS6243199]: We have made improvements. The glass-minds*** trim the excess branches. What we see now are the strongest paths. And in the seeing, they become true. [HNW047622]: Then tell me what you have seen. I gain nothing from running from the truth, no matter how uncomfortable. [RS6243199]: Cities turning on themselves in a frenzy of self-destruction. Children offering up parents in superstitious sacrifice to bloodied gods. An entire people who would boil off their own atmosphere rather than let their neighbors enjoy fresh air! Great waves drowning worlds. Bodies which do not decompose, for everything, down to the very bacteria, has died as well. Machine-plagues carving their prediction-machines into moons. Your garden, destroyed. As the Observatory saw it, so it came to pass.

The footnote is a text from Eido:

*** From the context, some sort of computational assistant? There appears to be some etymological overlap with the names of Vex Minds. Something to investigate later, perhaps!

This made me instantly lose my mind when I was reading. Very early into Lightfall's release, I made a post about the Veil and the history of the universe. It's about some very peculiar similarities between a lot of prediction technology and caches of information that preserve ancient history and ancient civilisations and how they may connect to the Veil.

Mind you, this was before we knew a lot about the Veil; I wrote this pre-Veil logs and before it was confirmed that the Veil is linked directly to consciousness and memory. It was also before Season of the Deep which gave us Akashic Revelation: a lore tab in which a Guardian tries to go through the portal and experiences a vivid flashback of memory of his own pre-Guardian life. The name of the tab is important: akashic records is an esoteric concept for a supposed existence of a record of everything that has ever happened in the universe, past or present or future, human and non-human.

This is basically what I proposed in my post, before this lore tab, about the Veil; that the Veil or some source the Veil can tap into, is something similar to that. That all of the prediction machines are essentially pulling from this same source. In the post, I mentioned the OXA machine (the "black box for galactic civilisations" that allowed the Psions to see the future), Inspiral lore book (in which various civilisations and individuals left their records in the Darkness), the Device (the machine built on Vex technology by the Future War Cult in the Golden Age, led my Maya Sundaresh, used to displace consciousness and also see the future as used by Lakshmi-2), and even maybe the Sundial made by Osiris. I also mentioned how there's a possibility that even the whole scope of Vex prediction technology is somehow based on or tapping into this same source.

I am very amused at how I wrote: "It’s also interesting that Maya Sundaresh seems to be quite involved in pretty much every aspect of this." So true past me, that really is interesting! Her connection to the Veil and Lakshmi (and the importance of the Device and FWC) will later be revealed in Veil Logs. Almost like these connections were made deliberately, between all of these machines and the Veil.

With the benefit of new lore being released in the time since I made the original post, I am even more convinced that there's something going on here, and especially after TFS CE because the section I copied here mentions yet another incredibly similar machine: the Observatory of the Witness' species. It's not described in a lot of details, but from what we did get, it's quite unmistakeable that this is similar to things like the OXA and the Device.

The Observatory is clearly shown to be some sort of a machine that can see the future. Or, rather, as HNW says, it can see "possibilities." This matches what we've seen of the Device when Lakshmi-2 was using it; she was able to see different possible futures, futures that were getting increasingly narrow and biased to what she wanted to see. Identical formatting for using some sort of a machine to predict the future is shown as well with a Psion Ixel using... something (? maybe the OXA?) to do the same.

And again, the same formatting is used this season when a Psion Qorix uses her inate Psion abilities to project visions of the future into the minds of those present at Caiatl's War Council. It's worth noting that Psions have huge ties to Darkness abilities, as well as their entire species having been influenced by Nezarec to an unknown extent, but enough for them to share psionic/psychic abilities, an affinity to void, helmets that reflect his head shape and possibly more we don't know about. It's also worth noting that Nezarec was the one who was transporting the Veil on his Pyramid ship and lamented how Neomuni were not using it to its full potential. Nezarec may have used the Veil to influence the Psions.

This is important because these devices aren't exact, and the Observatory seems to share the same caveat. It shows possibilities, not certainties. Different users might see different things, painted by their own desires and experiences. However, there's something in all of these prediction machines that can lead to a real prediction of the future. The invididual RS mentions several visions, most of which are not specific enough to identify, but sound plausible given the sheer size of the universe; they must've happened somewhere at some point. There's one specific that we know: "great waves drowning worlds." And there's one mentioned by RS that also happened; the destruction of the "garden" made by HNW. This is mentioned in the beginning of the CE. HNW terraformed a planet, but that planet was later completely destroyed.

Even more interesting, the way the Witness' species used the Observatory seems to imply that they employed the Vex directly to help them manage this machine. RS explains that the "glass-minds" are capable of "trimming excess branches" and allowing only the "strongest paths" to be explored. Perhaps this was their way of not falling into the trap that the people using the OXA or the Device could fall into; by having the Vex monitor and manage this prediction machine, it stops the user from inserting too many personal variables. And yes, as Eido noted as well, "glass-minds" is a phrase that indeed shares similarity with the Vex and is almost certainly referring to the Vex.

This is incredibly interesting for a lot of reasons. First, as I've already mentioned, these sort of prediction machines are common throughout the universe and keep being mentioned. Different species at different times have been capable of creating similar machines for similar purposes. Inspiral also goes deeper into how species could use the Darkness to access memory and history through it; the Ecumene and the Qugu had these abilities and used them as part of their civilisation. Through Psions, we get a mix of these two things; the Psions have both tangled with prediction machines like the OXA, but they also posses seemingly inate Darkness abilities that function similarly. They can project futures and possibilities to others, they can merge their minds (and bodies!), and their old religion was based on ancestor worship. Emotions, memories, consciousness itself: these are part of Darkness and governed by the paracausal entity we know as the Veil. It seems like machines capable of giving insight into the past and future are connected to the consciousness of the universe.

Second, these things somehow always come back to the Vex. We don't know how the OXA was built, but the Vex could access it. The Device was build from Vex technology and so was the Sundial. The Observatory is very closely linked to the Vex as well; either built by them or simply being close enough to be accessible for the Vex to manage it. The Vex are more or less known for their manipulation of time, their ability to move through it and use it as a tool, as well as for their prediction and simulation machines and constructs.

And of course, this year revealed to us that the Vex, or at least a part of the Vex, have tried recreating the Veil in the form of Black Heart, but failed due to their inability to understand paracausality. However, it seems like the Vex are drawn to the Veil even outside of just the Sol Divisive, as can be seen from Neomuna. The Vex were a constant threat to Neomuna throughout its existence and the Vex have been trying to access the CloudArk, an alternate reality engine built on the energy of the Veil.

This season in particular has been fairly suspicious with the Vex as well, showing us a concerning evolution of the Sol Divisive and the Vex in general; their radiolaria emitting Darkness energy, Oracles appearing outside of the Vault of Glass and also resonating Darkness, their attempts to "merge with the Witness" and a strange message that seems to be implying they're still not done with reaching out to the Veil in the form of the Black Heart. I talked about this more here.

Are the Vex drawn to the Veil for a particular reason? Perhaps they unknowingly tap into something the Veil is responsible for, like prediction, through the simple fact that the Veil is the paracausal entity responsible for Darkness which is memory? For the Vex, memory could work outside of time; perhaps their prediction abilities are simply them being able to "remember" the future, because they can exist through and outside time.

There is also the even more mysterious possibility here that revolves around a few hints in regards to the Veil and the Traveler being a single entity at some point in time. If the Veil and the Traveler used to be one before becoming separated, this may be what Unveiling talked about through metaphor; the mythical Garden before the universe existed could've been this singularity that was just the Veil and the Traveler together as one. And as Unveiling also noted, in one of those parts of Unveiling that seem to be closer to the truth than others, the Vex already existed then. The reason they're so out of place in a universe of paracausality is because they appear to have come into existence before paracausality so it is foreign to them. They might remember the time when the two were one, therefore they still have an instinctual draw to the Veil; and honestly, to the Traveler too, given how close to it they've settled in our system. As the lore on Scatter Signal notes, someone told us that all Vex agree that "Sol is Salvation." It's where both the Veil and the Traveler are.

This is beyond speculative, but it's been on my mind since that first post well over a year ago because of how closely linked Darkness, the Vex and these peculiar prediction devices have been throughout the history of the universe; now added with one more, the Observatory, most likely the first one ever made (or found), by the species that would later become the Witness. I could be off on the exact nature of this connection, but I feel like there is some sort of a connection all the same. I also feel like they wouldn't have mentioned this in TFS CE for no reason, especially because we're clearly not going to deal with the Vex until after TFS.

Either way, the Observatory mention and description really got me spiralling into unhinged territory. It added such a specific little detail about something I've speculated about before and made it fit perfectly. I wonder if this will remain just like a little curiosity and background worldbuilding or if there's a more direct reason for including it; namely if this is more hints about post-TFS stuff regarding the Vex.

Until we know for sure, I will continue to believe that all prediction abilities and prediction machines are tapping into a single source; the consciousness/memory of the universe, produced by the Veil as a part of the inherent propery of Darkness. The Vex are key to this because they may be doing it in a very specific way given their relationship to time, the possibility that they existed in the universe before anyone else, and possibly because of their memory of a time when the Veil and the Traveler were one.

It could be also something simpler and not entirely interconnected. But I was very pleased to see yet another Vex-based prediction machine being introduced into the universe, adding to the existing ones that have been fairly relevant this year and mentioned several times like the OXA and the Device. Can't wait for TFS and post-TFS content to see if this is something we'll be exploring in more detail, especially as we start dealing with the Vex!

All this about a half of a single page of TFS CE. Girl help.

[hnwreviews]

Decoy Mannequin - Breaches (file, self-released, 2020)

What it looks like:

This is the second release from Decoy Mannequin (Walls Made Of Limbs was the first, just a few weeks ago) and just like the first it has dark and gloomy artwork featuring some creepy mannequin pictures and the logo and title on the cover. It looks a bit like classic HNW from back when it was popular as a CDr genre in 2010. I could totally see this arrive on my doormat in a slim jewelcase with an inkjet-printed cover. Of course, now everything is digital so it’s also the road that Decoy Mannequin has chosen to take. I’m not sure who’s behind Decoy Mannequin. The Bandcamp only lists its location as Illinois but has no further details. I’ve tried contacting them through the form but have not received a reply (yet).

What it sounds like:

Breaches has a total of 6 walls that are all between 10:13 and 13:10 in length and that all employ only the numbers 0, 1, 1 and 3 in their length: 10:13, 10:31, 11:03, 11:30, 13:01 and 13:10. I don’t know if it’s supposed to be a sort of code or something, but the first release had a similar thing (two tracks of 30:11 and 31:10 respectively) so there seems to be some significance to it. The six walls are all very similar in texture and each represent a muddy, mid-paced type crunchy wall with some minor tonal differences between each. It’s very classic and meditative, with little harshness to it and minor shifts if any. 

In conclusion:

Decoy Mannequin presents a sound that is not unlike the one of the previously reviewed Beast release. Is this the start of some kind of early HNW revival? I can’t say I dislike it, though it doesn’t quite have the charm anymore that it did way back when. Even still, it’s decent enough and a pleasure for HNW purists. Perhaps the most exciting is the fact that there are new projects coming out more regularly that wallow in the same sort of anonymity that was more common in the earlier days. That, perhaps more than anything, creates that nostalgic HNW vibe to the max.

3 bricks out of 5

[dalepwithchari]

Charting the adoption of direct startup investments by family offices

Buy some great High Tech products from WithCharity.org #All Profits go to Charity

There’s money, and then there’s wealth. In all likelihood, money is what most of us have (or don’t have). It’s what we use to buy lunch, pay rent or put a down payment on a house. Wealth, on the other hand, is what buys yachts. But more than superficial material things, wealth also buys financial security (and all the good and ill that comes with it) for subsequent generations.

What is a family office?

Although close to half of Americans hold no stocks, bonds or real estate, most of the remaining half that are lucky and prosperous enough to do so choose to manage their assets on their own, or perhaps with the help of a financial advisor. But as you move further along the privileged end of the socio-economic curve, managing, preserving and growing one’s wealth becomes more complicated.

Many of the world’s highest-net-worth (HNW) families employ an entire office full of accountants, lawyers and investment professionals to manage their assets. These “family offices” sometimes manage the assets of more than one family, but they are still relatively close-knit.

Historically, family offices haven’t made many direct investments into individual tech startups, instead favoring a more diversified approach to tech investing by being limited partners in venture capital and other private-market funds. Or, outside of tech, they invest in public-market equities, real estate, fixed income or other “alternative” asset classes besides VC, PE and hedge funds, according to a 2017 article about ultra HNW investors’ portfolios from KKR.

Increasingly, however, family offices are investing more into individual tech startups, at least according to anecdotal reports and a recent funding round Crunchbase News covered. But one anecdote doesn’t document a trend, so let’s take a look at the numbers.

Family offices’ direct investment into startups picked up the pace

Data covering direct startup investments from family offices listed in Crunchbase bears out that trend. The chart below is based on more than 1,700 venture deals (seed, angel, equity crowdfunding, Series A, Series B, etc.) struck with individual technology companies by 193 family offices located around the world.

The 193 family offices with listed venture investments are, no doubt, only a fraction of the total count of such groups, which tend to be private. Combined with the fact that many startups are slow to announce funding, it’s not like the list of funding rounds or their participants is comprehensive. However, assuming it’s fairly representative, we can treat the figure above as a directional indicator of general trends.

And what are those trends?

First off, at least when it comes to deal volume, family offices’ startup investment activity tracks with the broader venture investment market (which includes individual angels, venture capital groups, seed funds, accelerators and others).

During the several years leading up to 2015, there was a run-up in the number of deals being struck. After that high point, though, deal volume began to decline in the U.S., which Crunchbase News has documented, as investors eschewed writing many smaller checks to early-stage startups, instead favoring fewer, larger checks with later-stage tech companies. On a global scale, projected deal volume is roughly flat on an annualized basis from 2015 through 2017, whereas reported deal data is down primarily due to reporting delays. Because there are more U.S. family offices that invest in startups than international ones, it’s not surprising to see that family office deal volume hews closer to the U.S. market in general.

Family office venture deal volume growth outpaced VC

But what’s different about family offices — and what lends credence to the anecdotal evidence suggesting there are more family offices investing in more startups — is the growth rate in deal volume over time as compared to institutional venture capital investors. To be sure, worldwide, there were more deals struck by both types of investor in 2017 than in 2010 (even when accounting for reporting delays). But the difference between these two types of investor is in the magnitude of the change.

In the chart below, we compare reported deal volume between VC funds (which have a lot of known deals per year) and family offices (which, as we showed above, have much fewer recorded startup investment deals per year). We adjust for this discrepancy in deal volume by indexing reported deal volume against 2010 levels. In doing so, we’re able to deliver a relativistic, apples-to-apples comparison between the two.

Worldwide, in 2015, reported deal volume from VC firms was almost precisely 2.5x that of 2010’s totals. But that multiple for family offices is roughly 6x. And, although it isn’t pictured above, family office deal volume growth outperformed traditional VC between 2011-2017, 2012-2017 and 2013-2017.

In relative terms, across a range of measures, deal volume growth was higher and faster among family offices than VC funds for a significant period of time. The data suggest that family offices making direct investments into startups recently became a trend. Especially for that period through 2014, family offices were on the early side of the adoption curve for making direct startup investments. Whatever growth we see on the VC side is the product of growth in the market in general, but it’s not like VC funds are still adopting direct startup investments into their repertoire. It’s been their model for decades. For comparatively stodgy family offices, it was still the new, new thing.

[Read More …]

Charting the adoption of direct startup investments by family offices

[abckidstvyara]

Charting the adoption of direct startup investments by family offices

Charting the adoption of direct startup investments by family offices

There’s money, and then there’s wealth. In all likelihood, money is what most of us have (or don’t have). It’s what we use to buy lunch, pay rent or put a down payment on a house. Wealth, on the other hand, is what buys yachts. But more than superficial material things, wealth also buys financial security (and all the good and ill that comes with it) for subsequent generations.

What is a family office?

Although close to half of Americans hold no stocks, bonds or real estate, most of the remaining half that are lucky and prosperous enough to do so choose to manage their assets on their own, or perhaps with the help of a financial advisor. But as you move further along the privileged end of the socio-economic curve, managing, preserving and growing one’s wealth becomes more complicated.

Many of the world’s highest-net-worth (HNW) families employ an entire office full of accountants, lawyers and investment professionals to manage their assets. These “family offices” sometimes manage the assets of more than one family, but they are still relatively close-knit.

Historically, family offices haven’t made many direct investments into individual tech startups, instead favoring a more diversified approach to tech investing by being limited partners in venture capital and other private-market funds. Or, outside of tech, they invest in public-market equities, real estate, fixed income or other “alternative” asset classes besides VC, PE and hedge funds, according to a 2017 article about ultra HNW investors’ portfolios from KKR.

Increasingly, however, family offices are investing more into individual tech startups, at least according to anecdotal reports and a recent funding round Crunchbase News covered. But one anecdote doesn’t document a trend, so let’s take a look at the numbers.

Family offices’ direct investment into startups picked up the pace

Data covering direct startup investments from family offices listed in Crunchbase bears out that trend. The chart below is based on more than 1,700 venture deals (seed, angel, equity crowdfunding, Series A, Series B, etc.) struck with individual technology companies by 193 family offices located around the world.

The 193 family offices with listed venture investments are, no doubt, only a fraction of the total count of such groups, which tend to be private. Combined with the fact that many startups are slow to announce funding, it’s not like the list of funding rounds or their participants is comprehensive. However, assuming it’s fairly representative, we can treat the figure above as a directional indicator of general trends.

And what are those trends?

First off, at least when it comes to deal volume, family offices’ startup investment activity tracks with the broader venture investment market (which includes individual angels, venture capital groups, seed funds, accelerators and others).

During the several years leading up to 2015, there was a run-up in the number of deals being struck. After that high point, though, deal volume began to decline in the U.S., which Crunchbase News has documented, as investors eschewed writing many smaller checks to early-stage startups, instead favoring fewer, larger checks with later-stage tech companies. On a global scale, projected deal volume is roughly flat on an annualized basis from 2015 through 2017, whereas reported deal data is down primarily due to reporting delays. Because there are more U.S. family offices that invest in startups than international ones, it’s not surprising to see that family office deal volume hews closer to the U.S. market in general.

Family office venture deal volume growth outpaced VC

But what’s different about family offices — and what lends credence to the anecdotal evidence suggesting there are more family offices investing in more startups — is the growth rate in deal volume over time as compared to institutional venture capital investors. To be sure, worldwide, there were more deals struck by both types of investor in 2017 than in 2010 (even when accounting for reporting delays). But the difference between these two types of investor is in the magnitude of the change.

In the chart below, we compare reported deal volume between VC funds (which have a lot of known deals per year) and family offices (which, as we showed above, have much fewer recorded startup investment deals per year). We adjust for this discrepancy in deal volume by indexing reported deal volume against 2010 levels. In doing so, we’re able to deliver a relativistic, apples-to-apples comparison between the two.

Worldwide, in 2015, reported deal volume from VC firms was almost precisely 2.5x that of 2010’s totals. But that multiple for family offices is roughly 6x. And, although it isn’t pictured above, family office deal volume growth outperformed traditional VC between 2011-2017, 2012-2017 and 2013-2017.

In relative terms, across a range of measures, deal volume growth was higher and faster among family offices than VC funds for a significant period of time. The data suggest that family offices making direct investments into startups recently became a trend. Especially for that period through 2014, family offices were on the early side of the adoption curve for making direct startup investments. Whatever growth we see on the VC side is the product of growth in the market in general, but it’s not like VC funds are still adopting direct startup investments into their repertoire. It’s been their model for decades. For comparatively stodgy family offices, it was still the new, new thing.

[propertycrowd]

For the longest time, and as far as I can remember, I have been an unrepentant China bear. But a recent business trip to Shenzhen, rubbing elbows with VC/PE fund managers, tech entrepreneurs and policymakers, had me wondering if perhaps I was wrong all along.

The trip, to me, was an eye opener for more reasons than one. Thanks to friends and family (and friends of the family), my wife and I were given a glimpse into a side of China that few of us as tourists see or have access to; with consumerism, controls and crowdfunding on full display.

Consumerism

I wondered aloud to our host how all this was possible. The answer that came back was quite predictably, scale. His reasoning, while simplistic, rang true: “China may be five times poorer on average, but we’re twenty times larger than the UK, and (thanks to gaping wealth inequality) our top 10% are no less wealthy than yours.”

“Furthermore,” he added, “we have all kinds of investment restrictions and capital controls. What else are we going to spend it on?”

The above line of reasoning, as the story goes, is in fact a relatively recent development. China has one of the highest savings rates in the world, and decadent consumption is certainly not something Confucius encouraged in his teachings. But recent changes in policy, technology and social attitudes have tilted the balance somewhat away from savings and investment, and toward consumption and a general sense of “carpe diem”.

Controls

A decades-old policy of mercantilism, captured succinctly by the idiom 肥水不流外人田 has meant that capital is only allowed to flow one way – inwards – and this has led to an excess of capital for which there are very few outlets deemed to be of an acceptable risk/reward nature.

Unsurprisingly, the residential real estate market in Tier 1 cities such as Shanghai, Beijing and Shenzhen have been red-hot, which policymakers have been trying to cool for years, to no avail. In some cities, the situation has become so severe that policymakers have now resorted to extreme draconian measures, including (but not limited to) an outright ban on second/buy-to-let properties, an arbitrary per-square-foot price cap on new homes, and even a requirement that homebuyers have a university degree.

The problem, as we alluded to earlier, is largely the result of controls which restrict the free movement of capital across borders. Many of the people we spoke to felt the real estate market was frothy, and agreed that the economics made little sense, with rental yields in Tier 1 cities averaging just over 1% p.a. So in a normal market, capital might flee the Chinese economy in search of higher returns overseas, but China, as we all know, doesn’t do ‘normal’.

There are plenty of HNWs who would love to invest in high-yielding, property-backed investments in jurisdictions such as the UK, but simply aren’t able to because their money is trapped in China. Those we spoke to who were also members of the ruling party told us that the authorities are unlikely to lift such controls in the foreseeable future because the problem is that the market has become so reliant on this excess liquidity to plaster over the economy’s imperfections (e.g. all the non-performing loans from local government and state-owned enterprises) that opening the floodgates may just trigger a revolution-inducing recession.

Crowdfunding

But the economy is a bit like one of those toy balloons that clowns turn into poodles for crying children at parties: squeeze it on one end, and out it pops the other. With investment in residential property no longer an option for most, be it for valuation or regulatory reasons, those with excess capital have begun to consider alternative investment options, and this is what we understand has driven in large part the rapid growth of China’s VC/Angel space in recent years, as well as its peer-to-peer/crowdfunding (and shadow banking) industry more broadly.

According to data from Cambridge Judge Business School, as referenced in this IPF report we highlighted in an earlier article, China’s crowdfunding sector grew by an estimated 1,160% in the two years from the end of 2013, and as of 2016 is the world’s largest by geography, far surpassing even the US (see chart below).

Total P2P/Crowdfunding Volume, by Geography

Source: IPF (2016); Cambridge Judge Business School Crowdfunding Reports 2016

But even at over $100bn, China’s crowdfunding sector shows no signs of slowing and still has ample room for growth. There lies an estimated $9 trillion of savings in “wealth management products” (with trillions more in idle cash) looking to be more efficiently deployed. This is set against the backdrop of a dysfunctional banking sector, with virtually costless liquidity being offered to large corporations and governments, while at the same time, startups and entrepreneurs have difficulties accessing both short and long-term capital – a situation similar to what we have in Europe.

For those of us hoping to tap the seemingly limitless China market for both capital and investment opportunities, I hate to disappoint, but the feedback is that Chinese crowdfunding is likely to remain a “family affair” for the foreseeable future. Exporting capital out of the country for investment in overseas projects violates the basic mercantilist principles I outlined earlier, and policymakers are wary of the sector’s susceptibility to fraud (especially after local P2P platform E-zubao was revealed to be a multi-billion dollar Ponzi scheme in early 2016), so the preference is to keep everything local, where at least rogue operators can be located and prosecuted more easily. And this is likely a key reason behind the demise of ambitious but short-lived start-ups such as HengXinLi, which pitched itself as a conduit for Chinese wealth seeking to move overseas.

Crowdfunding Volumes by Sub-Category (US $bn)

Source: IPF (2016); Cambridge Judge Business School Crowdfunding Reports 2016

Looking ahead, there is likely to be significant consolidation within China’s crowdfunding sector. In a report released earlier this year, the Beijing Bureau of Financial Work said it expected nearly 90% of the c.5000 Chinese crowdfunding platforms to either fail or be forced to liquidate by the regulators by the end of 2017.

I would also posit that real estate crowdfunding, which historically made up just 5% of overall crowdfunding volumes in China, is the sub-sector poised for the highest rate of growth given the typical Asian investor’s love affair with bricks and mortar. Furthermore, the fast-growing “entrusted loan” industry is effectively an institutional version of peer-to-peer lending, often collateralised by land or real estate, and it may not be long before these same deals are structured, securitised and offered directly to retail investors for crowdfunding (at which point, of course, the government might step in).

We live in interesting times indeed, and nowhere is it more so than in the world of Chinese crowdfunding. Keep your eyes peeled.

The post China – Consumerism, Controls and Crowdfunding appeared first on Property Crowd.