It's OPM. Banks don't have any money. They lend OPM. Brokerage Firms rarely risk their money; they rely on OPM to trade Market. Venture Capitalists, Hedge Fund Managers, Pension Funds and Insurance Companies are constantly searching for more OPM. Governments rely upon OPM to run country. So what's OPM? It's Other People's Money.

Understanding OPM is Key to Raising Risk Capital

The suppliers of OPM expect to be rewarded for their money. That reward is a combination of acceptable risk and profit. Often these investors don't fully understand Risk/Reward Ratio of their investment. To have any chance of succeeding over time, they should reduce investment proposals to a simple Risk/Reward ratio to determine their willingness to risk their money.

American Banks borrow money from their depositors and leverage it with tax dollars. The Depositors believe there is very little risk in loaning money to an American Bank and since 1934, no American bank depositor has lost their money in a bank failure, thanks to American taxpayer.

Losing At Bank

However, what bank depositors fail to realize is their 3% interest rate reward is inadequate to allow them to breakeven over time. They are taxed on their interest income at about 40%, thus their after tax income is about 1.8%. The current inflation rate is about 6%. Bank savings depositors are steadily losing money every year. To break even against inflation on a taxable investment requires a 10% interest rate. Thus, their Risk/Reward ratio is certain loss over time against a 0.03 annual reward. That's a Risk/Reward ratio of 100/0.03 over time. You would probably do far better in Las Vegas or Atlantic City!

Losing in Stock Markets

Brokerage Firm clients supply money (OPM) to play Stock Market. The public company failure rate on volatile end (Over-the-Counter and Over-the-Counter Bulletin Board) of U.S. Public Market is over 98%. To breakeven, client needs to sell their stock at a share price 98 times their investment. And that figure doesn't factor in taxes and inflation. It's rare that shareholders sell when share price doubles. Thus, their Risk/Reward ratio is 98% odds of loss over time against a twofold potential reward. The Risk/Reward ration is about 98/2.

At conservative end of U.S. stock market (the New York Stock Exchange), most share prices have traded within a narrow range of about 20%, for past couple of years. Thus, OPM investor's Risk/Reward ratio is even over past few years against a 0.02 reward. The shareholders reward isn't justified by fact that inflation rate is 6% and capital gains taxes of 23%. The Risk/Reward ratio is about 1/0.005

Why Most Venture Capitalists Fail

To create a US$100 million Multinational Corporation will take US$100 million. So, your question should be: where is money coming from to make my VCP proposal work?

The Beowulf Investments' PIPES

As a first step, my firm, Beowulf Investments (BI), will invest US$1,300,000 to create your client's US$5,000,000 company. As I've outlined in my Primary Source of Business Capital article, BI recover its risk capital within sixty days. (Once done, we are willing to wait necessary years to achieve our profits, along with your company insiders.) To do so, BI must sell some of its shares to public. The resulting increased float creates imperative to bury shares and reduce effective float, as discussed in my article, Burying Stock.

In theory, Beowulf Investments could recycle same US$1,300,000, or any amount of money, into any client company without incurring a long-term risk. However, this isn't in anyone's best interests.

Our goal is to supply money to start M&A process. We strongly believe that a public company M&A strategy will create money needed for company to grow. (In past four years, Cisco Systems, for instance, even with some major errors, turned their company into a current $147B giant using this process. I can hardly argue with such a gargantual success. So what we're doing here is not reinventing wheel.)

In first year or two, it is possible for Client Company to have access to a key acquisition, without having cash to buy it. In that case, Beowulf Investments will supply that cash.

Our Clients are Printing Their Own Money

Stock is money. It's a paper currency like all paper currencies. Most public companies print far too many shares and suffer inevitable consequences of seeing their currency collapse.

Used as money, our pubic company client's shares will supply 75% of cash they need to create a hundred million-dollar company.

Our public company client can buy private cash-producing assets, using its shares. These shares will hold a constant exchange rate value with U.S. Dollar. The owners of private, cash-producing company, acquired by our public company as it grows to being a twenty million dollar company, will have sold for far more to our public company client than they could have sold to another local private buyer.

The reason for that is that 2-for-1 stock split will give original owners nearly double their firm's actual value due to split. For example, our public company client will use US$1 million of Beowulf Investments' money and US$3 million of their shares valued at US$20/share. Thus acquired company will own 150,000 shares of our public company client. With 2-for-1 split, they will own 300,000 shares valued at US$20/share and worth US$6,000,000. Our public company client has effectively paid these private company sellers, US$3,000,000 more than their private companies were worth.