Citizens of the world

Carmenza and my work with Projects RH provides us with the opportunity to talk to and meet with people from around the world. Being based in Sydney, our days are long as we start early with the Americas and finish into Asia and the opening of Europe. Our network also speak to people across the planet. In our business we seek to understand what investors are looking for, where, and how much. There is little joy for all involved in a great deal of work going into a project if for some reason it will not be an attraction to the investment community. Here is what Investors want from entrepreneurs, today.

From Fintech to AI

In the developed world, we are currently experiencing relatively high inflation, increasing interest rates, high commodity prices, and high demand for labor. The argument continues to be that we need to increase interest rates as it is the only tool central bankers have to address the genie of inflation and attempt to put it back in the bottle.

Put simply, investors are looking for a combined variety of returns, which includes an increase in share value and the dividend flow. Without delving into the financial mathematics, an increase in global interest rates also means that investors are seeking a high rate of return. As a result, given that the risk-free rate (what the US government pays on bonds) has risen, all other investment expectations have also increased due to their base increasing.

The second factor at play is that investors are seeking to move down the risk curve. By this, we mean they are looking for more advanced opportunities to invest in. It was only last Friday when we were presenting to a prominent angel or early-stage venture capital firm, and we heard that they were looking for a minimum viable product and early revenue. We went back six months and looked at an interview with this firm. They had clearly said they were happy to invest early. When questioned on whether they knew anyone else that could make a new investor the next million or so, they indicated that it appears they were now looking for businesses with a minimum viable product and early-stage revenue. The suggestion was that we should return to family and friends. As you can imagine, the entrepreneur behind the opportunity was more than surprised. Fortunately for them, our associates at Pan Ocean Advisory Group have undertaken to provide a solution.

What is clear is that fintech is no longer the darling of global investors, but now they are very keen to see opportunities from AI. While artificial intelligence offers many enhanced investment opportunities, it is not the only option.

Food, the next “critical mineral”

In our own world, we are seeing ongoing interest and requests for projects in both precious metals and green metals. Today, I was reviewing our joint project list with the CEO of Pan Ocean Advisory Group, John Martin, based in Hong Kong. John’s view was clear. The investors were willing to proceed but wanted to stick to what they know best. He advised me that his local investors were very interested in pursuing mineral projects and medical opportunities. This reflects what we are seeing in the United States and Canada. Investors are returning to areas they either have expertise in or from where they made their money. Each is hawkish about their sector. This includes a group of Americans seeking agricultural opportunities worldwide as they see food as the next critical mineral, so to speak.

Investors are not strange creatures but human beings. They see the world through their own glasses, so we need to listen to what they have to say. It then becomes clear whom to approach.

The Green New Deal

Today, many people are not just worried about events in Eastern Europe, North Asia, or Latin America but what they see occurring in the USA, Europe, and Japan. Many are deeply concerned that there are simply no far investment opportunities in Europe and Japan. They see an ongoing recession in China. They then look to North America and see clear opportunities to invest in the greening of the economy coupled with technology. Many investors talk to us about the impact of The US inflation reduction act and their investment in science and chips. The Congress has now allocated USD 360 billion to the former and over US 240 billion to the latter. This is a massive investment injection into the United States economy, and it has been called by some the Green New Deal.

Going green requires money.

There is no global recognition that the US government is pump-priming the economy to minimize the impact of the post-COVID-19 malaise, followed by high inflation interest rate cycles, which would generally put an economy into a recession. China is clearly in a recession, and much of Europe is facing stagnation and moving towards a recession. Capital knows that this is a good time to be ready because, as the dawn follows the night, we will invest, and our world will return to prosperity.

That dawn is not too far away. Governments have now changed the ground rules to encourage the investments they want to see. They are putting down fringe groups and saying that we need to be reasonable and that some things will have to happen in our backyard. It is clear, as I have written previously, that going green requires money to extract the materials we need. This applies to recycling as recycling plants will need to be built so that they can extract and reuse materials.

Entrepreneurs, prepare!

As we prepare for the next boom, which will come from a combination of new technologies and the move to a greener world, there will be huge investment opportunities. At Projects RH, we know that many of our clients have the necessary technologies and mining resources to make this next boom a reality. For new technology companies and emerging mining houses, it is critical to prepare themselves to receive investments.

These preparations are reliant on the return to fundamentals. In the post Covid world I doubt we will see investment based on 10 years of projected future earnings, rather investors will be seeking investment which reflect the fundamentals which are based on sound financial modelling and they have high quality presentations which demonstrate that the company that they will invest into has sound management, prudent financials and has done their homework either in the form of independent mining reports for technology patents. What is essential for making those pictures to investors is that manage are clearly in tune What investors want and can demonstrate they have the technology and experience to deliver what they promise. If the entrepreneurs are not prepared to present their business case in a professional manner they will be ignored. Now is the time for entrepreneurs to engage in preparing their investment case.

By Paul Raftery CEO, Projects RH, based in Sydney. If you have any questions www.paul.raftery@projectsrh.com or +61 451 523 547.

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Source: Stewart, C., “India the Voice”. The Weekend Australian, 26-27 August 2023.