Frequently Asked Questions - 10
Answer ->Yes. We do due diligence. We have a three phase approach. One, on out registration sheet for businesses to be financed, Click here. You will realize questions to do with risks, as well as legality, and ownership. Our due diligence covers various areas including their legal registration, legitimacy of address, tax payment statuses, city council taxes and licenses payments, compliance with social security fund and staff tax payments, and presence of other operational documents especially strategic plan, governance documents, etc. We also look at the risk management plan, returns promised, and stress test in interest of investor. Finally, we also ask for personal account statements, as well as guarantees. In essence, we use same processes, and procedures.
Answer -> This is actually the average return on investment in agri-business enterprises. We have conducted in house research on some businesses, and also realised this is the most rewarding sector, followed by renewable energy, energy, manufacturing, trade, and lastly, services. If you have ever farmed, you will agree this is the case. The main risks are first controlled through ensuring adequate financing, so projects do not stall in the middle, or entrepreneurs start using cheaper, substandard inputs. Secondly, we analyze risk based on ensuring that our projects are near water sources. Third, we ensure that the projects have irrigation systems, even if hand supported irrigation. Fourth, we ensure all inputs are done on time, and are of the best quality. Fifth, we have a board of advisors who are experts in agri-production. Sixth, we are very clear on the financial projections, to make sure that the numbers make sense. Finally, we supervise, with weekly visits by our officers (currently two, myself inclusive). But we are aware we could do more, so, feel free to advise on other innovative ways to reduce risk. We are a growing company.
Answer -> The GBH owns parafuta.com, an agricultural online marketing platform, with a staff, CEO, we are giving 25% of the profits, and who, everyday, morning to morning, thinks and lives looking for people who want agricultural products, and people who are selling such products. We have already financed one LPO, and we are working on the next.
Other risks are addressed as below:
Weather-less of a risk since we do hardy, high value, short cycle crops, like onions, pumpkins, cabbages, etc. And we do them near water sources. Price fluctuation-Parafuta is constantly looking out for current, and future markets, on full time basis, and so, we will cap this. Further, our price projections are very low, for income. Find attached a sample, where catfish we are projecting at UGX. 5,000 per kilo, whereas market price is UGX. 7,500. Same to others.
Costs of produce management is factored as 10% of investment amount, as GoBigHub earning. Kindly have a look at the attached project. Kindly feel free to also advise on how better we can be. We are a growing company, and I do not have absolute answers to all questions.
Answer -> Each venture is managed by the entreprenuer/farmer, who LIVES on site. We do not finance entrepreneurs who are also employed, and are employing others. Very risky. GoBgiHub visits all projects once a week, and this are done with investors’ visits, also, if possible. The projects further, we visit once a month, or twice a month. Investors can choose to visit the projects they have invested in, anytime of the month, at own cost, so long as they are not a bother to the entreprenuer.
Please feel free to ask follow up questions. I might have misunderstood your question.
Answer -> It takes hard work, and even broken relationships to earn money, and hence, it should be clear where we invest it, and how much we earn. We share profits amongst the entreprenuer/farm owner, GoBigHub (performance fees), and investors. In cases where we suggest a manager, then, we both pay manager management costs, as well as sharing with the manager profits, to enhance performance, at 5%. Again, have a look at the attached, and revert Click here. You will realize questions to do with risks, as well as legality, and ownership.
Answer -> We request the investor to visit the investment, at least once a month, and see progress. Further, the benefit, and superiority of private equity investment, as against debt investment, is that equity investment is money with an opinion, while debt investment is stupid/dumb money. Private Equity investors bring both money, AND advise, opinion, and knowledge. Hence, we request our investors to share their knowledge, market information, and other information that may have, with us, concerning the investment. But we are open to also hear your suggestions of other ways in which we can engage investors.
Answer -> This is the entire idea. We do not finance ideas. There must be traction from the entreprenuer, before we get in. It shows their persistence, and belief in their venture. Anyone can have an idea, but only a few are willing to put their money where their dreams are. These few are deserving of investors support. This does not affect the venture because ventures do not require 100% of funding at the first go. But we would love to hear your opinions on this
Answer -> So far, we send weekly status reports, and investors are free to visit the project anytime, at own cost. At IT level, we are planning and investing on an online platform for an investor to monitor their portfolio, and project. But maybe in another 6 months. Again, we are open to new suggestions of monitoring.
Answer -> A potential investors receives our projects available for investing, and then requests for additional information on a particular project, and we send a breakdown of costs and incomes, and then, they pay the money by cash, or via our bank account, and we write a receipt. Finally, when a project is fully financed, we go ahead and sign a joint venture deed, which is registered with the registrar of companies. Kindly find attached a sample.
Our bank account is at Equity Bank, Kabalagala Branch, Account Name: Go Big Finance and Mentorship Hub, A/C# 1035200841992.
Answer -> We have various testimonies. Kindly ask per exited project, and we will ask investors to get to you, in confidence. You can also talk to the entreprenuer.
Answer -> We do not charge for adversiting. It is a free platform, for investors, entreprenuers, and mentors. We only charge when the investment deal is done, at which time, we take 2.5%.
Answer ->Our network is broad, and various, but mainly micro. We have started discussions with strategic partners, such as Uganda Investment Authority, and some private equity funds, to send to them large ticket requests.
Answer ->We have done upto USD. 75,000 of financing (a mix of debt, equity, and private equity). However, our focus is micro, below USD. 10,000. Guidelines of Investing We have seen a growing portfolio of investment in several projects by gobighub.com, guided by three (3) key principles:
1. Principle 1: Returns on investment: Every investor should invest guided by what they want at the end of the investment period, or, at exit. On this, we have investments that promise 5% per month and others are equity investments, unsecured, but with higher returns on investment.
2. Principle 2: Risk of losing the investment: The main task of an investor is to first, not lose the principal. So, some entreprenuers offer security, or guarantees. In certain instances, gobighub offers a security cheque, and shares in the promised profitability, on 50:50 basis, guaranteeing both principal, and return on principal. These are discussed on case by case basis, so that the risk exposure to gobighub is compensated.
3. Principle 3: Cost of investing: Every investment requires some costs, to be paid to the people who bring opportunities, like stock brokers, commission agents, etc. For this case, gobighub.com, charges 5% of the invested amount. This is shared between entrperenuer (2/5%), and investor (2.5%). In most cases, investors cover this cost entirely. This is how we generate revenue in gobighub.
Answer ->There are two ways to invest in GoBigHub platform. 1. Investing Directly in Enterprises: An investor can choose to invest in direct enterprises (the preferred option by over 90% of investors), which gives direct touch, and feel, by entrepreneurs. Such kind of investment, means the entrepreneur and investor have a direct, contractual relationship, and gobighub.com is only a facilitator. 2. Investing In GoBigHub: GoBigHub receives emergency financing requests on a daily basis, for such projects as invoice discounting, cheque factoring, etc. These require immediate and quick turn around times. To that end, we have been building an internal fund, funded by directors capital, and recently, by investors who lend money to GoBigHub, on agreed monthly, or quarterly interest rates. These are secured by post dated cheques, and general lien on all GoBigHub assets.
Answer ->When investing, GoBigHub reviews the contract sent by the entrepreneur to the investor, and or, creates a contract, for those investing directly in GoBigHub.com. Find attached herein sample contracts for investment in GoBigHub, as well as investment in an entrepreneur. GoBigHub is a sole owned company, 100% owned by myself, and we are just about to finalise our first audited report. We have been formally operating since registration last November, 2015.
Answer ->To date, we have facilitated investments approximately amounting to UGX. 750 million, in various forms including equity investments, private equity deals, short term debts, LPO financing, invoice factoring, agriculture investments, etc. As much as UGX. 350 million worth of exits have been made. Of the UGX. 750 Million, over UGX. 24 million has been problematic, and it has taken upto 8 months for those particular investors to get their investments. Some challenges emanate due to lack of records to show proof of past success, and so, they become blind ventures. Other challenges were entreprenuer running multiple projects, and hence, not committing to one venture. Further challenges involved the very short term engagements in agricultural ventures which wen affected by rain shortfalls or disease outbreaks, require a long term lease for investments to recover. Still, further challenges involve late payments to entreprenuer by LO issuers, hence, delays in the investors exits. Finally, we have outright case of refusal by entrepreneurs to pay back investment, except under threat of court process, and we have successfully sued and collected from a few. Hence, GoBigHub now demands strict security for investments, including guarantors, demand for business partners, bank accounts, credit reference checks on entrepreneurs, as well as FACT checks, to ensure safety of investors’ finances.