Page 52 - Trends in Telecommunication Reform 2016

Box 1.16: Key lessons: Shyp
• Shyp used equity crowdfunding to raise funds needed to launch the company. Securing a
‘featured’ position in the crowdfunding platform enhanced Shyp’s chances of succeeding
in its fundraising.

• The popularity of equity-based crowd-funding means that financial regulators and
governments may need to start applying rules to protect consumers and investors in the
event the firm collapses.

• The ability of firms to attract funding depends on the growth of digital industries and
the e-commerce sector. Governments, therefore, may determine that they have a
responsibility to promote the use of e-services to drive take-up and demand.

manager provide the financing. Research shows Allan Murdoch, Hipcom’s former owner, wanted
that this funding approach is currently available to invest in the company without diluting his
only in the UK, although it is possible that other equity or losing control of the company. Murdoch
countries could offer it in future. decided to use his own pension fund to capitalize
his business expansion. The fund manager
The investment risk for this approach can be provided a loan to Hipcom based on Murdoch’s
relatively low for the investor. The loan cannot pension fund amount. In return, Hipcom agreed to
exceed 50 per cent of the pension fund’s net asset pay an interest rate to the fund manager.
value and may also be secured against an asset of
similar or higher value . The level of risk for the lender is relatively low
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in this case. The loan value must not exceed 50
Case study: Hipcom, UK per cent of the pension fund’s net asset value
and other company assets also can be used as
This case study was chosen to show how a collateral. Murdoch raised GBP 684 000 over
government can facilitate the use of financial three stages (GPB 329 000, GBP 155 000 and GBP
resources that otherwise would be relatively static 200 000). With this approach, he managed to
or untapped. Hipcom is a cloud communication strengthen Hipcom and retain the same equity
company whose main business is buying stake in the business.
telecommunication licences from providers and
upgrading them for resale. This process is lengthy,
and for the business to grow it requires additional
sums of capital to buy new licences.

Box 1.17: Key lessons: Hipcom
• Hipcom obtained loans by using its owner’s pension fund as collateral, allowing the
business to expand and be more competitive.

• For pension fund managers, this funding approach can generate additional revenue from
using existing funds as collateral for loans.

• This type of investment approach depends on government policy allowing pension funds
to be used for such a purpose. By facilitating the use of resources that otherwise would
be static, the government can create an incentive for people to increase their savings and
help businesses to find alternative financing sources.

34 Trends in Telecommunication Reform 2016