Try Googling ‘wealth creation,’ ‘wealthy entrepreneurs’ or anything similar, and you will be presented with books, courses, a mind-boggling array of advisers and consultants and a host of ‘fast buck’ deals all hinging on real estate. However, ‘The Future of Wealth’ survey produced by Barclays Bank in association with the Economist Intelligence Unit in 2008 states that entrepreneurs are now emerging as “the dominant source of riches.” It does not end there, the International Financial Services private banking and wealth report, also from 2008 states unequivocally that the main source of growth in private wealth, worldwide, “…originates from those involved in building successful businesses.”
A wealthy entrepreneur might be the CEO of an enterprise providing a worthwhile income, or they may have sold that enterprise and moved on. Either way, they have created wealth for themselves, their shareholders and their employees, and it is in their genes for most of them to go through the process again. For them, it is not so much the money but the buzz that comes from pushing the risk-vs.-reward dynamic to its limits, and that dynamic is something that only entrepreneurs understand. Banks, with the risks they increasingly exposed themselves to over the past decade or two, were exploiting wealth that had been created by the real risk-takers, entrepreneurs. Perhaps the time is long overdue when banks should revert to being the plumbing of the economy, and nothing else.
To get an idea of the kind of private wealth that is available for investment, (and it is already widely recognized that alternative investment is at the top of the agenda for wealthy individuals) we can call on yet more authoritative reports. According to The Scorpio Partnership, a consultancy that provides research services to the global wealth management industry, there is currently $11.4 trillion of private wealth under management. The annual World Wealth Report 2008 from Merrill Lynch Capgemini estimated that in 2007 the value of funds managed on behalf of 9.5 million high-net-worth individuals worldwide was $40.3 trillion.
But there is a problem in re-cycling the wealth, or at least some of it, created by successful entrepreneurs into capital-starved start-up and growth companies. And this has always centered on getting the information from those early-stage companies in front of the wealthy entrepreneurs who might want to invest in them. Research conducted by Growthwire, a deal-flow newswire for early-stage investors, showed that there are 10 million investors seeking out deals, and 1 million early-stage capital raisings at any one time, worldwide. From a media standpoint, this is a colossal market that even some of the biggest players, including Dow Jones and Reuters, have tried addressing, each with their own take on the issues involved. These issues include confidentiality, quality control and compliance with a global cauldron of conflicting regulation in this particular investment stratum.
The main challenge for any of them is that, unlike the mainstream capital markets where deals are high-value and low-volume, the early-stage investment market is comprises of hundreds of thousands of low-value deals at any one time. This mass of information needs to be aggregated from quality-controlled sources and distributed according to investor preferences. Whichever company gets the formula and technology right, be it Dow Jones, Growthwire or Reuters, they will dominate an investment stratum that fuels half of every developed economy in the world. On top of that, they and the wealthy entrepreneurs they will be serving will most likely be the driving force behind global economic recovery and onward growth.