lecture from venture cap to ipo _ateneo de davao
DESCRIPTION
lecture file. How to build up your small firm, until you qualify for IPO.TRANSCRIPT
Capital “The fuel for your
operations.”
Capital “The fuel for your
operations.”
Find Long-Term Capital, and get access to Working Capital.
Find Long-Term Capital, and get access to Working Capital.
Summary of the talk• Access to Working Capital allows you to
undertake high-margin projects that improve the profits and cash flows of your company.
• Your company can only be born, if long-term risk capital is made available. The venture should be worth the risk.
• The funder makes a gamble, on you, the entrepreneur.
1.Finance at the birth
and growth of a firm.
1.Finance at the birth
and growth of a firm.
2. Actually, investors need You
more, than you need Them.
2. Actually, investors need You
more, than you need Them.
3.Find “Working
Capital” from coops
3.Find “Working
Capital” from coops
4.Ideas for an
“Industry bank” or guarantee fund.
4.Ideas for an
“Industry bank” or guarantee fund.
Hope for Healthy Returns, Good Payback
In the RED Break even
Positive cash flowSTARTSTART
How about a newly-born firm:
Sequoia Capital, Kleiner Perkins
Angel Investor
100K
Sales Breakeven
“ADS”
2001:Profits
Own fundsOwn funds
Google started 1998 with $100,000
$25m check
$25m check
2010: 8 / 292010: 8 / 29
Progress:
Start-up the
business
Growth & expansion
Mergers & acquisitions
Major player
Marketing Operations
Finance
Strategy
Somebody dares…
&&
Normal company starts humbly
Owner’s Equity
Your own money.Your own money.
You tap other people’s money.
Liabilities
Owner’s Equity
Current Liabilities
Personal Loans, Promissory NotesAngel investors
Cisco Systems75 visits
Cisco Systems75 visits
You acquire productive assets
Current Assets
Fixed Assets
Machinery & Factory…HR… + Cash for raw materials, payroll, working capital
Liabilities
Current Liabilities
Owner’s Equity
Working CapitalWorking Capital
This must be the hardest part
Current Assets
Current Liabilities
Project expenses
PayrollSales…
Collections…
A working-capital Source
owned by a group of
businessmen
A working-capital Source
owned by a group of
businessmenJustify the Borrowing
Pay it Back.
If something goes wrong,
someone should FIX it.
SimplifiedSimplified
Sources of funding:“Easy to Access”
(Let us review)
“Difficult to Access”
Personal savingsYour personal loansYour personal assetsMoney from relativesMoney from friendsA “Family Office”
Venture capitalPrivate EquityBank loan. Issue Bond.
A Bank for the Industry AssociationA Bank for the Industry Association
How about …How about …
PROGRESS
Life cycle of a company
Daring Investment
Struggle to Survive
Aggressive Expansion
Strong Hands
14
Tremendous increase in VALUE
You’ve come a long
way…
ReviewReview
Sources of Capital
Seed Capital
Angel Investors
Venture Capital
Private Equity
They capture the growth stage.
10m
300m
800m
60m
If you are a progressive firm,
…then, you can attract long-term
investment money.
Additional rounds of Private-equity
funding..
Find a Path
16
Investment banker finds the capital.
After size & stability are achieved
… more private-equity
money17
Banks start to lend, when the cash flows are stable & sure.
STOCK MARKET
BANKS
Investment bankers
Investment bankers
Investment banker finds the capital. But
there may be a “price to pay.”
Your Company
Good PartsGood Parts
BAD PartsBAD Parts
Reformatted Co.
Good PartsGood Parts
Equity Capital: public & private.
Private Equity (usually: late-stage). They monitor & evaluate progress.
Venture Capital (early stage): They coach & mentor investee.
Angel Investors: Individuals in very early-stage. (Motives.)
To review:To review:
Do you have a good project
Are you asking for a reasonable
amount?
You can find funding
Questionable project?
Overinflated request.
Numbers are “padded.”
No deal.
Last yearLast year
Current Year
Current Year
Predict- able
Predict- able
Predict- able
Predict- able
Unknown
Unknown
Pattern of SalesPattern of Sales
“Long-term, loyal, REPEAT clients”
Unknown
Unknown
Unknown
Unknown
No Engine of Growth?No Engine of Growth?
Can your CFO forecast the Revenues? Can your CFO forecast the Revenues?
??
Can your CFO forecast the Cashflows? Can your CFO forecast the Cashflows?
Last yearLast year
Current Year
Current Year
ForecastForecast
ForecastForecast
Forecast
Forecast
Forecast Company Earnings = Net ProfitsForecast Company
Earnings = Net Profits
IT would be nice if you had reliable expectations, even
if there is some cyclical pattern…
Forecast
Forecast
Forecast
Forecast
Engine of Growth Engine of Growth
Ideal SituationIdeal Situation
Last yearLast year
Current Year
Current Year
Strong Forecast
Strong Forecast
ReliableForecast
ReliableForecast
ConfidentForecast
ConfidentForecast
Company Earnings = Forecast Net ProfitsCompany Earnings = Forecast Net Profits
There is an “Engine of Growth.”
IF Money is abundant
Proposals get funded
A simple business plan can persuade
IF Money is scarce
Proposals get ignored
Only safest plans can
secure funding
IF investors are optimistic
Proposals get funded
Even a “long shot”
can get funding
IF Investors are pessimistic
Proposals get ignored
Only a “sure thing”
can get funding
Money flows towards GROWTHunique selling
proposition. Sure Buyer. Good contract.
What makes it low risk: experience, expertise. Track record.
• If you promise …
…High Returns at Low Risk, money will become abundant.
• Even “invisible” money will appear.
Money is flowing in
Tourism $
Direct Investment
Portfolio Investment
Gifts & Grants
Remarkably, HOT money
is NOT moving out.
Remarkably, HOT money
is NOT moving out.
The Philippines
EconomyEconomy
Stock market
BOND market
New Business
Is money flowing to
New Business
Ventures?
Review the processReview the process
Start-up capitalStart-up capitalWorking
capitalWorking
capital
ExpansionExpansion
Money is flowing to
New Business Ventures
Except to Mine !
One FILIPINO start-up got seed capital from here:
• Springs Seed Capital Initiative in Singapore, committed Sing $10 million to 15 companies. Total sum invested so far: $63 million.
• an investment fund that “matches,” the sum invested by a third party in an approved start-up.
• 185 start-ups have benefited from the fund: 30 of them have earned more than $1 million revenue in 2009-2011.
Search in SingaporeSearch in Singapore
The Small BusinessThe Small Business
InvestorsInvestors The usual “seed capital” initiativeThe usual “seed capital” initiative
US$1 mUS$1 m US$1 mUS$1 m
Decides to fund the start-up
Invests the same amount“Concept”“Concept”
“Springs Seeds”• Start-up Enterprise Development Scheme (SPR
ING SEEDS) – Two dollars to every dollar to be matched against investments of third-party investor(s). So far, $63 million invested.
• The third-party investment ranges from …. S$75,000 TO S$1million.
ADB seed capital funds US$480 million For “Asia”
ADB seed capital funds US$480 million For “Asia”
The Small BusinessThe Small Business
InvestorsInvestors SPRINGS “seed capital” initiativeSPRINGS “seed capital” initiative
US$1 mUS$1 mUS$2 mUS$2 m
Decides to fund the start-up
Invests DOUBLE the amount provided by investors
Better than the usual “Concept”Better than the usual “Concept”
Form a companyForm a company
Biz plan ContestBiz plan Contest
Technology Enterprise Commercialization
Technology Enterprise Commercialization
Winning PlanWinning PlanFundsFunds
Board of Judges Invests funds in a complete START-UP
Let’s set up one, like this:Let’s set up one, like this:
Focus on Technology • Technology Enterprise Commercialisation Sche
me (TECS) – a competitive grant to convert breakthrough technology ideas and proprietary IP into a promising business.
• competitive grant • proposals are evaluated on technical and
commercial merits by a team of reviewers.
This is a task for a “noble statesman.”This is a task for a “noble statesman.”
The Invention, itselfThe Invention, itself
Idea for an Invention
Idea for an Invention
“Proof of CONCEPT” FUND
“Proof of CONCEPT” FUND
PrototypePrototypeS$250KS$250K
Board of Judges Invests funds
The Invention finds a BUYERThe Invention finds a BUYER
InventionWho wants to buy it?
InventionWho wants to buy it?
“Proof of VALUE” FUND
“Proof of VALUE” FUND
Purchase order
Purchase order
S$500KS$500K
Marketing WhizInvests funds to help you find
a buyer for one million widgets
Bright kid with an ideaBright kid with an idea
Owner’s money
Owner’s money
Young Entrepreneurs FUND, aged 18 - 26Young Entrepreneurs FUND, aged 18 - 26
What he can raise
What he can raise
Amount x 4
Amount x 4
Plus FRIENDS’ money
TIMES FOUR, of what money you can raise from friends, relatives…
YES! Start-ups …. MAX S$50,000
Working capital
Down payment on a purchase
order
Bank Loan against purchase
order.
BANKBANK
From CustomerFrom Customer
Credit Lines from a Bank
Borrow, over the course of the year
…
Track Record: Repayments. Many years.
FINANCE is not usually the concern of supervisors, unless …Head of a Subsidiary.
…even if no collateral.
BANK lends…
Just the BACKING of
PARENT COMPANY
Short-termShort-term
Credit from Parent Company
Track Record is obvious, to Owner. Owner supports his
Vision/Mission.
What is an Acquaintance: Someone you know ..well enough, to borrow from. BUT not well enough, to lend to.
…but at 15%
Parent lends…
To motivate you to pay on time, or pay ahead of
time
Borrow, over the course of the year
…
What if you need more than just CAPITAL
• You may need specialty managers…
• You may need synergies…
• TO Control costs, or raise revenues
• TO ensure and/or stabilize the forecast cash flows.
Special Case:Special Case:
Sales Sales
- CostsRaw materials
Cost of CapitalCost of Labor
Cost of LandTaxes
= Healthy Profits, Cash Flows = Healthy Profits, Cash Flows
If your capital provider…If your capital provider… can start up your “Engine of Growth.”
Need: Managers & Capital
Ready for Next Step ?
Capital is being offered, together with management
experience & assured sales.
Growth will require additional capital & human
resources
Different sort of ProblemDifferent sort of Problem
Why is that: Prospects are FLATWhy is that: Prospects are FLAT
A lot has been achieved, so
far. BUT:
…Need a strategy for Growth…
Prospects…
Seek beneficial DEAL
Don’t let it, go to
waste… You need CAPITAL & STRATEGY
to get it.
Find a BRIDGE
This is YOUR
potential.
DEALDEAL
DEAL partners
FINANCIAL PARTNERS
OrSTRATEGIC PARTNERS
Access new
MARKETS
People with
experience &
contacts
CapitalFINANCIAL PARTNER:
infuses SMALL capital
STRATEGIC PARTNER:Infuses BIG
capital + know-how
He receives 20% or 40% of
company shares.
He receives 60% or 80% of
company shares.
SAME manage-
ment team
TEAM of outside
managers
Working Capital LOANS
IDEA
NEW VENTURE: steady sales
FIRST PROFITS: PRIVATE EQUITY
Engine of Growth is running
Angel Investors
Venture Capital
Private Equity
INVENTION: first buyer
OWNER
Review of this section:Review of this section:
Engine of Growth is running, already…
QUALIFY FOR BANK LOANS
QUALIFY FOR STOCK MARKET
Expansion, diversification
OTHER
Investors
OTHER
Investors
Review of this section:Review of this section:
In the next section:• We will learn that “Investors need you more
than you need them.”
• If you can promise a reward and manage the risk, money will “run” to you.
• Find out what investors are looking for, so that you be on the same “wavelength”
• What are the techniques for minimizing business risk? Pool the funds. Invest in many.
What do investors look for?
Small Savers Wholesale Savings Loans or Equity Investment Funds Subcontracted to Banks, Funds, etc
Growth …atacceptable levels
of Risk
Small Savers
Small Savers
Managed Funds
Managed Funds
“Retail customers”
“Retail customers”
“Wholesale dealers”
“Wholesale dealers”
Institutional Investors
Institutional Investors
Individual Investors
Individual Investors
Subcontract to:
Subcontract to:
Specialist Funds
Specialist Funds
Private-Equity Funds
Private-Equity Funds
Venture Capital Funds
Venture Capital Funds
FUND ManagerFUND Manager
1. Stocks 2. Bonds3. Cash 4. Etc
1. Stocks 2. Bonds3. Cash 4. Etc
Bonds ExpertBonds Expert
Cash ExpertCash Expert
Stocks ExpertStocks Expert
Target: 20%
“Managed Funds”
Beat INFLATION. Meet growing RETIREMENT
PAYMENTS.
FUND ManagerFUND Manager
18% x 0.5 6% x 0.4 2% x 0.1
---------------12% for the
total
18% x 0.5 6% x 0.4 2% x 0.1
---------------12% for the
total
Bonds: 6%Bonds: 6%
Cash: 2%Cash: 2%
Stocks: 18%Stocks: 18%
Target: 20%
*Not good enough
FUND ManagerFUND Manager
39% x 0.218% x 0.7 6% x 0.1
---------------21% for the
total
39% x 0.218% x 0.7 6% x 0.1
---------------21% for the
total
Target: 20%
Stocks: 18%Stocks: 18%
Bonds: 6%Bonds: 6%
Special Funds: 39%
Special Funds: 39%
“Venture Capital TRUST” or Hedge Funds or “Absolute
Alpha” funds: various names
Somebody should search
• For fast-growing companies• Put them all together • And then, they will be able
to attract funders.
Small companies grow fastAverage 39% / year,For example
25%
120%
- 30%
60% 40%20%
There has to be an acceptable level of RISK; RISK, that is managed.
Thoughts
Like the fingers of one handAverage 39% / year,For example
25%
120%
- 30%
60% 40%20%
Thoughts
From Very Good, To Good, To Bad.
That’s Life
Careful monitoring and coaching to manage the Risk
120%
- 30%
Range of investment outcomes
Net Losses
High Returns
50%
90%
0%Cash
BondsStocks
Risky new ventures
Losing ventures: still have hope?
“Best of Breed” are on the frontier
High Risk
High Returns
Net Losses
Low Risk
-50%
Business Failures
++
++
---
The Big Enemy: inflation
-+5%
* Investment Firms are compelled to seek GROWTH
Bonds
Risky new venturesStocks
Risk management Guarantee Fund
Back-up… Contingency Plan
2%4%
To achieve more of the POSITIVE
returns, we need:
50%
90%
0%Cash
BondsStocks
Risky new ventures
High Risk
High Returns
Net Losses
Low Risk
-50%
Conservative
Aggressive
+++
+
---
Losing ventures: still have hope?
Business Failures
IF CONSERVATIVE:IF CONSERVATIVE:
Aggressive
50%
90%
0%Cash
BondsStocks
Risky new ventures
High Risk
High Returns
Net Losses
Low Risk
-50%
Conservative +++
+
---
Losing ventures: still have hope?
Business Failures
IF aggressive:IF aggressive:
50%
90%
0%
Risky new ventures
Losing ventures: still have hope?
High Risk
-50%
Sunrise Industry
Venture capital’s interest
To attract venture capital• Companies can band together, establish
a credit cooperative, or working capital fund.
• They take turns borrowing from the credit cooperative.
• IF the fund grows 39% a year, big funders will want to join in. s
WORKING CAPITAL FUND
WORKING CAPITAL FUND
20 people contribute
5million each
20 people contribute
5million each
Hire a FORMER
BANKER, who knows how to process Loan
Decisions.
Hire a FORMER
BANKER, who knows how to process Loan
Decisions.
Promises 25% per year Interest
Promises 25% per year Interest
A BOARD checks BUSINESS PLANS
A BOARD checks BUSINESS PLANS
IF NO COLLATERAL: HIGHER THAN 30% IF NO COLLATERAL: HIGHER THAN 30%
“Industry Association”
Defaults carry penalty. Payable next year.
Lend at 30%Lend at 30%
To Projects that RETURN > 30%
To Projects that RETURN > 30%
50 people contribute
2million each
50 people contribute
2million each
WORKING CAPITAL FUND
WORKING CAPITAL FUND
Target 25% returns per
year on capital invested
Target 25% returns per
year on capital invested
Outside Investors make
placements. (After 3 years track record)
Outside Investors make
placements. (After 3 years track record)
The BOARD selects who is deserving
The BOARD selects who is deserving
They Coach & Mentor the fund recipients, to
assure success.
They Coach & Mentor the fund recipients, to
assure success.
“Industry Association”
A GODFATHER Fund supplies ANY deficit.
MAKES EMERGENCY
LOANS
A GODFATHER Fund supplies ANY deficit.
MAKES EMERGENCY
LOANS “default insurance”
Lend at 30%Lend at 30%
To Projects that RETURN > 30%
To Projects that RETURN > 30%
WORKING CAPITAL FUND
WORKING CAPITAL FUND
Lend at 30%Lend at 30%
A buddy pays in his behalf?
A buddy pays in his behalf?
Fails to pay interest or principal?
Fails to pay interest or principal?
Failed to pay 30% this year… Therefore pay 66% by next year.
A CO-MAKER takes on the burden, in case the borrower fails to pay.
A CO-MAKER takes on the burden, in case the borrower fails to pay.
Co-guarantor : someone who
“vouches” for his Buddy.
Style of Grameen Bank: each borrower
has 5 Buddies, for back-up.
Co-guarantor : someone who
“vouches” for his Buddy.
Style of Grameen Bank: each borrower
has 5 Buddies, for back-up.
“Buddy Guard”
WORKING CAPITAL FUND
WORKING CAPITAL FUND
Lend at 30%Lend at 30%
The Fund grants an extension?
The Fund grants an extension?
Failed to pay 30% this year... Therefore pay 66% by next year.
If the rest of the FUND is doing OK, then the board can COLLECT NEXT YEAR.
If the rest of the FUND is doing OK, then the board can COLLECT NEXT YEAR.
Fails to pay interest or principal?
Fails to pay interest or principal?
Just like PREFERRED SHARES have cash dividends, payable
in arrears. (LATE PAYMENTS
ACCEPTED.)
Just like PREFERRED SHARES have cash dividends, payable
in arrears. (LATE PAYMENTS
ACCEPTED.)
Sunrise Industry
++ ++++
----== ==
Development. Progress. Growth.
Working Capital.
Project Loans.
Approved on the basis of BUSINESS
PLAN.
Sunrise Industry
++ ++ ++
----==
High-Margin Projectsthat need much Working Capital
Working Capital FUND
Emergency lender
(ANGEL) just in case
BACK-UP system
OPTION 1: “pooled funds” tend to minimize overall risk
Sunrise Industry
++ ++ ++
----==
Working Capital FUND
Small Business
Corp’s Back-up Fund
Credit Default insurance
High-Margin Projectsthat need much Working Capital
OPTION 2 with insurance premiums paid: even better!
Sunrise Industry
++ ++ ++
----==
Mega ProjectsMega Projects
Infra-structure
Funds
Contin-gency
Guarantee Funds
Insurance
They grew, and became self-financing.
They grew, and became self-financing.VIPs to vouch
for the project
Example of OPTION 1
Sunrise Industry
++ ++ ++
----==
They get paid backThey get paid back
Student Loans
Contin-gency
Obligation (stand-by)
Loan Guaranty
Smaller than the WorkCap requirement
of operating companies
Smaller than the WorkCap requirement
of operating companiesGOVT
vouches for the project
Example of OPTION 1
Sunrise Industry
++ ++ ++
----==
Most get paid backMost get paid back
Credit Card Receiv- ables
Securitized mini-Loan packages
Back-up plans
Smaller than the WorkCap requirement
of operating companies
Smaller than the WorkCap requirement
of operating companiesSomeone vouches for the whole.
Example of OPTION 1
Business LoansANYBODY can
contribute capital: INDIVIDUALS or
companies
ANYBODY can contribute capital: INDIVIDUALS or
companies
WORKING CAPITAL “FUND”
WORKING CAPITAL “FUND” Lends to any
QUALIFIED company. Projects > 30% IRR
Pays cash dividends
Personal Loans
Nearly always should pay cash dividends
Business Loans
Companies make contributions, for
membership
Companies make contributions, for
membershipCREDIT
COOPER-ATIVE
CREDIT COOPER-
ATIVE Lends only to member companies
> Co-Makers… > Jointly & Several
Personal Loans
Sometimes pays cash dividends; usually: REINVEST
Livelihood projects
++ ++ ++
----==
Grew to P220m by 1980s. Return on Equity 40% per year
Grew to P220m by 1980s. Return on Equity 40% per year
Working Capital
P1201 in 1960
Perpetual Help
Credit Coop, in Leyte
System of microlending
Reached P1bn by 2011.Loanable funds.
Reached P1bn by 2011.Loanable funds.
33 incorporators in 1969. Raised P1,201.94
Livelihood projects
++ ++ ++
----==
Assets 1m in 1988, 1.6m in 1998Assets 1m in 1988, 1.6m in 1998
Working Capital
P5300 in 1972
Barangka Credit Coop, in Marikina
System of microlending
431m by 2011.431m by 2011.In 2008, Most Outstanding Cooperative in the Philippines
REPEATS every yearREPEATS
every year
15 million15 million
100 million100 million
2 million2 million
3 million3 million
“Nice project”
“Weak”
5 millioncosts
5 millioncosts 2 million
revenues2 millionrevenues
“Bad project”
-Costs, taxes
= Net Profit
“TOP LINE”
“BOTTOM LINE”
Good contracts = lead to steady sales
Make the sales grow fast. Then you attract capital.
Sales
80% of TOTAL INDUSTRYREVENUES
Small Size LARGE SIZE
THE LARGEST FIRMS
THE LARGEST FIRMS
THE SMALL FIRMS
THE SMALL FIRMS20% of TOTAL
INDUSTRYREVENUES
Hoping for
growth
Small Business Investment Company are privately-owned, privately-managed
investment funds, licensed and regulated by SBA, that use their own capital to LEND to
Small Firms.
Small Business Investment Company is backed by an SBA guarantee to make equity and debt investments into small businesses. They
supply equity capital, long-term loans, and management assistance.
The Small BusinessThe Small Business
InvestorsInvestors USA: Small Business Investment Corp.
USA: Small Business Investment Corp.
Since 1994
US$10mUS$10m
US$20m
(Matching funds)
US$20m
(Matching funds)
Debt or EQUITYDebt or EQUITY
Small Business Investment Corp.Small Business Investment Corp.
Equity investments in
another
Equity investments in
another
Loans to one company
Loans to one company Max 7 yrsMax 7 yrs
Investment CommitteeInvestment Committee
Equivalent to your “WORKING CAPITAL FUND”
Small Business Investment Corp.Small Business Investment Corp.Equivalent to your industry’s “WORKING CAPITAL FUND”
Small Business Investment Corp.Small Business Investment Corp.
The Philippines
The Small BusinessThe Small Business
Investor MONEY
Investor MONEY
Matching FUNDS from
a bank, guaranteed
by SBC.
Matching FUNDS from
a bank, guaranteed
by SBC.
BorrowerBorrower
GuarantorGuarantor
Guarantee Certificate
The Individual Guarantee (per company)The Individual Guarantee (per company)
LOAN
BANKBANK
BANKBANK
BorrowerBorrower
GuarantorGuarantor
LOAN
Portfolio Guarantee Contract
The PORTFOLIO Guarantee (per bank)The PORTFOLIO Guarantee (per bank)
Whoever passes the loan criteria, can borrow from
bank.
* can INSURE 80% of the loan.
BorrowerBorrower
GuarantorGuarantor
LOAN for some big project
Portfolio Guarantee Contract
The PORTFOLIO Guarantee (per industry)The PORTFOLIO Guarantee (per industry)
Whoever passes the loan criteria
of the PSIA FUND, can borrow.
Small Business Corp. CAN INSURE up to 80% of the loan. The insured lender
recovers cash today, while still trying to collect from the delinquent borrower.
PSIA FUNDPSIA
FUND
Working Capital LOAN
P 70m salesP 70m sales
P 10 million project costP 10 million project cost
MONITORING & EVALUATIONCan you really manage the project that wellHow are you implementing Marketing Plan?How are you supervising Production Team?
How are your Project Management skillsDo you need coaching on strategy
Are you able to target high-margin projects?
COACHING & MENTORINGWill the project produce 70m in sales?Is the market ready for this product?
Are the industry trends in Favor?May I see the design of marketing plan?
LENDS 100m Only 1
becomes a problem
Only 1 becomes a
problem
THE REST: HEALTHYTHE REST: HEALTHYWorking Capital Fund:100m
ONE COMPANY:Loan Default 3mONE COMPANY:Loan Default 3m
The problem company promises to pay up by the second year. Meanwhile, the fund can lend up to 700m worth!
Less than 1 / 7 ever default.
The problem company promises to pay up by the second year. Meanwhile, the fund can lend up to 700m worth!
Less than 1 / 7 ever default.
If default rate is 3% only: