Author: Andrew Boyes-Varley
We’ve become accustomed to exceptionally high returns in recent decades – but they were the exception, not the rule. The new normal, as investors will by now have come to recognise, is characterised by volatile markets and mediocre returns. Interest rates, in many countries, are at record low levels as a result of the extraordinary stimulus measures that have been taken by a number of central banks to boost anaemic economic growth. Is this the end of meaningful returns, as we know them? For some canny investors there is a new instrument with the potential for significant returns and exercise of outcome control by the investor.
Before we consider this new instrument, we should introduce the global enterprise that provides access to the instrument and that unlocks the cashflows, which deliver the returns. It is called INNOVO and it is shaping the “New Global Commerce”.
INNOVO is a new ecosystem, which revolutionises commerce. It is a free disruptive platform where buyers and suppliers cooperate to create and share savings - and make a difference. Business-to-Consumer companies like AirBnB and Uber have used a “digital-platform” business model to disrupt their respective industries at lightning speed. INNOVO has developed a particularly advanced digital-platform business model, for organisations of any size undertaking Business-to-Business commerce across all goods and services, to unlock and realise savings.
The traditional approach to business has two very costly areas of waste which INNOVO addresses:
- Conventional sales and marketing (‘push marketing’) to win new customers suffers from ultimate conversion rates of only 1%. Suppliers don’t know when a new customer is in the market to buy so 99% of their sales and marketing approaches fail to generate a sale because they are made at the wrong time.
- These very high selling costs also leave the supplier with wasted spare capacity that is too expensive to sell.
INNOVO’s model brings Buyers and Suppliers together in a community founded on cooperation. This is a deceptively simple concept with significant ramifications. Buyers simply post a procurement request on the INNOVO Platform when they are ready to buy. In return for buyers telling suppliers of their readiness to buy, suppliers share some of their savings in wasted selling costs and unsold wasted spare capacity with buyers and the Platform.
INNOVO is free to use, works alongside existing procurement processes, with existing and new suppliers. INNOVO is currently generating savings of c.17% gross, c.10% net to the buyer.
Now to the instrument, which is called an INNOVO Growth Participation (IGP) Unit. It is a non-equity based financial instrument. It is the securitization of the future revenue flows to INNOVO (the shared savings, above) from companies nominated by the purchaser of the IGP Unit. The IGP Unit’s potential to yield high return makes it an alternative to derivative financial instruments, but without the associated increase in your risk exposure. The derivative analogy also applies in that the “underling value generating assets” are the companies nominated by the IGP Unit holder.
An investor who purchases an IGP Unit nominates to INNOVO, a set of Agreed Target companies with combined total annual revenues between them of up to an agreed amount. This amount is a function of the IGP Unit value.
The purchaser merely introduces the companies it nominates to the INNOVO Platform for their use in both their sales and procurement activities. The more the introduced companies benefit from INNOVO, the greater the return will be to the IGP Unit holder. So, not only does the purchase of an IGP Unit have the potential to yield high returns for the purchaser, but it is also designed to increase the profitability of the nominated companies by giving them access to new customers and reducing their cost base. This makes it particularly interesting for investors that have a portfolio of investee or associated companies, that are seeking ways to improve their profitability.
IGP Unit holder receives; 4% of savings arising from its nominated Agreed Targets’ use of INNOVO for procurement and/or 4% of the savings associated with winning new customers, for a period of 3 years following introduction. Savings are generated monthly on the value of trade over the INNOVO Platform by the Agreed Targets. The IGP Unit holder’s 4% shares are paid monthly in cash by one of the ‘Big 4’ accountancy firms and audited by another.
The projected Return on Investment is 17 times, which is based on an average use of the INNOVO Platform of; 5% for sales to new customers and 5% of procurement spend. As IGP Unit holder is able to select and influence the organisations it nominates it is able to directly impact both the level of return and risk of their investment.
In summary the key benefits of IGP Unit to you, the investor, are:
- projected 17x RoI, paid monthly in cash, over three years
- revenue share from established corporations, nominated by you - the IGP Unit holder
- the ability to impact the performance and risk profile of your investment
This “new normal” time and the rise of the New Global Commerce presents a unique value creation opportunity for those investors that have the foresight not to miss out.