“The intelligence of a mob is the square root of the number of people in it”
And because we are talking about the stock and the cryptocurrency market here – “The ‘power of compounding’ works well with the mob driven sentiments just as it does with your wealth”
Believe it or not, technicals, fundamentals and news – all go for a toss when a mob drives a stock up or down.
And why worry when Elon Musk is the leader of the mob with the finest brains of the world; who can make you rich within minutes!
I am sure you would love to get rich within minutes. So keep reading to learn how you can create wealth using the X-factor of one of the wealthiest man on earth – Elon Musk
People decide the stock price of a company- not the company
The stock market is expected to be a regulated market which is out of control for any retailer, and is fully governed by people who are experts in finance. Well, this is the general belief among the masses.
But that is not the case. The markets move as the big investors and the retail investors (to a certain extent) want it to move.
So all the markets (where people participate), run on mob mentality and less on fundamentals or technical aspects.
And Elon musk, who is followed by masses, has been the leader of the mob recently where he has driven buying and selling pressures on the stock of Gamestop, and now with cryptocurrency.
The Gamestop battle
Gamestop corp is a US based gaming equipment and consumer electronics manufacturing company with its headquarters in Texas. The gaming merchandise was in huge demand during the lockdown days. This company was targeted by short sellers managing huge hedge funds for gaining profits once the price of the Gamestop share started moving in bearish territory.
Hey hey, no need to worry if you are coming to the terms “short sellers” and hedge funds for the first time! Here is the break-up in case it is a bit too technical:
Short selling is a method in the stock markets where you sell a share first and then buy it again.
So let’s say a stock is trading at 100 and you anticipate it will go down to 80, then you short sell this stock and sell it at 100 and buy it back at 80 and end up gaining 100-80=20 bucks for this trade.
Now, how do you sell it when at first place you don’t own it? Well, that is a feature which is available in the stock markets where your broker helps you to carry out this transaction.
So, it is all up to the broker to decide the magnitude of the short sell he wants to allow. And this depends from customer to customer as well.
Hedge funds are pooled investments which are managed by professionals in various instruments to gain returns on the entire pooled money. Simply put, it is a financial partnership where the gains are shared with the primary investors and a part with the hedge fund managers or professionals.
Just as the hedge fund operators were anticipating a bearish move in the stock of Gamestop with their short positions intact; Mr. Musk spoiled their party by tweeting for Gamestop with a link to the Reddit group- wallstreetbets.
Reddit, if you are not aware, is an online platform or forum for discussion on various topics and wallstreetbets is one of the forums on Reddit which has likeminded people from the field of stock markets trading and investing.
With 47 million followers on Twitter, Elon Musk was a heavyweight for the hedge fund managers who had to bear a loss of nearly 5 billion USD cumulatively.
What is Cryptocurrency?
Funny enough, we do not know the identity of who actually invented this massive industry. Yes, it might sound absolutely ridiculous, like: who will not own up the responsibility of ideating an almost-revolutionary-mode of transacting? But it’s true.
Some believe that Satoshi Nakamoto created Bitcoin-the first cryptocurrency. The funny part is that the identity of Satoshi Nakamoto is still not known.
Cryptocurrency is a digital currency which is run by a group of computers. One bitcoin (or any currency) is formed when a group of computers solves a complex mathematical equation to form a block and make the working easier. One block is formed at a time and these blocks form a chain called a blockchain inside which all the transactions are stored in digital format.
As you are reading, there are thousands of computers working day in and out to solve complex mathematical equations and forming blocks to make the blockchain stronger.
Solving each block is getting difficult day by day and is requiring more time than before. Hence, mining of bitcoins is no more a profitable business now as it used to be from 2010 to 2017. The total number of bitcoin that can exist is 21 million after which the blockchain will be completely formed without any anomalies.
What has Elon Musk got to do with Cryptocurrency?
You might wonder, cryptocurrency is not regulated in most of the nations, including India; neither is the Tesla owner planning to start a new crypto-coin. Then why is the world’s richest man so much in the news with cryptocurrency?
Cryptocurrency is notorious, as is news that this form of trading helps politicians hoard all their black money and even use it to fund terrorist organizations.
Elon Musk being associated with Bitcoin- a thought to be a speculative gambling instrument – has raised many eyebrows.
But just as we discussed in the beginning that the stock price of Gamestop depended on the mob mentality; so is the case with cryptocurrency as well, and Elon Musk came to the rescue of the retail investors once again.
Elon Musk tweeted a photo of the SpaceX rocket with the moon in the background and followed it with a word- “Doge”.
Post the tweet, the price of Dogecoin-just another cryptocurrency like Bitcoin; soared higher by 45% within minutes. The buying pressure created a huge demand and with less supply the price gained a bullish momentum.
Elon Musk has invested USD 1.5 billion in Bitcoin as well, after which the price of Bitcoin shot up to record levels of 50,000 USD.
Is Elon Musk misusing his reach?
Elon Musk is followed by millions worldwide. Needless to say, a huge following can be catastrophic if not used ethically. The stock market or the cryptocurrency market is a speculative market, which is highly driven by sentiments of people. And Elon Musk is always just one tweet away from changing the sentiments of people.
The equity market regulators work hard to ensure an unbiased playfield for the retail investors as well as the institutional ones. But if a single tweet from Elon Musk can cause a loss of nearly USD 5 billion to hedge funds, then this internet gang war between the bulls and the bears can cause drastic speculative repercussions in the future too.
But then, if someone is losing USD 5 billion; that is because someone has gained USD 5 billion too because the stock market in the end is a zero-sum game. Someone gains in the stock market only because someone has lost.
So let’s think about it the other way round. Had Musk not tweeted about Gamestop, the hedge fund managers had already created a playfield of their own by downgrading Gamestop in the views of the investors and were one step away from gaining those 5 billion USD.
The deliberate downgrading, as alleged by Elon Musk, was sending an impression that the company is not well run to the investors. Moreover, it was affecting the sentiments of its customers as well; because the stock price of any company drives the sentiments of its customers as well in the long run.
These hedge funds tried doing the same with Elon Musk’s Tesla a few years ago where they shorted Tesla heavily sending a negative message to its investors.
Hence, it is believed that Musk has settled scores with them through this whole Gamestop saga.
But then, revenge or online group wars is too petty a thing for the likes of Elon Musk; just as it is for the hedge fund managers who induce speculative rumors for personal gains.
Elon Musk – Messiah for the retail investor?
You know that the cryptocurrency market is run by very few people around the world who are bitcoin miners or hold huge amounts of bitcoins and other currencies. This is the disadvantage of cryptocurrencies not being regulated.
Also, the stock markets, to a considerable extent, are run by the institutional investors who have got huge holdings as compared to the retailers.
So under such circumstances, if Elon Musk tweets something, it is easily accessible to the common man and the common man can use it to wage a war against the institutional investors. These institutional investors have already ganged up to feed on the retailer’s money.
Hence, Elon Musk can aptly be called the “Messiah” for the common man.
If not a Messiah, Musk certainly is the Robin Hood now after tweeting about “showing no respect” to the US based trading platform-Robinhood for halting trading in Gamestop for a while.
This Gamestop episode is historic and can change the prevailing structure of the stock markets.
Now does it give an equal playfield for everyone; or whether it will spoil the sport forever is for the regulators to decide. And regulations differ from country to country. So no cut and dried formula for now; but interesting days ahead.
Elon Musk’s hate for short sellers
Short selling as mentioned above is selling shares you don’t own (borrowed from the broker and settled later) and buying them later at a lower price.
Cryptocurrency – Is it legal?
Legal and regulated are two different words. Cryptocurrency is legal in India after the Supreme Court lifted the ban on it in March 2020. But it is not yet regulated by the central bank- RBI.
Cryptocurrency is expected to overtake fiat currency if all goes well with it in a few decades. Currently, there are a few stores in a few nations where cryptocurrency is accepted as a legal tender to buy and sell goods.
The legalities and the regulations differ from nation to nation. You must go through the rules of your territory and take your own decisions accordingly.
The X-factor of Elon Musk
Well, if you are thinking too deep into this race of online supremacy between the bulls and the bears; and decide what is good and what is bad for the future of cryptocurrency and stock markets; you need to halt for a moment and just concentrate on how you can use the X-factor of Elon Musk to make some personal profits.
Let’s not make the task of the regulators easy by deciding for them; but channelize our energies in following what Musk is up to.
Dogecoin along with many other crypto coins have shown moves as anticipated by Elon Musk. Vigilant traders have made full use of his tweets to pounce upon the situation and make quick profits. He is serious about the future of cryptocurrency and has invested 1.5 billion USD in Bitcoin himself.
The series of tweets are still on and you never know which is the next altcoin to get a seat on the SpaceX rocket and fly to the moon.
And as far as shorting by institutional investors is concerned; the game has just begun after the Gamestop saga.
Private Company vs Public Company
The difference is more than literal
Do you know why you cannot buy shares of a private company?
So, can you only buy shares of a public company like ONGC, IRCTC, Indian Oil, etc.?
Then why are the shares of private companies like Infosys and Wipro listed on the stock exchange? Are these private companies to begin with?
Do you know a private company cannot have more than 200 members?
OMG! Somebody please answer all these questions.
Yes, the difference is more than literal.
Let us have a cut and dried distinction between a private and a public company.
Definition of Company
Let us take the bull by its horns and get the definitions out from the textbooks.
Companies Act 2013
A company is a legal entity that is formed by different individuals to generate profits through their commercial activities.
Majorly, a company can be classified into two strands- public company and private company.
Before knowing the difference between a public company and a private company, it is of utmost importance to check on the definitions of a public company and a private company as per the Companies Act 2013.
According to the Companies Act, 2013, a “public company” is a company which—
(a) is not a private company
(b) has a minimum paid-up share capital of five lakh rupees
According to Section 2(68) of the Companies Act, 2013, private companies are those companies whose articles of association restrict the transferability of shares and prevent the public at large from subscribing to them.
According to the Companies Act 2013, a public company has to mandate all legal proceedings which are not mentioned in the definition under Section 2(68) of the Companies Act, 2013, which pertain to a private company.
Difference Between a Public And Private Company
Let’s look at all the major pointers which differentiate a public Company and a private company.
Minimum Number of Members
In a public company, a minimum of 7 members is required to form a company; whereas a private company requires at least 2 members to form a company.
Maximum Number of Members
In a private company, a maximum of 200 members can be present to form a company; whereas in a public company there is no such restriction on the maximum number of members to form a public company.
Invitation To Public
A public company can freely invite the public for subscription, which implies it can issue a prospectus. On the other hand, a public company is prohibited from inviting the public for its share capital, which means a private company cannot issue a prospectus.
Number Of Directors
In a private company, a minimum of 2 directors is required; whereas in a public company, a minimum of 3 directors is required.
Transferability Of Shares
There is no restriction on transferability of shares in a public company; whereas in a private company there are complete restrictions on transferability of shares, through its article of association.
A public company must disclose the annual financial report; whereas for a private company, there is no such obligation to disclose their annual report to the public.
Index Of Members
In a public company, it is mandatory to maintain an index of all members in the company, whereas in a private company, it is not needed to maintain the index of its members.
The minimum paid-up capital for a private company is Rs. 1 lakhs; whereas the minimum paid-up capital for a public company is greater than that of a private company. It is Rs. 5 lakhs for a public company.
In case of a public company, it is defined that total managerial remuneration cannot exceed 11% of net profits and in the case of inadequate profit, the maximum amount to be paid is Rs. 87,500. Whereas in a private company there is no such restriction on the maximum cap for directors’ remuneration.
Quorum For Meetings
In the case of a public company, it is mandatory to have a personal presence of five members in a meeting to constitute quorum, whereas in a private company, it requires a minimum of two members to maintain a quorum for meetings.
Below is an array with a list of pointers that differentiates a public company and a private company.
|S.NO||BASIS||PUBLIC COMPANY||PRIVATE COMPANY|
|1||MINIMUM MEMBERS||AT LEAST 7 MEMBERS||AT LEAST 2MEMBERS|
|2||MAXIMUM MEMBERS||NO MAXIMUM LIMIT||CAN’T EXCEED 200 MEMBERS|
|3||INVITATION TO PUBLIC FOR SHARE CAPITAL||POSSIBLE WITH THE HELP OF PROSPECTUS||CAN’T INVITE PUBLIC FOR ITS SHARE|
|4||NUMBER OF DIRECTORS||MINIMUM OF 3 DIRECTORS||MINIMUM OF 2 DIRECTORS|
|5||TRANSFERABILITY OF SHARES||FREELY TRANSFERABLE||RESTRICTIONS ON TRANSFERABILITY|
|6||ANNUAL REPORT||COMPULSORY TO SUBMIT ANNUAL REPORT TO ROC||NOT A MANDATE TO SUBMIT ANNUAL REPORT TO ROC|
|7||INDEX OF MEMBERS||MAINTAINING INDEX OF MEMBERS IS MANDATE||NO NEED TO MAINTAIN INDEX OF MEMBERS|
|9||DIRECTORS/MANAGERIAL REMUNERATION||CANNOT EXCEED 11% OF NET PROFIT||NO LIMIT / NO RESTRICTIONS|
|10||QUORUM FOR MEETINGS||5||2|
“The best investment is in the tools of one’s own trade.”- Benjamin Franklin
It is always better to be well versed with the tools of one’s own trade and the management of the inflows and outflows.
An avid tradesman associates their trade to generate profits and simplify the trade complexities by forming a company. These differences stated above lay down the basics of companies and form a guided path for a better approach to start with a company.
Here Is Why Entrepreneurs Should Go Out and Start Networking
Don’t hide behind. Face your circles. It’s high time you start networking.
We have often watched Hindi films where protagonists aspire to be a rich men as a kid. And hence they start thinking of different business ideas to be successful.
Well, this happens in reality as well. Who doesn’t dream of starting their own business one day, right?
However, business is not as easy as eating a piece of cake. And no, you don’t need to have a Ph.D. or an MBA degree to start a business.
You just need to have clarity of thoughts; about the business idea, sales and marketing, and most importantly, NETWORKING.
Today, everyone needs everything. The circle of needs and demands has become wider. Everything in entrepreneurship is becoming more interconnected. Just like the Past, Present, and Future in the web series “Dark”.
Networking is the one and only way to get to know what’s around you. From having conversations with your parents to your fruit vendors or even your house helps, you never know what brings you to the peak of your business.
We will share our two cents to convince you enough to go out and start networking if you are a budding entrepreneur. Pardon us if these two cents become 4 or more, but you will definitely not regret reading this till the end.
Entrepreneurship And Networking
The first thing that any budding entrepreneur does, while starting their own business, is to spread the word about it.
The first set of people that they talk to are their family, friends, and even banks (for financial purposes). Although these efforts may or may not materialize into something fruitful, you learn a thing or two about the ABCs of networking.
Networking is one way to get clarity of thoughts about your business. It’s like building a blueprint of your business in mind. You not only know the industry better but also get to know the loopholes and healthy shortcuts that will save time and increase efficiency.
In the ABCs of business, “A” stands for “recognizing the needs and expectations of people around you.”
Networking is the first step to recognize the gap between demand and supply. It’s similar to providing electricity to those areas with no light, and the idea and motivation behind it.
So now that you are still reading, let’s go further and discuss the importance of networking in entrepreneurship:
Builds Trust And Respect
You may or may not earn money every day from your business. But once you earn trust and respect in the market, there is no way that people will forget you easily.
It’s a fact.
Earning money is easy.
But earning trust and respect takes more effort.
Networking with your business peers or veterans will get you noticed. Initially, you won’t find them paying heed to you, but once they do, they are never going to leave you.
People believe in aggressive marketing to increase sales and business. But try aggressive networking instead, and there will be no stopping for you in the future.
Remember, making friends in schools and colleges? It’s a similar situation in entrepreneurship, too.
Going social is one way you get confidence in networking with people in the future.
Did you ever come across someone who would go to a restaurant with you and start talking to the waiters and receptionists?
Well, you may feel awkward about it, but that’s their first step to get to know the surrounding market.
Start from a party that you attend, be it a family party or a party with friends. Join a group of your choice and listen to the conversations. Once you get the grip of it, start by putting forth your views and then turn it around to your business idea. This may look boring and slow, but slow and steady will definitely win the race.
Today, there are many millennial-made apps, like Bumble, LinkedIn, etc. that encourage people to build an entrepreneurial network in any industry of their choice. Start posting. Start swiping right to the connections that interest you.
For that matter, you can even join dating apps to build professional connections. Your first conversation about your business will be a good ice-breaker (You’ll thank us later for this pro tip).
Don’t Be Selective In Your Own Circles
A very common mistake that most “choosy” or “picky” people do, is being very selective in deciding who to network with.
Today, almost all industries are interconnected. A top-class hospital will always need catering or food services for their staff and patients. A hotel will always want to have options for good clothes vendors for room and restaurant linen.
So if you limit yourself to one or two industries, and sideline others, chances are that you may lose a lot of opportunities.
Expand yourself. Even if you are not sure about it at first. Take that first call that says “our budget is low”, when you know that you have a different area of expertise to explore.
Your Shyness And Fear Will Only Put You Behind The Race
Entrepreneurship requires you to go “out-of-your-circles” more than going “out-of-the-box”.
You are likely to face uncomfortable situations all the time. You have to become an extrovert if you are a highly introverted person. You can’t hide from people who you dislike. You can’t say goodbye to those people whom you are done working with.
Your fear, your shyness will start putting you behind the race of a successful entrepreneur.
You have to be outspoken. Pave your way and lead it too. Take others along the way and build a huge business “family”.
Remember Abhishek Bachchan in the film “Guru”?
No, you need not be exactly like him, but you are expected to know why to be like him. And take your own decisions from the existing lessons.
It’s A Long Road That Will Definitely Lead You To Your Vision
Networking is a continuous process. You don’t stop after a certain level of achievement.
Starting a business is not enough, you have to keep it running. And for that purpose, you may need to explore your potential networks.
It’s often expected from budding entrepreneurs to network only with business-minded people to start and run a business successfully. What they don’t realize is that business is made by people, for people, and with people.
So start networking – whether virtually, or face-to-face. Get that business idea in place, get started with your plans, and you will surely reach a place where you can write “successful entrepreneur” in your social media bio.
2021’s India Is Atmanirbhar: 10 Desi Unicorn Startups
With 10 startups joining the unicorn club in just 4 months of 2021, is India moving towards Atmanirbhartha?
The Many Firsts of a Fantastic First Quarter of 2021!
The Indian startup ecosystem got an impressive start in the first quarter of 2021. As per Venture Intelligence, Indian startups witnessed the highest investment in two years, and the capital flow was $4.2 billion!
This is not all.
Most of the startups saw a three-fold hike in valuation in their recent funding rounds. And among these, 10 got valued at more than $1 billion.
And hence, the Indian startup ecosystem received its new set of unicorns.
The unicorn story of 2021 is unique.
Because it is the one with many firsts.
The first health tech, social commerce, e-pharmacy, and infrastructure technology that made its way into the unicorn club.
According to the NASSCOM report, India will have 50 unicorns by the end of 2021.
But many industry experts and research firms believe that, if the current rate continues, India would easily surpass this number.
Here is the list of 10 Indian startups that gave 2021 a pleasant start.
- Digit Insurance
- Five Star Business Finance
The Beginning of Unicorn
If you know any entrepreneur personally, you may have an idea how difficult it is to raise the funds for a startup. It is definitely not a cakewalk.
The fundraising usually begins with family and friends. And as the company expands, it approaches angel investors, and then goes for the venture capitalists for the fund acquisition.
Even though it is a tough task for any startup to gain the investors’ confidence, some horses pass this race and achieve the unicorn tag.
For those who are new to the concept of unicorn, it is a startup that has a valuation of $1 billion or more in the venture capital industry. And Aileen Lee, the founder of Cowboy Ventures, coined the term ‘unicorn’ in 2013.
And since then, startups are continuously striving to attain this prestigious status.
India Didn’t Have a Great Start
When Aileen Lee coined the term ‘unicorn’ in 2013, the United States had 39 unicorns.
You may ask, what about India?
There was only one company called InMobi, the mobile-advertising services provider, that could make it to the unicorn club.
India was nowhere closer to the US in the matter of unicorns. The reasons were many:
- Limited funding
- Inadequate infrastructure
- A plethora of social and cultural challenges
- Lack of talent
- College students found entrepreneurship unappealing compared to the management jobs in large IT firms.
- The aspiring entrepreneurs often got rejected by the prospective brides and their families.
India Slowly Picked Up the Pace
Even though India’s unicorn story had a not-so-brilliant start, the current scenario looks promising.
As per Venture Intelligence data, there were only 10 unicorns until 2018, and since then, there has been the addition of 28 unicorns.
For an Indian startup, on average, it would take up to 8 years to turn into a unicorn.
India’s oldest startups, like Naukri.com, MakeMyTrip, and Justdial, which began its operation prior to 2005, took 15 years to achieve the unicorn title.
But this period has shrunk in recent times.
A recent report by Orios Venture Partners shows that the newer technology firms are hitting the billion-dollar mark in less time than their older counterparts.
The younger enterprises such as Swiggy, Rivigo, Razorpay, and Unacademy joined the unicorn club in 5 years on average. Whereas, Udaan, Ola, Electric, and Glance took just 2.4 years!
What could be the reason for this transition?
As per the Orios Venture Partners report, the reason behind the younger startups turning unicorn sooner could be:
- The prior entrepreneurship experience of the founders of these companies
- These founders know how to secure the funds more efficiently
- The growth mindset
There are two other reasons the investors from India, and all over the world, are backing the Indian startups with their funds:
- Indian startups leveraged the changing consumer behavior and quickly tweaked themselves to satisfy the needs of the customers
- These companies started functioning on the fact that “Focus on the market and the customers will ensure your growth”
Will ‘Atmanirbhar Bharat’ Soon Be a Reality?
India’s honorable Prime Minister, Narendra Modi, raised a clarion call to the country to be self-reliant, aka Atmanirbhar in all senses.
He also outlined the five pillars of Atmanirbhar Bharat:
- Demography, and
You may ask, how startups can help in making India self-reliant?
The Indian startup ecosystem had a slow and steady evolution from one sector to the other, ranging from IT/ITES to e-commerce, deep technology to hyper delivery networks.
Today, startups also have the most favorable conditions to survive and flourish, starting from the funding, development of regulatory infrastructure, global mergers and acquisitions, the influx of global investors to internationalization.
Do you know what brought this revolution to the world’s third-largest startup ecosystem?
It is the government’s mission to get as many entrepreneurial stories as possible through its programs like Startup India, Stand up India, Digital India, and Vocal for Local.
And the unicorn forms one-tenth of new industries coming into existence every year.
The increase in the number of tech unicorns is driving the investors’ interest in India’s startup ecosystem.
According to a report by NASSCOM, the startups in the technology field alone have created 60,000 direct jobs in 2019.
These data show that, if more startups come into existence, and get support from the investors and from the government, India could see a greater spike in job opportunities.
Atmanirbhar citizens make Atmanirbhar Bharat, don’t you agree?