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Frequently Asked Questions |
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What are Social Enterprises? |
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Social Enterprises are organizations that work towards a social objective or mission, with a business / entrepreneurial approach. Usually these institutions have a “double bottom-line” focus – that is, they aim to achieve a social as well as a financial return from their activities. Examples of social enterprises are microfinance institutions; grass-roots organizations in the development space, such as those in alternative energy, education, healthcare, skills training, crafts, or any other activity that has a direct social impact. Focused service providers to social enterprises, are also in effect social enterprises themselves. |
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How will CapitalConnect help in price discovery? |
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Over the last few decades, social enterprises around the world have gained in prominence as their impact on people’s lives has become increasingly evident. These enterprises are now growing in scale, structure and reach; and their capital needs are growing as well. At the same time, investing community around the world is becoming increasingly socially responsible and is seeking to provide capital support to these social businesses. However, there currently exists an asymmetry in information flow between these two sets of entities – social enterprises and investors / lenders – which is resulting in only a few enterprises having access to adequate and suitable funds. In addition, lenders and investors find it difficult to exit from their existing exposures, and are forced to hold till maturity or listing. This is primarily because enterprises and investors lack an effective common meeting ground to enable information flow and price discovery. |
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CapitalConnect bridges this gap by bringing together entities that wish to– |
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- lend (institutional lenders) and borrow (social enterprises), and
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- buy (investors) and sell (investors, enterprises, promoters) equity / debt instruments
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| With easier and transparent flow of information between the demand and supply sides, the prices that are finally arrived at are more realistic and representative of market appetite |
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Is CapitalConnect a stock exchange? |
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| No, CapitalConnect is an order-matching and price discovery system. It provides a common platform to institutional players in the social enterprise space, and lets them interact among themselves. While CapitalConnect lays out the broad contours of this interaction through its rules of participation, it is left to the participants to take their discussions forward and complete their transactions outside the portal. |
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What are the qualification criteria for registering on CapitalConnect? |
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| To register on CapitalConnect, you need to be either (1) a social enterprise, (2) an institutional lender or (3) an investor (current or potential) in a social enterprise. Incorporated enterprises with a project plan and in the process of raising fresh capital are also eligible to register on CapitalConnect. CapitalConnect is not open to individual investors, excepting large stake holding promoters of social enterprises. Promoter investors are also allowed only to offer to sell equity. |
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Is CapitalConnect a simple database? |
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| CapitalConnect is a dynamic platform for regular interactions between interested stakeholders. On registration you get exclusive, customized access to the CapitalConnect application dashboard. Key features of the application are: |
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- Option to set levels of privacy and information sharing
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- Options to make offers suiting your strategic needs – debt and equity; buy and sell; specific and generic; identifiable and masked; negotiable and non-negotiable
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- Options to respond to offers and interact with other participants on the platform
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- Options to initiate discussions among social enterprises to discuss business partnerships
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| In addition, you will also be privy to regular market trend information as derived from the transactions on the platform. |
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Does CapitalConnect vouch for the information that participants upload on the website?? |
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| CapitalConnect pre-screens the participants before registering them on the portal. The screening process is limited to cross checking the contact information of the authorized user, and ensuring that the information provided meets the minimum needs on the site. CapitalConnect does not verify the accuracy or authenticity of the information provided by the participants. |
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| Participant service agreements with CapitalConnect have clauses that require them to ensure veracity and accuracy of their information. Also, to reduce any scope for misrepresentation, most of the information uploaded on the site requires to be audited. |
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Are offers made on the site firm and reliable? |
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| All offers on the site are indicative, not legally binding on the participants and are not to be treated as formal invitations to subscribe to an issue. Parties interacting on the site are expected to crystallize the pricing, and all other transaction terms off-the-portal. |
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Is there a limit on the number and size of offers on CapitalConnect? |
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| No, there is no limit imposed by CapitalConnect. In practice, limits are derived from the total capital on the books of the enterprise whose securities are being bid for, and the portfolio holdings of buyers and sellers. |
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| There is a self-check built into the portal – by quoting disproportionate numbers (number and price), participants only dilute their standing and their future offers are unlikely to be taken seriously by other participants. CapitalConnect will also shortly introduce performance rating system, wherein the conversion rates at different stages of the process are tracked, and participants rated. |
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What is the currency for offers? |
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| The currency for an offer on CapitalConnect is the currency of denomination of the underlying instruments (debt or equity). |
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Is there a limit on the number of offers or information requests I can make on CapitalConnect? |
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| No. |
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| Please also see our Primer an overview of our registration process and the application dashboard. For any clarifications or discussion, write in to us at contact@edacapitalconnect.com.
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