FT Entrepreneurs

“The way I see it, everything is up for buying and selling”

MOHAMMAD ZAHOOR

BUSINESS UNDER FIRE FACING DOWN RULING CLANS AND REBELS IN WARTORN UKRAINE

BY YURI BENDER

WOMEN ON THE RISE IN LEBANON HAITI REBORN THE AMBITIOUS WEALTH COLUMN ROLLSROYCE GHOST SERIES II

WWW.FT.COMWEALTH MAY 2015

Ft WEALtH MAY 2015 it’s entrepreneurship with a mission to change the whole system

covEr pHotogrApH Taking the extra step dAvid pArrY

Special reports editor Leyla Boulton FT Wealth editor Hugo Greenhalgh Deputy editor Rohit Jaggi Production editor George Kyriakos Art director Jonathan Saunders Picture editor Michael Crabtree Sub-editor Philip Parrish Global sales director Dominic Good Global relationship director for banking and finance Valerie Xiberras Publishing systems manager Andrea Frias-Andrade Advertising production Daniel Lesar

contributors Aaron Stanley is the FT’s Washington bureau manager Daniel Ben-Ami is a freelance journalist and writer Yuri Bender is editor-in-chief of Professional Wealth Management Everyone has their own notion about entrepreneurship. “You can truly Emma Boyde is a commissioning editor for be creative and have the freedom to create whatever innovation and FT Special Reports Stephen Foley is the FT’s US investment product you like,” says Weili Dai, co-founder of Marvell Technology correspondent Group, a global semi-conductor company. To show that Haiti “is Henry Foy is the FT’s central Europe not a pariah that can only export cheap apparel and mangoes”, adds correspondent Maarten Boute, a founder of Sûrtab, which makes Android-powered, Andrew Jack is editor of FirstFT Maya Jaggi is a cultural journalist and critic low-cost tablets. And for Mohammad Zahoor, one of Ukraine’s most Rohit Jaggi is the FT’s aircraft, car and prominent foreign businessmen, “everything is up for buying and motorcycle columnist selling”. Different voices from disparate places around the world. John Kenchington is editor of Investment In this special edition of FT Wealth dedicated to entrepreneurs, we Adviser, an FT publication Jeremy Hazlehurst is founder of Family Capital, do not seek to add our own view, but to showcase the great variety a website for the family business sector of men and women who have taken that extra step to start their own Sarah Murray is a regular FT contributor company. And what a range it is. We report from the UK, Ukraine, Ania Nussbaum is an FT intern Lebanon, the US, Haiti, China, Venezuela and Poland on the state of Andres Schipani is the FT’s Andes correspondent entrepreneurialism around the globe. Matthew Vincent is the FT’s deputy companies editor Is there a common theme? Hala Fadel, chairwoman for the pan- Lucy Warwick-Ching is the FT’s online Arab region of the MIT Enterprise Forum, should have the last Money editor word: “It’s not just about making money; it’s entrepreneurship with a mission to change the whole system.” YOUR NEXT Hugo Greenhalgh, Editor FT wEalTh [email protected] 26 June 2015

4 |Ft.coM/WEALtH PHOTOS: STEVE FRANCK; REUTERS; THIERRY VAN BIESEN; RICHARD SCHULTZ/CORBIS; JUAN TORO DIEZ co 24 32 10 12 18 6 8 at Social comment Th higher Ch tHE invE tHE OP A Le and America’ at it sensing Fo tr ge been In ventures bA HE crisis HopE FEA 18 tr ack tr can quie dus tt ntE e allenging reign banon cKing AL ac ac ing global modernise idE ricH st EN ted a tHY af t tries in break t risk Fo ca at MEnt ter the MAnA As re potential ves in TU s tention to foc talys as by r volution coL health ves pr bEir proper old 20 means tors coL countr youthful IN HAiti female used the the Liam oFit tors 10’ t Fo nt gEMEnt and RE uMn ut for its are assumption uMn hold s GS from cus re on ty in ear in s y higher Baile econom technolog is ne forms increasingly entrepreneurs back mark the Ukr lifes idealism happening thquak S of w s in y are the countr ves aine ty on re et ha y le , ward oligarchs tors ve e with tha y are y t in — if 54 8 24 40 46 36 50 48 56 42 44 58 54 52 direc Mo source Crowdfunding Ve We founder-led Is Ja who Once Th Ho Flying Th Ben pHiLAntHr corrE bu invE EQ st corrE dEb AMbitious bo LiFE cA IN op nusz the nezuelan e e sinE uitiE w r oK ili re At st Rolls-Roy rise Me wants the st t SI rEviEW US Up Dai long-term and in the E YLE rEviEW of Pa MEnt spondEnt spondEnt zrich ss ves s on br of GH eas finance lik of more Te ain the gur to a ting companies ar t op ot Ma WE cnam Time coas be t ce dr As is is Y in T rv u over donors AL outper 56 ain president Ghos a ga for ian ell t the tH political in P2006T cities thering to Te st writing entrepreneur Ru ag t ar formance a Silicon chnolog are e Ft ssia fluk t-ups are of of .c opting pace ma Tw aus e? tr cheques by oM Po Va ying verick in y terit land of as /W lle for a to y y EA 46 Lt H| 5 INVESTMENT FOCUS LUCY WARWICKCHING

GRAPHIC BY RUSSELL BIRKETT

Global village

s fears of a UK property bubble increase, investors in the country are turning to overseas markets in search of diversification, decent liquidity Prime Global and solid returns. Cities Index A House price rises in most developed economies have been fuelled Annual % change Zurich by attempts by central banks to sustain to December 2014 -8.0 economic recovery by holding long-term interest rates at record lows over the past five years. 5.1 London The Knight Frank Prime Global Cities Index, a measure of price movements in luxury residential Vancouver 7.5 13.4 Dublin property, rose 4.2 per cent in 2014. Properties Paris in 24 of the 32 cities in the index 18.8 New York -3.5 either held or increased their San Francisco 14.3 Geneva value. BlackRock Real Estate, the -2.0 property arm of the world’s biggest Los Angeles Madrid fund manager, estimates the $12.9tn 13.0 5.1 global real estate market could nearly Miami 11.5 double in value by 2020. -2.0 Monaco Weak spots remain, however, and the contrast between the US and Europe is stark. The average 1.5 Rome price of a luxury property in one of the four US cities tracked by Knight Frank ended last year 14.4 per cent higher, while the equivalent home in Europe rose just 0.7 per cent. Investors face an uncertain year, with possible new property taxes in London and New York, and potential government moves to cool overheated housing markets in the biggest Asian cities. 8.5% Rise in San Francisco’s Performance over the past three years commercial rents in 2014 (Global property funds, cumulative returns, % to April 12 2015) (Savills World Research Top 3 funds Bottom 3 funds 12 Cities 2015) Brookield Global FP Charteris Listed Real Estate Ucits Acc 69.7% Property B Acc 37.8%

Third Avenue Schroder Global Real Estate Val 64.0% Property Inc Max A Acc 30.7%

Fidelity Global SLI Global Real Property Acc 58.7% Estate Ret Acc 16.0%

6 FT.COMWEALTH WORLD PROPERTY OUTLOOK LIAM BAILEY

18.3% 65% Returns for buy-to-let landlords of investment deals in in the UK in 2014 the London office market (Wriglesworth) came from overseas in 2014 (Savills World Research The biggest theme underpinning global 12 Cities 2015) property investment activity has been the ultra-low interest rate environment that the main world economies have experienced over the past five years. This has led to a compression of yields as investors have competed ever harder to secure prime property in city markets such as London, Munich, New York, Singapore and Sydney. This squeeze on investment returns, and the expectation of interest rate rises in 2015, is acting to push investors to look for more risk. Demand for property in markets such as Paris, which has been overlooked over the past four years, is likely to rise. More investors are betting on an upswing in recovery markets such as Dublin and Madrid. Moscow -3.7 The author is head of residential research for Knight Frank Vienna -3.0 Seoul 5.3 -0.5 Beijing Tokyo 8.1 11.1% Increase in prime Tel Aviv 10.3 Delhi 1.8 Shanghai 0 residential rents in Tokyo Mumbai 2.9 Hong Kong 1.1 (Knight Frank Prime Global Rental Index) Bangkok 5.1 12% 1.4 Dubai Growth in Singapore’s Nairobi 0.3 office rents in 2014 (Savills World Research Bangalore 10.1 12 Cities 2015) 0.5 Kuala Lumpur -12.4 Singapore 6.5% Increase in prime rents in 2014 Cape Town 13.2 11.2 Jakarta Sydney 11.0 in the Middle East, the highest increase among world regions year on year (Knight Frank Prime 27.1bn 8.1% Global Rental Index) Invested into New York’s Increase in prime rents office market in 2014 in Dubai in 2014 (Savills World Research 12 Cities 2015) (Knight Frank Prime Global Rental Index) Source: Morningstar

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PHOTOS: GETTY IMAGES; CHARLIE BIBBY

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Photos: Charlie BiBBy crisis management Foreign investors see potential in ukraine — iF it can modernise its economy

BY YURI BENDER photogRaph BY DavID paRRY Country comparisons: both Pakistan and Ukraine “have a hostile relationship with their neighbours”, says Mohammad Zahoor hings have not been going according to plan for his north London house overlooking Hampstead heath. Mohammad Zahoor, one of Ukraine’s most prominent He lost $25m in revenues during 2014 after production foreign entrepreneurs. stopped and expects to take a similar hit this year. In Luhansk, the country’s eastern-most region, a A hotel Zahoor owns in Donetsk has been overrun once-lucrative processing plant supplying coal for metals by fighters of the self-styled Donetsk People’s Republic, and mining group Rio Tinto lies mothballed in rebel- who pay his company a nominal “so-called rent” of held territory. Zahoor’s renovation of a landmark hotel in Hr10 (44 cents) a month. Many faces: the centre of Kiev, Ukraine’s capital, has ground to a halt, But he is not panicking just yet. The Pakistani-born Kamaliya with the latest tranche of funding from the European businessman has been here before and his immaculate Zahoor, wife of Bank for Reconstruction and Development uncertain. jet-black coiffure remains unruffled. He recalls the Mohammad, And then Leila, the prized pet falcon of his pop star wife bloodshed in Pakistan, prior to the independence of above, and signs Kamaliya, fled their home in Kiev’s exclusive Koncha Bangladesh in 1971. “In the 1970s, the deaths were in of destruction Zaspa suburb, leaving Zahoor to seek a replacement. east Pakistan, destined to be another country. Nobody in as the conflict He blames his run of bad luck, apart from this west Pakistan ever cared about losing one big chunk.” continues latest incident, squarely on the rise of Russian-backed Similarly, several thousand deaths and a refugee crisis, in Donetsk, separatists, splitting the smokestack cities of Donetsk which displaced more than 1m of east Ukraine’s people, opposite page, and Luhansk from the rest of Ukraine. could have been prevented, he believes, even though it is which forced “There were a lot of raids on our factory and people a difficult decision for any government to allow part of Rinat Akhmetov wanted to grab it, but somehow our security guys have its territory to secede. “They should just let it go. If a wife (far right) out of been able to stop these things,” explains the Savile Row- doesn’t want to live with her husband and her intentions the city in 2014 suited businessman as he relaxes next to a roaring fire in are firm, there is no sense in holding on to her. If they

14 |ft.com/wealth gES IMA Ty gET vIA PHOTOTHEK gES; IMA Ty /gET AFP PHOTOS:

‘iF a wiFe doesn’t want to live with her husband and her intentions are Firm, there is no sense in holding on to her’ want to go to Russia, let them go to Russia,” says Zahoor, he publicly backed Ukraine’s first president, Leonid as he occasionally strokes a white Persian cat, which he Kravchuk, in the 1994 election, which was won by rival speaks to in Russian. “The grass is always greener on Leonid Kuchma. the other side, but once they see the other side, they will But the approach was much less direct than in understand they were either fooled or dreaming.” Pakistan. “In Ukraine, they don’t come and ask why you After winning a metallurgical science scholarship to are on the other side. They just send people to constantly the Soviet Union in 1974, Zahoor eventually returned inspect your documentation and properties, and from studies in Donetsk to a career at Pakistan Steel. But question whether what you are doing is legitimate.” his marriage to a Russian woman, his first wife, sparked Ukraine and Pakistan are both corrupt countries suspicion in the secret services, spooked by Soviet cursed by geography, adds Zahoor. “Both have a hostile involvement in the nearby Afghan conflict in the 1980s. relationship with their neighbours and both struggle to “I was travelling to Islamabad to meet government keep their economy going.” ministers, and the Pakistani intelligence services were His biggest troubles, however, came at the turn of the not happy with the fast progress of my career. They told millennium. When he tried to ramp up steel production, me, quite bluntly, that I would never move upwards. he attracted the attention of Ukraine’s business bosses, I could not accept this,” says Zahoor, recalling the who had been gradually taking control of heavy industry. conundrum he faced in his late 20s. These included Rinat Akhmetov, the most powerful He resigned, moving to Moscow to run a metals businessman in Donbass at the time, who was eventually company and eventually back to Soviet Ukraine. Following forced out of his native Donetsk by separatists in 2014; and independence in 1991, he received a similarly unsettling Serhiy Taruta, later to become Donetsk regional governor. knock on the door from Ukrainian authorities after Until then “steel had not been a hot commodity”, ➤

ft.com/wealth|15 Plans afoot: President Petro Poroshenko, far left, with Vitali Klitschko, mayor of Kiev, at a presidential election rally in 2014

‘there is a lot oF money to be made in a crisis situation. we are at the bottom, so it’s deFinitely not time to sell’

recalls Zahoor. “People just wanted a quick buck from countries. “Exactly the same thing happened with the vodka or casinos.” But when “visitors” told him they Muslim Brotherhood in Egypt,” recalls the banker. “For were taking over his steel mill, he decided to play one year, nobody was investing or taking decisions any along, presenting them with a 40-page non-disclosure more. They were all busy running for the door.” agreement. “The way I see it, everything is up for buying and selling.” oreign investors have become increasingly Luckily, a rival clan was keen to partner with Zahoor, wary of Ukraine since Russia’s annexation of saving him from the raiders. He agreed to share the mill, Crimea and the start of the rebellion in the but offloaded the rusty, non-profitable part housing east last year. But there is room for optimism. 10,000 workers, and held on to a smaller piece. “I got rid valentyna, a cheery stallholder on Kiev’s of everything I wanted to, while they got something big,” most picturesque cobbled street, Andriyivsky stresses the smiling entrepreneur. “In Russia and Ukraine, Uzviz, selling traditional embroidered scarves [disputes] are always about owning something big.” Ffor Hr220–Hr1,000, says US and Canadian genuine entrepreneurs are muscled out of Ukraine’s tourists were the first to avoid Ukraine. “When the war business world by warring clans, he says. As well as started, customers stopped coming, because they feared expecting big changes to this system, he hopes to send instability,” she says. “Even those from former socialist more young people abroad for work experience in allies such as Kazakhstan disappeared. But Europeans are different industries. “Just like The Apprentice [television] starting to come back, as word gets around that it’s safe to programme, we need to encourage young people to be visit Kiev.” entrepreneurs and become rich,” he says. “Only 10-20 This could be a good time for foreign investors, believes per cent of Ukraine’s economy is owned by [small and Robert Koenig, a US businessman and adviser to Kiev medium-sized enterprises]. The rest is big business. For mayor and former heavyweight boxing champion vitali a country to regenerate, that has to be over 50 per cent.” Klitschko. “My own investment experience shows there Zahoor’s experience in Ukraine is by no means is a lot of money to be made in a crisis situation,” says unique. “We have a European client in Crimea whose Koenig, who controls the Ukrainian franchises of luxury factory was confiscated by the Russians,” says the chief brands such as Tiffany, Burberry and Montblanc. “We are executive of a leading global private bank. “A year later, now at the bottom, so it’s definitely not time to sell.” they had figured out they didn’t know how to run it and Koenig is sitting in the high-ceilinged canteen of Kiev asked him to come and sort out the mess they had made. city hall. Bracing himself for a marathon council meeting Now they want him to stay there and run his business.” addressing Kiev’s waste management problems, he takes This type of scenario is common in many developing a few slugs of Ukrainian bottled water and talks about

16 |ft.com/wealth and activist in the street protests that led to the abdication of President viktor yanukovich last year. Leshchenko has been elected to parliament in Poroshenko’s bloc. Armed people being sent on to the street outside the headquarters of [partially state-owned oil company] Ukrnafta was a challenge to the president’s legitimacy to govern Ukraine, says Leshchenko, a gangly, bearded figure, known for his fearless investigations. “Only Poroshenko has the right to do this. The president did the right thing by sacking him. This marks the first stage of de-oligarchisation of Ukraine.” Kolomoisky has denied that the armed men were summoned by him and that they came from one of the volunteer military battalions he supports. The dismantling of oligarchs’ power must coincide with a small business renaissance. Remixing the economy by encouraging start-ups and entrepreneurs in information technology, farming and agriculture is undoubtedly the way forward, says political analyst and former presidential adviser vadym Karasyov over green tea in his favourite O’Panas restaurant in Kiev. “Ukrainian economics needs to move from a post-communist model to a European gES model, involving a new middle class, but this will take at least 10 years.” IMA Ty “At the moment, everything is imported — even toilet

paper and toothpaste are Polish,” adds Leshchenko. /gET

“This is the opportunity for the rebirth of domestic AFP manufacturing, which will be much cheaper for consumers than buying foreign goods. Currency

devaluation means that for $300, people will work eight REUTERS; hours, five days a week.” For foreign investors in particular, this may be a unique

window of opportunity. W PHOTOS:

‘vladimir putin wants to make ukraine as unattractive a place as possible For Foreign investors’ current investment opportunities: “Since the cost of communication and price of advertising has fallen, it’s a great time to reinforce the strength of a brand.” Indeed, at the time of going to press, Koenig and Klitschko were planning to visit New york and Washington to raise money for an investment fund focused on the capital’s urban projects. The fund is managed by Ukrainian brokerage Dragon Capital for pension schemes and wealthy individuals. yet the American half of this duo also urges caution: “The crisis may look over, but it’s not over. [Russia’s president vladimir] Putin wants to make Ukraine as unattractive a place as possible for foreign investors. His main aim is to keep things unstable.” In addition to pressures from across the border, Ukraine’s government faces huge challenges of In hope of a modernising and “de-oligarchising” a floundering revival: “Stop economy dominated by four big business clans. corrupted President Petro Poroshenko has achieved the first stage candidates!” of this task by curbing the powers of metals, media and demands Serhiy banking magnate Ihor Kolomoisky, recently stripped of Leshchenko, his duties as governor after camouflage-clad men turned right; a resident up at an oil company that Kolomoisky was battling to of Debaltseve, retain control of. One of the most vocal critics of the near Donetsk, oligarchs is Serhiy Leshchenko, a well-known journalist above

ft.com/wealth|17 BackingBeirut the rise of female entrepreneurs in lebanon is winning over investors

BY MaYa jaggi photograph BY thierrY Van Biesen

n Bachoura, a run-down quarter of central Beirut, a quiet revolution is gathering strength. From the balcony of a new office block, the Mediterranean sparkles behind a row of cranes. On a freshly painted roof patio next door, entrepreneurs work at picnic tables laden with laptops and lattes. Amid walls still bearing artillery scars from the civil war a quarter of a century ago, the Beirut Digital District is rising — one of a growing number of spaces in the Lebanese capital dedicated to 21st-century start-ups. Hala Fadel, a dynamic serial investor who grew up in Paris, is among women in the vanguard of this entrepreneurial revolution. She is chairwoman for the Fronting the pan-Arab region of MIT Enterprise Forum, a non-profit revolution: Hala organisation that promotes entrepreneurship, and began Fadel says the its start-up competition in 2005. Returning to Lebanon line between in 2003, “everything outraged me”, she says. “But I social and love the people. It’s not just about making money; it’s commercial entrepreneurship with a mission to change the whole entrepreneurship system. This is why I wear so many hats.” ➤ is blurring

18 |ft.com/wealth ft.com/wealth|19 20 |ft.com/wealth ‘It’s not just about makIng money; It’s entrepreneurshIp wIth a mIssIon to change the whole system. that’s why I wear so many hats’

Once a top-ranking analyst at Merrill Lynch in London, Fadel started a telecom software company after studying business at Massachusetts Institute of Technology. Last year she quit her day job in fund management to co-found Leap Ventures, a $71m venture capital fund for high-growth Middle East technology Turning the tide: Butterflye’s businesses, which launched in March at the sixth Instabeat goggles, above; a ArabNet Beirut. At this huge networking event, Raed march opposing domestic Charafeddine, vice-governor of Lebanon’s central bank, violence against women, hailed an “Arab digital renaissance”, while the telecoms marking International minister, Boutros Harb, pledged improvements to Women’s Day in Beirut Lebanon’s notoriously slow internet. in March 2014, opposite The line between social and commercial and below entrepreneurship is blurring, Fadel says, as everyone wants to create jobs. But with inadequate governments (Lebanon has been deadlocked without a president for almost a year), start-ups are stepping into the breach, to address issues from recycling to traffic jams. Fadel enthuses about Tripoli’s car-free day in 2011, when she organised a rally of 50,000 people and 900 volunteers to raise environmental issues in the northern city. “Twenty- two kilometres of roads were closed for a day. It was the best project of my life.” Another of Fadel’s passions is to exploit the talents of women. Of 5,000 applications to the MIT Enterprise Forum start-up competition this year, 69 per cent had at least one woman in the team, she says. Over the life of the competition, 47 per cent of teams have been led by women. Her own open-plan office has a mostly female staff. Fadel, who scarcely knew her parents’ homeland, returned to make a difference, like many other new entrepreneurs. A business park across the Beirut river is home to the Beirut hub of Diwanee, a pioneering online media company aimed at women. Co-founded by Delphine Eddé, it has grown since 2008 to six websites, covering topics from motherhood and health to beauty and fashion, with a lifestyle channel partnered by Google. Of its 7m unique users a month, 70 per cent are in the Gulf — insulating the company from worsening security since the Syrian war began in 2011. Eddé’s family fled the civil war to Paris when she was two, and after studies at the Sorbonne and in New York, she was headhunted as digital director of Condé Nast France, the magazine publisher. It was the Israeli bombardment of Lebanon in 2006 that spurred her and GES Hervé Cuviliez, her French husband (also a backer of IMA Leap Ventures), to move to Beirut and “do something for TY the country”. They started Diwanee when only 5 per cent

/GET of online content was in Arabic. “We realised women’s

AFP websites were not in Arabic, and Arabic sites were not for women,” Eddé says. Of 140 employees in Beirut, Dubai and Belgrade, “more than 80 per cent” are women. Small private enterprise is nothing new in the Middle REuTERS; East. The Arab uprisings of 2011 were triggered by a thwarted Tunisian fruit-stall entrepreneur. But even

PHOTOS: before the Arab spring trumpeted the potential of ➤

ft.com/wealth|21 Facebook and Twitter, the region was undergoing a tech- based revolution — as charted in Christopher Schroeder’s book Startup Rising (2013). Accessing markets and skills abroad, start-ups also open a path for talent to sidestep red tape and wasta (an Arabic term for favouritism). Roughly a third of Middle East start-ups were founded by women. In two landmark exits in the Arab world, the recipe website Shahiya.com was acquired for $13.5m by Japan’s Cookpad in January. Last year, a majority share in Diwanee was bought by Paris-based Webedia. Both Lebanese start-ups had women at the helm. “Technology and the internet are equalisers for women in strict locales,” says Amal Ghandour, the incisive Beirut blogger of thinkingfits.com. For her, the surge in start-ups signals “desperation in a region of overbearing governments and meek private sectors — the only way out and up for disadvantaged youth or Arab females looking to break age-old barriers”. So what are those barriers? In certain respects, Lebanon seems to be an Arab-world leader in women’s freedom — from the lack of censorship that makes Beirut an Arabic publishing hub to fashions flaunted in Beiruti cafés. While Saudi women, restricted in driving and workplaces have embraced the internet as a salvation, some highly educated businesswomen in Beirut are politely impatient at being set apart from male peers. Yet urban freedoms cloak inequalities. Rallies in Beirut in March for International Women’s Day attacked discriminatory laws preventing women from passing their nationality to their children. Only after such protests was domestic violence criminalised last year. Lebanese women are “superficially free”, says Fadel, citing Lebanon’s ranking for women’s rights of 123rd out of 136 in the 2013 World Economic Forum’s Global Gender Gap Report. “The apparent reality is hiding a horrible truth. A woman is not the legal guardian of her children. Women’s participation in parliament is only 3 per cent — we’re second to last after Saudi Arabia. And 77 per cent of women of working age stay at home. It would really be a revolution if women became part of the economy.” In 2012, BLC in Lebanon, in partnership with the World Bank, became the region’s first bank to target funds at women entrepreneurs, arguing that while women owned 30 per cent of small and medium-sized enterprises in the country, they were granted just 3 per cent of loans. Funding and guidance for start-ups and growing businesses is increasing, partly though Lebanese central bank initiatives. But the start-up revolution may have to embrace a broader section of women if the goal is to boost the economy. Finance is not the only hurdle. “In this part of the world, men have more access to professional networks,” says Rima El-Husseini, who studied banking at the American university of Beirut (AuB) and co-founded the Blessing Foundation in 2012 to “create a space where women can talk business”. Its third round of business mentoring ended in March. “There’s a perception that women don’t help each other, but it’s totally the opposite,”

‘In thIs part of the world… there’s a perceptIon that women don’t help each other, but It’s totally the opposIte’

22 |ft.com/wealth GES

Seats of innovation: IMA Beirut Digital District, TY far left; Maria Hibri and Hoda Baroudi,

above, and one of their WHITE/GET creations, below; the TIM Corniche promenade in central Beirut, right PHOTO:

‘In our offIce there’s almost every resident companies is Butterflye — an exemplar of innovation. Hind Hobeika was an engineering student sect and every combInatIon of at AuB and a competitive swimmer when she invented Instabeat — a device for swimming goggles that monitors backgrounds. outsIde, the tensIon and displays heartbeat and other data on the lenses, and Is there. but start-ups don’t do that’ record the athlete’s progress. She honed the prototype in 2010 on Stars of Science, a Qatar television reality contest (“they lock you in the lab for four months”), winning third El-Husseini says. She aims to extend that space to “less- prize — the only woman in the top five. educated women designing bouquets or gift-wrapping The contest was empowering, says Hobeika. Berytech, biscuits, who definitely face social barriers: they may not the seed fund, encouraged her to quit her job designing be allowed to work outside the home or have financial air conditioning, and she now has nine staff in Beirut, independence”. In June, the foundation launches an Berlin and ukraine, while manufacturing in the uS. “open market in Arabic for any woman in business to sell Butterflye has raised $2m, including $80,000 in online — we’re trying to give rural women a platform too”. crowdfunding from 54 countries, yet frustrations remain. El-Husseini’s luxury chocolates and gifts company, When Hobeika wanted to hire a Cornell-educated started with her sister in 1996, has franchises across engineer from Tripoli, “the weekend of the interview, the Arab world and is a reminder of pre-tech women’s a bomb went off, and she didn’t want to commute any enterprise. Bokja, a thriving furniture company with a more”. Volatile security also “affects our reputation”, she showroom in Beirut’s regenerated Saifi Village, is another. says. “People say, ‘is it safe?’ It’s more about image.” Hoda Baroudi and Maria Hibri put in $5,000 apiece While Fadel aims to break that image, “to show in 2000, growing the company to 34 employees and a Lebanon is not just a warzone, and there’s something $1m turnover. “We started from scratch, working with going on beyond nightclubs”, there are hints of another artisans” — most of whom are men, says Baroudi. “It took shift in the start-up culture. Tensions among staff at some time to gain respect. They’d talk down to us, but we were companies in Lebanon have been raised during Syria’s persistent.” Citing Lebanon’s long-term brain-drain, they descent into war, which has inflamed sectarian friction. say men took jobs in Dubai and elsewhere while women But Fadel paints a different picture: “In our office there’s did business at home. Yet technology has opened up almost every sect and every combination of backgrounds. many more opportunities, and the flexibility suits women. Outside, the tension is there. But start-ups don’t do that.” In historically Greek Orthodox Achrafieh in east If anything, experience of war may fuel the can-do Beirut, bicycles rest outside the Kiosk, a former Ottoman ethos. Baroudi speaks of a “Lebanese culture of now — bathhouse in the Sursock palace gardens. The restored there’s no postponing anything”. El-Husseini, who saw villa houses Coworking +961, a start-up services provider out the civil war years in Beirut, adds: “Nothing puts us set up by Fadel three years ago amid soaring rents and down. We’re always ready to start all over again — and we named after the country dialling code. One of nine always find a way.” W

ft.com/wealth|23 and informa wa theme diseases come: A BY te Am op cr re he ta ve AA st insurers of ch e fo obesit for ro eA po al of er health tion are thing the n a y-rela providers St rm te th ic ne ke rt co s An w y to ted d A’ le un y s Y mp s A hA pr he it fe An ve of y Al As fo ie it th t s r s of un Omada and swears 87 uncovering and ke af Pr funds long he with Silicon “Omada Hi fordable eping ev 9 dre iversit during ew ge af ention, s maintained id alloca light-bulb w nerously fordable eo, by Va people He a up y lle copy Obamacare, a medical was alth, care a a a ted the y consultanc medical business provision but would founded of care credits to uS his ac moment one the had the t st digital na (a ac udent foot 906-pag admit school tional centers st model ca), as it y on t rug in on in as the in came health diabe direc ” Pa gled and the their to, medicine public sa internship, ac tha lo e for ys much ca t during uS t Go tes to alto, t is duf response Kindle. pla talys disease would combine ogle known health Pa pre tform. fy less california, tient and t , vention his analys for a Sean tap but former boas control ins informally the internship to the Pr the into titute, the af otec duf t other t launch on who ter about, tw Ha where ac fy tion pag and o. rv had in a , e ard of ➤

PHOTO: RicHaRd ScHulTz/cORbiS EntrEprEnEurs arE transforming another toward their goals. While weight-loss schemes are loathed by many, Omada’s convenient, community- a sEctor that was an invEstmEnt driven approach to dropping pounds has been a hit — 65 per cent of clients have stayed in the programme for 12 backwatEr and tEchnology laggard months following the initial trial period. duffy’s story illustrates how a new crop of health technology entrepreneurs have jumped on the for the prevention of type 2 diabetes — a chronic disease Obamacare health reforms to transform a sector that that costs the uS $245bn annually in treatment and was an investment backwater and notorious technology lost productivity, according to the american diabetes laggard into a space overflowing with innovation and association. “We wouldn’t have any customers without opportunity. the aca doing this,” he notes. Prior to Obamacare, the role of health information Promptly dropping out of Harvard, forgetting even technology was analogous to a stockpiling of technical to tell his father, duffy launched Omada in april 2011, arms by hospitals and insurance companies seeking to embracing what he calls “digital therapeutics”. This maximise revenues at the others’ expense, where neither combines mobile and wearable health-tracking tools with side would blink first — leading to essentially “mutually an online peer group to foster better exercise and eating assured destruction”, according to aneesh chopra, the habits. The concept, combined with duffy’s technical and former White House chief technology officer who now medical acumen, attracted a $23m capital infusion from heads a health analytics start-up. “if you wanted the andreesen Horowitz — the Silicon Valley venture capital highest technology, you would look at the revenue and firm’s first foray into digital health technology. billing systems — how do you better document care and Through small online communities comprising a coach squeeze every nickel out of the insurance company?” and peers who share their health dreams, fears, triumphs The winds began to change after the recession from and failures through Omada’s platform, individuals at about 2008, which spawned a new urgency among risk from type 2 diabetes can monitor and encourage one employers — led by groups such as apple, the technology

26 |ft.com/wealth a nEw Emphasis on promoting hEalthy habits minimisEs thE nEEd for costly hospital stays and trEatmEnts OOMbERG bl GES; iMa Ty /GET POST SHinGTOn Wa THE

Troubled system: a free

KinG/POlaRiS/EyEVinE; clinic, opposite, run by T Remote Area Medical; the Affordable Care RObER Act has aroused strong political feelings, left; Aneesh Chopra, above PHOTOS:

company — to control healthcare costs, new funding for fields, such as consumer engagement, data and analytics, digital health records and data, and the passage in 2010 personalised medicine and wearable devices. of Obamacare, which flipped the business model of health bryan Roberts, a partner in Venrock, a health iT insurance on its head and revamped how the government venture capitalist, says these new incentives for value pays healthcare providers for services rendered. creation and the availability of data are attracting the These reforms fundamentally changed the incentives brightest young minds to the field. “We are seeing a behind how healthcare is delivered. under the old dramatic increase in the level of entrepreneurial talent “fee-for-service” model, healthcare providers were participating in the space,” he says. compensated strictly based on the volume of care they provided, and uS healthcare spending, though tapering ealth iT’s unofficial coming-out off recently, rose to $2.9tn in 2013 (17.4 per cent of gross party came during a december domestic product — nearly double the OEcd average). 2010 economic summit between in the new landscape, known in industry jargon as President barack Obama and top “population health”, providers are paid based on how corporate executives in which post- well they can deliver more effective care at a better price. aca health technology was promoted This has created a new emphasis on promoting healthy by the president as a potential new habits, thereby minimising the need for costly hospital Hopportunity. Venture capitalist stays and treatments. John doerr of Kleiner Perkins — who was bullish on the Eyeing a sea of opportunity, technology entrepreneurs vision but lamented that nobody else in the investment quickly rushed in to find ways of fostering healthy community knew a thing about it — took matters into lifestyles and improving treatment outcomes. Venture his own hands by convening the first panel on innovation capitalists followed suit, quadrupling their investments in healthcare technology at the following month’s in the area since 2011, according to Rock Health, a JPMorgan healthcare investor conference. healthcare technology incubator. in 2014, $4.1bn was The panel, comprising doerr, chopra, Google’s Eric poured into digital health companies focused on new Schmidt and Todd Park of athenahealth, the health ➤

ft.com/wealth|27 The largest EHR vendors, Epic and cerner, have been ‘thE usE of information tEchnology significant beneficiaries, as have new companies that [in hEalthcarE] is 25-30 yEars bEhind specialise in providing the infrastructure necessary for tapping into new government payment models, such thE rEst of thE commErcial world’ as Evolent Health, a spin-off from the advisory board company, a healthcare and education consultancy. On the ground level, a cottage industry of start-ups that help providers maximise Medicare reimbursements technology company, stole the show as investors flooded through EHR usage is taking off. Seeing an immediate the forum to learn more about the emerging field. an opportunity to harness his technical and software informal poll revealed the vast majority of participants background, lewis Mitchell, a developer with Mayo had little or no background knowledge of the Obamacare clinic, a non-profit medical research group, jumped in. reforms to health iT, but they peppered the panel with “The use of information technology [in healthcare] is questions about this new investment landscape that had 25-30 years behind the rest of the commercial world,” been created seemingly out of thin air. Mitchell says, emphasising the need for new value creation. The discussion centred on the law’s carrot-and-stick “i made a conscious decision to get into healthcare because approaches to promoting new technologies to help control i thought the things i was doing 25 years ago, if applied costs and improve patient outcomes, in particular the to the medical community, could have a dramatic impact.” Healthy living: incentives for providers to begin using electronic health His new program, PhySoft, tackles kidney dialysis — First Lady records (EHRs) and to use them to increase efficiency. a cumbersome and costly procedure that accounts for Michelle Obama because Medicare — which insures the elderly and $50bn in annual spend and 6 per cent of all Medicare helps FoodCorps accounts for 20 per cent of all healthcare spending — is the expenditures. using captured EHR data to optimise volunteers with largest payment source for nearly every clinic and hospital the drug dosages administered to dialysis patients, planting in the in the country and effectively a price-maker, when the aca PhySoft could trim $15,000 off the $37,000 drug and White House mandated that it should begin to shift to new “fee-for- hospitalisation bill racked up by a typical Medicare kitchen garden value” payment models, the market took notice. patient each year. GES iMa Ty GET REuTERS; PHOTOS:

28 |ft.com/wealth Taking the medicine: free treatment in Los Angeles, below; the non-profit Children’s Hospital in Aurora, Colorado, right; Sean Duffy, bottom right

n addition to Obamacare’s cost-cutting pressures, its more politically controversial mandate of requiring people to obtain health insurance has forced millions of americans to deal directly with the complexities of the healthcare system — creating opportunities for consumer education and choice. Harnessing the frustration he incurred trying to Iselect the proper health insurance plan for himself, noah lang started Stride Health to demystify the product for insurance shoppers. “Even though i have a degree in mechanical engineering, to get the data i needed to [decide on the right plan] was nearly ‘thErE’s govErnmEnt, impossible to do in terms of pricing and understanding the plans,” he says, underscoring the need for the average Education, financial consumer to have access to better information. sErvicEs… but hEalthcarE On the back of an Obamacare provision that did away with traditional paper-based insurance underwriting, is thE most scrEwEd up’ lang developed a personalised recommendation engine using algorithms that guide people to the best-fitting insurance plans on the basis of their health history and pricing needs. “i started this company to change the way no industry can remain immune to technology. americans make healthcare coverage decisions,” he says. Kushner says. “We can have engineers look at [any Josh Kushner is another smart guy to have been so industry] and say ‘this doesn’t make any sense’, and befuddled by his health insurance that he vowed to do it better. There’s government, education, financial invent a different way of doing things. With Mario services… but healthcare is the most screwed up — it is a Schlosser and Kevin nazemi he created an insurance total train wreck.” company, Oscar, whose cartoon ads adorned new york but this wave of healthcare innovation is not limited subway carriages this spring. “The consumer never to the uS. looking to expand his platform to help fight mattered in healthcare,” explains Kushner, “and for the obesity-related diseases on a global scale — and their first time ever the consumer does matter, because they $2tn impact on global GdP, according to McKinsey, are making choices on their own.” the consultancy — duffy and Omada Health are as new york state’s first new commercial health incorporating in the uK. insurer in 15 years, Oscar is off to a fast start in its drive “Obesity is the biggest health emergency — it’s this to become the disrupting force of the health insurance generation’s smoking,” warns duffy, “but it is also the market. it has attracted 40,000 customers in just two biggest market opportunity.” W years through the state’s health exchange and was valued at $1.5bn at its recent fundraising. Additional reporting by Stephen Foley

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Hard work: five years on from the earthquake, many Haitians, such as this family in Port- au-Prince, continue to live in improvised accommodation 20 fo BY th ne in hop An du 10 e w ll dr es na e ow st ea ar sc fo hi ti ri rt pA e in on ni es r he hq An g ha d ol lp re An th ua dr it in d co ew e i ke g an JA ck ve d r

PHOTO: geTTy images abrina intervol dons a baby-blue only exportcheap apparel and mangoes,” says Belgian overall, her hair and feet covered, entrepreneur maarten Boute, one of sûrtab’s founders as she passes through an airlock and its chief executive. to enter a sterile, white room. as a The company was started two years ago by Boute, good technology professional, she who is also chairman of Digicel Haiti, the country’s main carefully ensures the outer door is mobile carrier, in partnership with Richard Coles of closed before opening the inner one, multiwear, a Haitian Textile company — also surtab’s behind which more than two dozen largest shareholder — alongside Danish philanthropists colleagues are busy assembling Ulla and JP Bak. it was supported with an initial electronics. investment of $600,000 and a $200,000 grant from the This is not silicon Valley, nor Us agency for international Development. an iPad factory in shenzhen, but The company employs 70 people and produces about a small manufacturing facility in 4,000 tablets a month. employees earn a base salary of Port-au-Prince, the capital of the almost $7 per day. a bonus per completed unit pushes poorest country in the americas. it wages to $13, almost three times Haiti’s minimum assembles the sûrtab — an android- of about $4.70 a day. some hope private investment powered, low-cost tablet with “made initiatives like this will mean the number of people in Haiti” proudly emblazoned on its leaving the country will fall, says Laurent Lamothe, a aluminium back cover. telecoms entrepreneur and former prime minister. sûrtab is one example of how sûrtab was based on the aakash, a $40 education- entrepreneurialism in different areas — moving from focused tablet produced in india for poor consumers. farming traditional crops such as coffee to establishing The most basic model has a price-tag of roughly thriving businesses to produce high-tech products — is $100 and comes with WiFi, but prices rise to $285 slowly making inroads in a country usually known for for those with a high-definition screen and 3g phone poverty and its humanitarian crises, particularly after an connection. all come with seven-inch screens, and a earthquake five years ago shattered the capital. 10-inch version is in the works. “i used to see electronics made in China, or Japan, sûrtab — a play on “sure, it’s a tablet” as a response or the United states; now we are making some here,” to the scepticism of many about Haiti’s capabilities — intervol says. “at first, people did not trust Haitians, but has shipped products to educational institutions in, we have shown we can, and that makes me proud.” she for example, Kenya and Jamaica. Last year, socialist used to work at a car wash. after a three-month course Venezuela ordered 10,000 of the tablets. sûrtab has on handling materials, she now assembles tablets. plans for the Haitian market with its “mobile classroom”, “These workers show that Haiti can do high-tech a kit with tablets, a mini-server, a self-powered storage manufacturing and assembly; that Haitians are facility and education-orientated software. capable of producing something that is good and “There’s a real market for education, a market for cool; and that this country is not a pariah that can people who want to support ‘made in Haiti’ products and a real market for non-governmental organisations that want to have good but affordable products that support ‘These workers show ThaT This the local economy,” says Boute. The factory, he says, has capacity to produce 8,000 counTry is noT a pariah ThaT can only tablets a month with Chinese, Korean and Taiwanese exporT cheap apparel and mangoes’ parts. “at first, people thought we were not going to be able to make them; now the challenge is to sell them,” explains Diderot musset, the company’s general manager. although the main focus is education, some local companies are buying the tablets in bulk for their employees to buy in turn by monthly instalments. They are also sold in Digicel’s retail outlets across Haiti. “We are trying to have more Haitians have ‘made in Haiti’ tablets in their hands,” says musset. That may already be happening. Not far from the assembly plant in Port-au-Prince’s industrial park, a man is in the Rebo expresso coffee shop sipping a latte and reading on a sûrtab, surrounded by fellow customers sitting on sofas or wooden chairs. “There was never a [western-style] coffee shop in Haiti before,” says gilbert gonzales, a Haitian who studied business in the Us before returning home — in another example of how business entrepreneurialism is making inroads into the country. after initially marrying into the family of the shareholders, he became vice- president of Rebo, a Haitian coffee-bean company. “We were not sure people would leave their house or office, where they traditionally get coffee for free. But there is a need,” says gonzales, who is now exploring a franchise in the Us. While his new coffee shops appeal to

4 |ft.com/wealth ‘i heard This was a very good business; everyone drinks coffee’

the aspirant Haitian middle class as well as expatriates and tourists, he also started a project targeted at a broader segment of the population. Rebo has developed a network of more than 100 micro-entrepreneurs: mobile street coffee sellers who operate from two hubs in the capital. One of those sellers is Jean Jeannes, who has just returned the cart from which he earns his living after a long morning shift in the sun, selling coffee and sandwiches to passers-by. in the courtyard, dozens of identical pushcarts are lined up, each with the Creole slogan “Ti Pilon” (mortar and pestle) on the side, the symbol of ground coffee. “i heard this was a very good business; everyone drinks coffee,” says Jeannes. each sales representative — the majority are women — is self-employed, paying on credit first thing in the morning for a cart and reimbursing when they return it from sales of the coffee and peanut-butter sandwiches. gonzales says each seller typically earns two or three Thriving business: Haiti’s times the minimum wage. He explains that applicants capital was shattered must be aged under 45, be screened as healthy and then after an earthquake undergo a two-day training course covering hygiene, (opposite and above) but basic business skills and understanding coffee. an entrepreneurial spirit gonzales’ network has challenged the country’s is driving the country’s traditional coffee shops, which burn through a large recovery. Laurent sack of charcoal each week in the course of roasting the Lamothe, former prime beans. By offering the drink in paper cups with lids, minister, is seen using a sugar and stirrers, gonzales’ sellers allow busy Haitians ‘Made in Haiti’ Sûrtab to buy better-quality coffee which they can take with tablet (right). Traditional them on their journey into work. farming, including coffee gonzales is now focusing on securing high-quality bean cultivation, remains coffee volumes at a time of slow yields and a recent strong (below) infestation. “you get used to thriving in crises,” he says, adding that Haitian farmers, working on small plots of land, have long failed to invest sufficiently in new plants and suitable methods. That is why his next project — if he can persuade the government to help — includes large-scale coffee farms. “We have difficulties with access to capital, infrastructure, water and electricity,” says gonzales. yet, like many entrepreneurs in earthquake- ravaged Haiti, he is optimistic. “i see opportunities everywhere,” he says. W ReUTeRs OOmBeRg; BL ges; ima Ty /geT aFP PHOTO:

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PHOTO: NBC/NBCU PHOTO BANK/GETTY IMAGES

Investment crowdfundIng

The search for seed capital

n a trendy building in King’s Cross, BY JeremY This is an investment roadshow such as Steve Smith, founder of retailer London, a 200-strong crowd of HazleHurst run by Crowdcube, one of the UK’s Poundland, celebrity chef Hugh professional-looking middle-aged biggest and, at the age of four, oldest Fearnley-Whittingstall and EasyJet types and youngsters with fashionable crowdfunding websites. Along airline founder Sir Stelios Haji-Ioannou beards and piercings are watching with others, including Seedrs and crowdfunded their latest ventures. entrepreneurs make 60-second Crowdfunder, it is revolutionising Advocates of crowdfunding like to Ipresentations about their businesses. investing into early-stage businesses. talk about “democratising investment”. The start-ups include an online If you thought crowdfunding was The bigger sites have a minimum stake menswear retailer, a website founded for small fry, think again. Crowdcube of £10, but six figures are becoming by a former Spitting Image puppeteer, has raised £78m for 229 businesses more common. Two people invested a luxury milkshake business run by since 2011, and Seedrs raised £10m in £500,000 each in Chapel Down. an ex-Marks and Spencer employee the first quarter of 2015. The Chapel A fund manager at the King’s and a company that streams live gigs. Down Winery, a Kent vineyard, raised Cross event, who wished to remain Afterwards, everyone mills about £3.9m, and in March, JustPark, a peer- anonymous, has invested £250,000 eating canapés, sipping beer and to-peer parking business, raised £3.7m across 10 businesses over the past two discussing potential deals. (see box). High-profile entrepreneurs years via crowdfunding sites. “It is

40 |ft.com/wealth It’s rewardIng to Invest In somethIng that lIterally startedIn a basement

becoming a very interesting space,” she chance any investment will go under,” says. “It is bringing opportunities to says Jonathan Bell, chief investment the market that weren’t there before officer of Stanhope Capital, a global — things that are a bit more niche. investment office. “You want to have It’s rewarding to be able to invest 10 or more in your portfolio before in something that has literally been the odds start looking good.” He started in a basement. It’s fun, and adds that people should only invest there is an altruistic side to it as well.” money in crowdfunding that they are She has invested in sectors she prepared to lose. W would not have considered before, such as biotechnology, and in Zero Carbon Food, a company that grows food in Investors book slots tunnels under Clapham Common in In sharIng economy south London. Another fan is Gavin Jordan, a JustPark, previously known as corporate finance partner at EY, the ParkatmyHouse.com, allows drivers professional services firm. He has to locate parking spaces that lie vacant during the day. Space loaners include homeowners with empty driveways, as well as hotels, schools, which gives tax relief on investments churches and pubs. It is free to list you have a ready-made in start-ups, and the seed EIS, which empty spaces and the company group of people you can does the same for very early-stage handles payments itself via users’ businesses. bank accounts or on PayPal. poll about new Ideas The schemes allow investors to “shift The company reportedly has some of the risk to the taxman”, says 500,000 drivers choosing from Sarah Buxton, a tax expert at law firm 100,000 parking spaces across invested “between £300,000 and Bryan Cave. UK taxpayers get upfront the UK, with plans to expand £400,000” in more than 80 businesses income tax relief of 50 per cent on internationally. through crowdfunding, mostly through investments in eligible businesses, and It taps into the sharing economy, Seedrs, over the past two years. capital gains tax relief on profits. invoking the spectacular success of Part of the appeal, he says, is If the business fails you get loss US start-up Airbnb, which allows convenience. “It’s practical to be able relief, which for a 45 per cent taxpayer people to rent out rooms as well as to play the investors’ videos on the means you only sustain a £2,750 loss flats, houses and castles, and whose iPad when I want to,” he says. “That on a £10,000 investment under the value is approaching $20bn. works far better than having to go to seed EIS, says Buxton. “It really does JustPark is the brainchild of a presentation during the day, read shrink your risk considerably. It is a Anthony Eskinazi, who played chess something on paper or have a face-to- very tax-efficient way to invest.” for Great Britain and taught himself face meeting.” All fairly straightforward, but what to code. Businesses love crowdfunding too. are the drawbacks? First, the returns Unusually for a crowdfunded “You have a ready-made group of are not stellar. Even a £500,000 start-up, the company arrived at the people you can poll about new ideas, investment in JustPark would provide platform with existing backing from or ask them to try a new website,” says 2.1 per cent equity in a business that an incubator fund run by German Benita Matofska, founder of Compare so far has no revenues — and could be carmaker BMW and European and Share, a comparison website for the diluted by future investment. Fees could venture capital firm Index Ventures. sharing economy that has raised more be an issue — there are several layers The entrepreneur had targeted a than £250,000 in two crowdfunding Growth sector: and Crowdcube’s venture fund takes £1m fundraising for 4.76 per cent rounds. “You also have a group of Richard Ballard, 20 per cent of the profit if the investor of the company. But 2,903 investors evangelists who have a vested interest co-founder of makes more than a 7 per cent return. gave their backing, the largest in telling everybody about the business.” Zero Carbon Also, as these are early-stage individual sum being £500,000, and UK taxpayers who invest via Food, opposite, businesses, investments are risky. the fundraising closed at £3.7m for crowdfunding can take advantage of and one of its “You need to diversify because you 15.61 per cent of the equity. the enterprise investment scheme, products, above need to be aware there is a high John Kenchington

ft.com/wealth|41 PhilanthroPy Private seed investing at an caPital early stage can help bring in other capital

Direct stakes in bright ideas

ince 2009, private BY SARAH MURRAY schools catering to low- income communities in India have been able to secure credit when they want to Shire teachers, increase classroom space or buy computers. But the organisation providing these loans is not a foundation or charity — it is a for-profit company, and the kind of enterprise into which a growing number of philanthropists want to put money. The loans from the Indian School Finance Company not only help schools educate more students, raise teaching standards and make greater use of technology, but also put them on a path to financial stability, potentially making them more appealing to commercial lenders when they want to expand further. Philanthropists wanting to address an issue such as lack of access to education in developing countries might once have written a cheque to a foundation or non-profit organisation. This is changing rapidly as a new generation of entrepreneurial donors recognise that private capital is also a powerful tool when it comes to tackling social and environmental issues. “This is definitely one of the biggest growth areas in philanthropy,” says Eric Kessler, founder and managing director of Arabella Advisors, a philanthropic services provider. He sees a generational shift taking place, with the philanthropists who are opportunity both to write cheques to advance their charitable missions. now inheriting money and the young as philanthropists and address Today, however, many are turning technology entrepreneurs who are other problems more appropriately to the funds in their endowments to cashing out with billions being “wired through a for-profit investment,” says make“mission-related investments” in differently from older philanthropists”. Andrew Kassoy, co-founder of B Lab, for-profit businesses whose activities These individuals, he says, realise a US-based organisation that seeks to match their goals. that to accomplish their goals — harness business as a means of solving “Nowadays when philanthropists whether in improving women’s health social and environmental problems. think about how to use their capital, or eradicating malaria — the non- While some are using private capital they have many more tools than they profit sector alone does not have the to do this, others are doing it through had in the past,” says Michele Giddens, resources to provide all the solutions. their family foundations. Traditionally, a founder of Bridges Ventures, a “Increasingly, they recognise the foundations have used their donations specialist fund manager dedicated to

42 |ft.com/wealth high impact potential can help bring in Enterprising philanthropists can donate to non- other capital,” says Giddens. investments: profits, such as US-based Acumen and Groups such as Toniic and Investors’ the Indian Endeavor, that invest philanthropic Circle are springing up to support these School Finance dollars in enterprises they believe can types of investors. The groups highlight Company, above, provide essential services, such as low- potential deals for members and help and B Corp- cost healthcare or access to clean water. like-minded peers share information certified d.light, More recently, the number of and resources. a solar lighting specialist advisers and fund managers — Meanwhile, finding enterprises with company, left such as Sonen Capital, Imprint Capital a track record is becoming easier, as and above left and Bridges Ventures — has expanded, ratings systems emerge. For example, giving individual philanthropists the rigorous assessment processes and and families the opportunity to build accountability required of B Corp- investment portfolios made up of certified companies can give individuals companies that are addressing social confidence they are investing in credible and environmental challenges. high-impact enterprises. Banks are catching on, too. Even so, for philanthropists with “Financial services institutions are less experience, direct investing can be starting to create opportunities, mostly a challenge. After all, for an individual because it’s being demanded by their to conduct extensive due diligence on high-net-worth clients,” says Kassoy. In fact, in the past few years, it has become far easier for philanthropists to use some of their capital to support entrepreneurs. of course, when investing private capital in for-profit it’s no different from any enterprises, the tax deductions cannot other direct investment be claimed as they would with a charitable gift. And, as many argue, — you need deep expertise this does not mean individuals should abandon their philanthropic donations. sustainable and impact investments. a company and track its performance After all, not every social and DESIGN Philanthropists need to be careful, — particularly if it has operations on environmental challenge lends itself however, to select the best vehicles for the other side of the world — is tough to market solutions. However, as their investments in entrepreneurial without experience, networks and philanthropists look to make a bigger .LIGHT businesses. For experienced resources. “It’s no different from any impact with their money, there is now investors and venture capitalists, other direct investment — you need a broader range of options. “Sometimes direct investment is one possible deep expertise to be a successful direct the right answer is adonation and route. When it comes to early-stage investor,” says Kassoy. “It requires more sometimes it’s a for-profit investment,” STEEMErS/D enterprises, these individuals can than writing a cheque.” says Kassoy. “But philanthropists have THEo provide seed funding or become angel For those without the expertise and come to have a more diverse view of investors. “Doing some seed investing experience, a range of intermediaries what the opportunities are to solve big W at a very early stage in a business with have emerged in recent years. First, problems.” PHoToS:

ft.com/wealth|43 The business guru Weili Dai

Smart thinking in action

eili Dai is BY Morgan co-founder Meaker of Marvell Technology Group, a global semiconductor Wcompany that she started with her husband, Sehat Sutardja, 20 years ago. When Dai moved from China to the US at 17, she spoke no English. She took a summer job at Bell Labs, the research company, after she had graduated in computer science from the University of California, Berkeley. Dai subsequently worked in software development at Canon Research Center America, the information technology company, before she co-founded Marvell in 1995. Today, she is president of a company that counts Apple and Google among its clients. “I started thinking about the Marvell concept after I met my husband. We are both technology people,” she says. “I encouraged him to get a PhD. I said, down the road, when it’s the right time to start something I’ll be there to support him and do it together. I believe entrepreneurs need to have good experience and a technical foundation. Then you can start your own company. That’s when you can truly be creative and have the freedom to create whatever innovation or product you like. “Each stage [of Marvell] has [had] “Collaboration is a must. Today, it’s collaboration is a must. its own challenges. When we had just no longer about standalone products. started, people looked at the risk. It’s about developing technology and today, it’s about working But we are crazy entrepreneurs — working with the ecosystem. You have with the ecosystem we believed in ourselves. Whenever to collaborate to make smart solutions. anyone shows me the risk, I ask We’re in the era of smart lifestyle. them to flip the page and take a look Moving forward, [our vision for the at the [other] side — I read this as future] is the “Smart Me” device, which opportunity. They think I’m crazy should combine the smartphone with because start-up companies are very wearables, for example the smart- If we collaborate with partners and risky, but when companies are big, watch and smart glasses. All this I customers, and all work together to there’s still a risk. People say, now you believe should be combined in one accomplish more, that’s a great thing. are big players, how do you manage device. In the early days, I even partnered with the risk of losing market share? As a “When we started the company we Intel. Everyone knows Intel. We pushed big player, how do you see growth? always had a vision that we want to the industry together. You co-operate This is why a company like us is always be the technology leader and we want with the competition. I focused on the thinking ahead. In the last few years, to drive technology to the masses. success of the industry overall. I’ve been driving our business and

44 |fT.com/WealTh PhoToS: REUTERS; GETTY IMAGES; BLooMBERG to technolog to approach in above, We Le fruition bring a d ili simple by Dai, belie lifes y ty ideas ves les: technolog responsibilit in is in my are husband! ex Wo at tha Th in capable time should technolog about technolog idea. and passiona more jus [being] you meaningful pla to ver gre a it such friendly lives ha and Collabor to technolog Th tha st Th with er tha ’s fun rat a volved, ver citing ve my pla deploy technolog technolog e e e “[If “I “F “Being t yer y w t t t all men young of ver apply a belie smar oppor technolog moment eg you is] you na smar or the enjoying an a alwa y Yo up y spor beautiful founder . schedule the about the y joy y I much To tur bask ha entrepreneurs, u too as impac a could and should because complementar towards at in te, need need, simples ve t. we y . need y er ve and ys y y smar co-founder ter on t, lifes a me, tha ally men. tunit ion I is the for Do field, — complica wha co-founder et in but than y was self belie y y a team it can needed. par and t you top to ball . because are tak ward to ty recipe it ’s life is give y taught ta team yourself [par to In some Fr t to and y and ge ’s No te at ] has go le push lifes t go t born fT delega the nd mak ahead you the ve ench individual e the go be of work. it think my be of ver ev approach t and for and t the one w ing of tic .c more — would easier to think, ing women go en spor mak tha tt our thing ty fully co-founder ted, f. to ecosys tha business mus case e your the me If om the is er ularly] in same our be le. va t . we quar to Keep the , piece more you the y. te t, spend In of .” [in to to more we for Bask lifes t t Shanghai e ca you in to be Tr fashionable. dis world our /W this t commit more. is ha W it tha us to people na be be the you probably smar projec tions. technolog think are volved mus tem ter me a y ’s be possible. are time a ty spor ke tric ve it of ea tur use. et impor is wa to harder in user- know skillse t ev fun ne lot le, . more world, y. simple probably ball a will more advice it the I hug lT t of tness en jus al t. pla go this y w I is team t. ’s women used ’s t be more it ted look than Boy talent smar h| or er If my t and more y. e. is tant. ts as be a y , to of t 45 CORRESPONDENT VENEZUELA

Art in the age of austerity

s the afternoon drinks BY ANDRES work of the dwindling number of start to flow, the art SCHIPANI contemporary Venezuelan artists scene in eastern Caracas who remain. resembles many similar “Venezuela was a regional exhibitions held in superpower when it came to London or New York. the plastic arts, and now it AGallerists talk up the is the galleries assuming the photographs on sale — “in the low, responsibility, occupying the thousands of dollars” — as potential place museums used to have, buyers circle, glasses in hand. because their situation is The photographs by local artist Juan pathetic,” says Nicomedes Febres, Toro Diez reflect the current volatility of director of the gallery D’Museo, politically polarised Caracas. His works where Toro Diez is exhibiting his are artistic representations of the waves of photographs. anti-government unrest that left dozens “We feel like adventurers, dead more than a year ago. Among other fighting to maintain the presence things, Toro Diez photographs Molotov of art collections that have cocktails and empty tear-gas canisters. dwindled,” adds Luis Miguel Part of an exhibition titled “Country La Corte of the gallery Espacio Risk Index”, the photographs highlight Monitor, which sells works by how the art scene in oil-rich Venezuela renowned Venezuelan artists has adapted to a new reality in a country such as Carlos Cruz-Diez. ravaged by an economic, political and Cultural populist priorities. Feeling the pressure, a “We cannot replace the museums, but social crises as shortages of everything beacons: works number of curators and arts professionals we try to provide a breath of fresh air,” he from toilet paper to art supplies affect the by, clockwise emigrated, swiftly followed by some says. everyday life of Venezuelans — even those from above, private collections. Carmen Araujo spent 10 years working in the art scene. Alessandro “There are only a few survivors left,” at the country’s national gallery. She left While the oil money was flowing, the Balteo Yazbeck, says Miguel García. “There is still a in 2004 “when policies started to change Venezuelan art world was the envy of Carlos Cruz- market, but the big private collections things within museums”. As policies many of the country’s Latin American Diez, Emilia have left the country.” changed, dynamics changed, she says. neighbours. The capital’s inhabitants Azcárate and Moreover, as Venezuelan artist After several projects, she started one grew used to living among works by Juan Toro Diez Alexander Apóstol wrote earlier this year: of Caracas’s most-respected galleries, Alexander Calder, Fernand Léger and “The scarcity of incentives for creativity in a former coffee plantation on a hill local artists such as Jesús Rafael Soto and and local production also led to an overlooking the city. Alejandro Otero. enormous diaspora.” “With the current situation of art “The Museum of Contemporary Yet as the established arts scene moved institutions, small galleries like us have Art was a jewel,” says Miguel Miguel abroad, it created space in its wake for a an increasing responsibility when it García, a respected curator and founding network of smaller galleries and private comes to promoting the arts,” she says. member of the national art gallery. “The spaces that have graduated to become the Her words are echoed by Miguel García: first painting by Mark Rothko to set city’s cultural lynchpins by supporting the “Venezuela used to be known for three foot outside the US came to Venezuela. reasons: the liberator Simón Bolívar, oil Private collections included works by WE FEEL LIKE ADVENTURERS, and museums. Now, galleries are the Alberto Giacometti, Paul Klee and cultural resistance.” Francis Bacon.” FIGHTING TO MAINTAIN THE The clusters that have emerged or He says, however, that everything consolidated as a consequence, such started to change when Hugo Chávez, the PRESENCE OF COLLECTIONS as Centro de Arte Los Galpones — late president, rose to power in the late hosting galleries such as Oficina #1, 1990s. Critics suggested the once-thriving THAT HAVE DWINDLED Espacio Monitor and D’Museo — and visual arts scene had started to favour the Hacienda La Trinidad — with the the government, and arts and culture Carmen Araujo Arte gallery — stand as became marginalised in the wake of more two cultural oases in Caracas.

46 FT.COMWEALTH PHOTOS: EPA; JUAN TORO DIEZ; ALESSANDRO BALTEO YAZBEC, EMILIA AZCÁRATE COURTESY OF HENRIQUE FARIA, NEW YORK to Ne year collec his suppor holdings le sur are Colombians, man economic critics such or regional for ex in is is ar contempor Le totally ft tis insec isola ceptional Res Tired “If But “T show another e Bog w vive, local galler go the of ts y he He as Yo we tors tric ing interna the don otá, Oficina tion, in dif t, ure, countr mos rk case Ar nrique le of galleries were ar we y and places tions ferent places. t ha situa scene t ’t br in the t le econom ar ” alone so Basel t ar fairs, want cannot sa Ve ve anch, t y Me serious Car tional alloca alone doing tis y cu ys situa #1, Ve on Fa nezuelan tion shrunk. while such situa ” is ts, xicans rat acas Ar nezuelan thrive. to ria Mi including to a foreign st where y, but tion tions aujo. ors, and galler really ar interna show ill wha come. ami decided tion, problem we as and collec t st ” a fairs, or galleris São at the would rug t contempor lot mean Beach. “T ” case he y cu af we Br foc home, sa And ar foc tional he tions ford Buenos lack gling Pa of rrenc continues azilians, ys lik t. us to do we domes used countr ulo them “T ts be Suwon it e close given on here to of the and is or las here ha to y ev in or st at his on hard ar ve Aires ents t ha a at tic tend at y who the y are e ve ar soul loca uphill and only go Ve sense, wha tis “H od, nezuelan ted t Emilia ts, is to ere, is ” because ba Ve Fa such work go in tt I nezuelan. ria ing the le continue Azcár ar as [in adds. with on Up tis the Alessandro Car ts, in per at FT ar galler “W ” e. who Ve acas], working t .C Eas W “E but e nezuela, OM ma ver y’ are t s also ” Side, y mission Balteo he ything W ex be with sa por ceptionally EA in a but ys. galler ev LT tr Ya was ay is our er H zbeck not y an y 47 Correspondent poland PeoPle still see me as a man who knows business; this is good for me

Political maverick

anusz Palikot made his fortune BY HenrY FoY — much to the chagrin of Warsaw’s this month’s presidential election. He as a political entrepreneur. political establishment. admits he has no chance of unseating Today he is struggling as an At the last general election in 2011, incumbent Bronisław Komorowski, entrepreneurial politician. his party won 10 per cent of the vote, but the ballot is an important aperitif Aself-made drinks millionaire making it the third-largest party in before the general election in October. Jwho built the world’s 10th- parliament. But, he admits, his attempt His Warsaw apartment is on a natty, largest vodka producer in the 15 years to seize the political initiative in a well-heeled street fittingly equidistant after Poland emerged from under similar fashion to amassing market from the parliament building and Plac communist rule, Palikot dropped the share as a liquor baron has not followed Zbawiciela, a square so renowned for alcohol a decade ago in a bid to become the same trajectory. the liberal, left-leaning twentysomethings the country’s leader. “Only today do I really understand that flock to its bars and coffee shops In the years that have followed, politics,” he says, sipping green tea in that it has been nicknamed “Plac Palikot has waved a dildo and a gun at his bright, airy apartment. “I think that Hipstera”, or Hipster Square. a press conference, used a butchered the idea that I understood it 10 years But like the giant rainbow flower pig’s head as a prop during a television ago is wrong.” sculpture that arches over the centre of interview and threatened to smoke Palikot is a little under the weather — the square and has been burnt at least a joint in the country’s parliament a side-effect of his campaigning for four times by conservative protestors

48 |ft.Com/wealth angry at the gay rights message they of piles of books by Aristotle and Søren say it conveys, Palikot finds himself Kierkegaard, rather than works by Jack wrestling with an electorate that Welch or Warren Buffett. But he says appears unready for his countercultural his entrepreneurial background is a big ideas. He has campaigned against asset to his radical agenda. teaching Catholicism in state schools “People still see me as a man who Campaign trail: publishing of some political books, the and champions gay rights. He has knows business; this is good for me,” he Janusz Palikot entrepreneur was approached in 2004 called for the relaxation of drug laws says. “What people think about me, feel in March, by Donald Tusk, leader of the Civic and abortion rules. He is the most about me, is that I am not in politics opposite, and Platform party and soon to be prime vociferous candidate to openly support only to be in politics. If I have the in 2011, above. minister, to join his party. Poland joining the euro. power, I use it to change something. His party, below, That convinced Palikot to sell “Everybody knows who Palikot is, “The spirit of politics and business is protesting in his businesses and run for office. in terms of the church, the gays and similar. You can be a creator in both,” 2012 against “I believed I was the only man that so and so. I had to very quickly build a he adds. Poland’s signing understood business in politics, and reputation,” he says, when asked about After Poland became a democracy in of the Anti- could change the structure of our the enduring image of him waving 1989, he moved into the production of Counterfeiting administration,” he recalls. the dildo in an attempt to mock the alcohol, and by 2005 he was running Trade Agreement A successful stint as Civic Platform’s right-wing opposition. “Of course [my the largest flavoured vodka producer in pro-business face followed, and Palikot actions are] coming back at me now. the country, as well as the biggest wine ran a commission set up by Tusk to “My mistake in politics was that I importer. He also had 65 per cent of the streamline the country’s bureaucracy. developed a position too quickly. I domestic market for sparkling wine. But as Tusk began to shift his party was from business; I did not calculate Having dipped his toes into small to the left, and Palikot’s antics brought politically,” he says. “[In business], local issues and having supported the infamy rather than popularity, the the winner is the winner: you finish liberal firebrand was jettisoned from something. In politics you must be the ruling party. careful. You must wait your time. In Today, running his own caucus, he politics, you must block others, and is toning down the controversy a little. then do your thing.” The unruly mop of brown, curly hair Palikot entered business as a the sPirit of Politics and that went with his unpredictable, zany 20-year-old student in 1984, and four character has been shorn off in favour years later was a millionaire thanks to business is similar. You of a clipped, smarter grey cut. the success of his company, which sold But he is still the only real alternative wooden pallets for liquor bottles. But can be a creator in both for young liberals to the centre-right Poland’s political enfant terrible did not parties that have dominated Poland’s study management. Instead, he chose politics for the past decade. philosophy and his living room is full “If have the opportunity to debate on TV directly with Mr Komorowski, then I am the winner. Without a doubt,” he says. Palikot, who has the support of between 2 and 4 per cent of voters for

OOMBErg; his presidential campaign, believes his Bl party can gain 12 per cent of the vote in the parliamentary election, cementing its third position. He says he has already suggested to Ewa Kopacz, prime minister and Civic Platform leader, that he could be prime minister if her party comes

AK/NurPHOTO/COrBIS; second and needs his support to form amajority. WID Her response, he admits, “was very Tur short”. But, folding his arms, Palikot S/POlArIS/EYEVINE Ar maintains: “I will be prime minister in NEW the next five years, perhaps even this year. Why could I not be?” W EAST PHOTOS:

ft.Com/wealth|49 DeBate entrepreneurial culture Asia embraces the start-up

sia may be at a BY emma BoYde watershed in wealth creation. Instead of younger generations joining family businesses, there are Aindications that a western appreciation of entrepreneurs has become entrenched in the east. It is easy to see why. In China, for example, Jack Ma, founder of ecommerce company Alibaba and one of the wealthiest men in the country, is a household name. He is perhaps even more admired in his country than western counterparts such as Mark Zuckerberg, founder of Facebook, or Jeff Bezos, founder and chief executive of Amazon, are in theirs. “There are almost 4.5bn people in Asia, so generalisations are dangerous, but advancements in technology and access to information as a result have changed things dramatically,” says Tej Kohli, an Indian technology entrepreneur, billionaire and philanthropist. However, while the academics He points out that a large there are cultural may be unconvinced, the enthusiasm proportion of the population across differences and these for following the western start-up Asia now have smartphones and are model is growing, says Kohli. “The simply more aware of opportunities are about family values west is producing lots of exponential available elsewhere. “Fewer people entrepreneurs and the east is trying to want to go into the family firm, because catch up and follow the west.” their eyes have been opened to the Kohli believes that in his area of opportunities,” he says. expertise — financial technology Are they right to dream of setting up School at the National University of and harnessing big data — “the on their own? Academics are unsure. Singapore, agrees, adding: “You don’t opportunities that exist today in Asia “Where does growth come from? To see start-ups that have already died. far exceed those in the west”. be honest, I don’t think we have firm Most of the time you only see the Budding Asian entrepreneurs face evidence that entrepreneurship as such successful ones.” certain headwinds, however, such as is what creates the most value,” says Even in the US, where access to capital. Morten Bennedsen, professor of family entrepreneurs have always attracted “There is no doubt that it is easier enterprise at Insead, a business school a lot of attention, there are doubters for entrepreneurs to access funding in that has campuses in Paris, Singapore in the academic ranks. Andrew Keyt, the west,” says Kohli, adding that in and Abu Dhabi. president of the US chapter of the India most entrepreneurs are self- He adds that 90 per cent of Family Business Network and executive financing, borrowing money from companies worldwide do not survive director of the Loyola University friends and family. more than 10 years. “It’s very easy to say Chicago Family Business Center, says: Prof Wiwattanakantang also points that we have to spend a lot of money “I do think that we [in the US] tend to the weaker legal institutions in on entrepreneurship, but I don’t think to over-romanticise the start-up and many Asian countries, which mean there’s evidence for it.” the big liquidity event, and lose sight entrepreneurs and those who fund Yupana Wiwattanakantang, of the challenge of creating long-term them run greater risks. “We know from associate professor at NUS Business sustainable value.” research that, in countries with weak

50 |ft.com/wealth far clock Figures Be Zuck and zos, le Te erberg, wise ft j : Ja Ko Ma to ck from follow hli rk Ma Je ff , know as was parents’ tha clandes not Ch their children Bennedsen the are hold finance, legal dif sa th He as secondar in in Pr do those ex th y of Singapore the his universit ferences inese Strong Th not t recalls academics. about family want se when Bennedsen back sys , parents, po ings of e e family progr tt and want tine ” fspring ing tems, shellfish st it she ys to er ea we family udent some are tha cu he av is and y chool sa up ammes basis. ne go family ’s to sa lture oid a or ha had , ys, t which changing, it “big he his back ys. join one “T st to ve gr these As is sa st in ha va adding fac here in could adua nt built tell Th is own hard of ys ian ties lues ving his thing wes the he the to tor ten st mak e As dif is their rong entrepreneurs, st are teaches class help te is tern-educa could business a y family — to ian ia le wes to been ferences udent tha though. ” business in es school. t not ge cu in tr re er his parents st Ch it t pr run l t, did t ltur turn. ,” As for udents also to harder as ternal ex to firm. ina Pr fa hoped en ia, yi his on well al ther As obe of od as ted and ian the ng a y big for tr y uc epr to will continue promised st entrepreneurship Economic premier the be of fail, st would would belie business warn business. entrepreneurs ef Spain, of sa born was ill ar for ys an luxur in If Th And felt beginning t mean on but a he ts, ve Ch their in entrepreneurial tha e journalis en at av ensure ca In g prizes messag the it now countries y Delhi ina the Li t oid can dia a to cars could Pr tha the the own Fo na Keqiang gains is lo mak of shif has eu tc a and rum be t tional y for successful in tha va and hard of Bennedsen the e tr t will businesses. soon t larg and st e in a ying 1958 this in from Cos ft t growing ts such it in and priv rs h go homes majorit Ch Ma simply landing. cu .c le e. easier told Da an vernment ta ha year their ina’ vel cu to lture at om Kohli, rch innov the as up rica. ve vos of economis e lture in a the an too. s , Ch in plane, /w y a when a fa is growth for econom Ch hand tr its tha hope of successful na ther at the ina right He y Wo who ea At ina’ could people ion again. them tion t would d “mass rld UK lt was he a fully at who s ” t, was to flee y h| of , will to W t

51 PHoToS: BLooMBErg; AP; AFP/gETTY IMAgES book REVIEW oNCE UPoN A TIME IN RUSSIA

Tales from the wild east

BY daniel Ben-ami

ussian oligarchs, in the popular imagination, are often seen as exemplifying the worst qualities associated with wealth. They are frequently linked Rto ostentation, corruption and even outright gangsterism. The reality, of course, is more complex. Oligarchs emerged in the 1990s alongside the tumultuous transition to a market economy that followed the collapse of the Soviet Union. That does not excuse all their actions, but it does help put them into context. The more recent generation of wealthy Russians seems anxious to avoid the gross excesses of some of its predecessors. Once Upon a Time in Russia tells the story of the Russian oligarchs by focusing on two of the leading figures from 1994 onwards. Boris Berezovsky went from a career as a mathematician to making a huge fortune, largely as a result of gaining control over former state assets. He was also a close ally of Boris Yeltsin, the first president of the Russian republic, and an early supporter of Vladimir Putin, the current president. However, Berezovsky died in mysterious circumstances at his home in Ascot in the UK in 2013 after a dispute with the Russian authorities and losing much of his fortune. Roman Abramovich is the other high-profile figure in the tale. The senior school dropout started his career by running a toy company before making his fortune in the trading and Losing battle: transportation of oil. He was an early Boris Berezovsky protégé of Berezovsky before famously outside the High falling out with him. Abramovich Court in 2012 was the victor when the twotussled following his case in an English court in one of the most against Roman expensive legal cases in history. Abramovich

52 |fT.CoM/WEAlTh This is also The sTory of Vladimir PuTin’s rise To leadershiP

There are many secondary characters, it becomes a little more understandable but in a way, implicitly at least, this once the mindset of the Russian is also the story of Putin’s rise to authorities at the time is understood. leadership in Russia. First as prime The government was experiencing minister and then as president, he substantial financial difficulties and, at succeeded in taming the power of the least according to Mezrich, feared the Russian oligarchs in the early 2000s. return of communism. They were allowed to keep their wealth An important disadvantage of the on the strict condition they accepted approach is that inevitably some details his government’s authority. are imagined rather than real. Mezrich Ben Mezrich relates the story in cannot possibly know for certain what the form of a true-life novel. The Putin was thinking at a particular time bestselling author has used the device or even some of the dialogue related in before, including in The Accidental the book. Even assuming Mezrich did Billionaires, which provided the basis exemplary research — and no doubt for The Social Network, the Hollywood he did an immense amount of work film on the creation of Facebook. on the project — there is a degree of Mezrich uses interviews, first-person poetic licence. Indeed, the “Once Upon sources, court documents and newspaper a Time” part of the book’s title could accounts as the basis for his narrative. itself be taken as an acknowledgement In many cases he imagines what the of the work’s partly fictional character. characters would have said to each It should also be recognised that other, what he calls “recreated dialogue”, easy accessibility has a downside. Fully while he acknowledges “settings have understanding the transition from the been changed, and certain descriptions Soviet Union to a market-orientated have been altered to protect privacy”. Russia means examining a host of This approach has some advantages as cultural, economic and social factors. well as considerable disadvantages. Even if it were possible to insert a The clearest benefit of the approach microscopic spy drone into President is that it makes the story more Putin’s private office it would not reveal accessible. It is easier to grasp the main the whole story. Russia’s unprecedented elements of the narrative and getto transition is too complex to be reduced know the protagonists. to a straightforward narrative. W Sometimes it also provides insights that are harder to glean from factual Once Upon a Time in Russia: The Rise accounts. For example, the willingness of the Oligarchs and the Greatest Wealth of the Russian authorities to sell state in History, by Ben Mezrich (William assets at such knockdown prices in the Heinemann, 2015). £18.99/$28.00 1990s can seem crazy in retrospect. Even the most avid advocate of privatisation The reviewer is the author of Ferraris is likely to blanche at the memory. But for All (Policy Press, 2012) BIBBY ThE qUoTE “Berezovsky realised that he had miscalculated again. First, he cHARlIE had put his money, talent and media behind Putin, helping to put him in the Kremlin. Now he was facing off with a force of nature in a battle he might already have lost.” PHOTO:

fT.CoM/WEAlTh|53 CAR REVIEW ROLLSROYCE SEEKING THE CACHET OF THE GHOST CAR TOO EARLY HAS HASTENED MANY A CORPORATE DEMISE

Potent symbol

s a sign that you BY ROHIT JAGGI However, a first Rolls-Royce is The dominant connotations of have made it, a PHOTOGRAPHS also one of the classic signs cautious wealth and fortune inform some of Rolls-Royce is hard BY STEVE FRANCK company doctors look for when the components lovingly stitched into to beat. The tall searching for overstretch. Many each Rolls-Royce, but they also serve radiator grille and entrepreneurs have sought the cachet to obscure its strengths as a motorcar, bluff front comprise an of its potent symbolism too early – of which there are many, particularly A unmistakable, unique with the result that the car, instead with a model such as the Ghost. Smaller and very public symbol of success. of cementing a business success, has than the Phantom, whose bulk is Ignoring the fact that Ford of Europe hastened a corporate demise. intimidating on narrow roads, and more used the phrase “the car you always So while a Rolls-Royce is a sign of practical than the two-door fastback promised yourself” for the definitely having arrived, it can also be a portent Wraith, the standard-wheelbase Ghost further downmarket Capri (itself a of an imminent and ignominious is the car I would choose to drive low-rent version of the US Mustang), View a slideshow departure from the business scene. myself, rather than be driven in. a first Rolls-Royce is a tangible marker of Rohit Jaggi The likelihood of that being the case The Ghost, now in its second that mastery of your field, whether it driving the is raised by an increasing shift in generation, is a big car — almost as is business or rock music, has been Rolls-Royce Ghost ownership of the cars from old wealth long as my dainty London mews house rewarded by financial success. at ft.com/wealth to impatient new money. is wide, lending a certain comedy

54 FT.COMWEALTH Even without using all that performance, covering ground is what the Ghost does best. Gadgets such as adaptive cruise control, which maintains a safe distance from the car in front, and a lane- departure warning make short work of motorway distances. The ride at those speeds is also appropriately sumptuous for a car that costs north of £200,000. Over potholed streets at low speeds Eye-catching: the need for the suspension to balance from the Spirit the car’s vast weight against the mass of Ecstasy to the of the huge wheels can result in less neo-brutalist than stately jiggles, though. looks, the Ghost The cabin – especially with the right attracts attention hues of leather and wood veneer – is light and airy, as well as self-consciously luxurious, despite a spattering of chrome. It is a relaxing environment whether at a British motorway 70mph- and-a-bit or an autobahn 155mph – the THE RIDE AT HIGH SPEEDS IS governed top speed. SUMPTUOUS BUT CAN BE LESS No speed is great enough to avoid attention, though. Whether it is the THAN STATELY OVER POTHOLES name, the radiator-top mascot or the neo-brutalist looks, the car catches people’s eyes, especially those in thrall to celebrity. I was driving through London a couple of years ago in military types call a “God’s-eye view” a super-luxury saloon when of the areas next to the car, using a car stopped cameras mounted around the alongside, its vehicle. That and the normal rear driver beckoning camera make not only reversing me to wind down but also manoeuvring next to my window. “Are kerbs and other cars much less you someone I intimidating. And cameras facing should know?” sideways out of the long, long nose he asked. The car I are useful when navigating the arched STATS was driving was from another British entrance to my mews in order to avoid ENGINE: motoring bastion now owned by a squashing fast-moving pedestrians. 6,592cc V12, German carmaker – Volkswagen’s Given the mass and bulk, the car 563bhp, 780Nm Bentley – but the lesson is the same. handles densely packed city streets of torque That has to be a concern. All cars pretty well, once I get over worrying TOP SPEED: exist in their own cloud of image and about cyclists scratching the two- 155mph marketing, but the power of the Rolls- aspect to parking it outside my front tone paintwork as they squeeze past ACCELERATION: Royce brand means there is a danger door. And it weighs a colossal 2.3 its width. The up-lit Spirit of Ecstasy 0-60mph in of people believing their own myth- tonnes before adding fuel or humans. standing proud of the grille provides 4.7 seconds making if they own one of the cars. The well-fed waistline of the car is also me with a visual reference to assess FUEL ECONOMY: In business, however, reputations high, so that nearby small children and the Ghost’s extremities without 20.2mpg generally have to be earned. Putting the low-lying sportscars tend to disappear resorting to using the cameras. (combined) cart before the horse, or the trappings from the driver’s view. The car certainly shifts too – the V12 UNLADEN of success before the success is assured, Technology rides to the rescue, engine puts out 563bhp and propels WEIGHT: would merely add to suspicions that though. From parent company BMW the Ghost from standstill to 60mph in 2,360kg some Rolls-Royce owners are trying comes a system that provides what just 4.7 seconds. PRICE: £216,864 too hard to prove themselves. W

FT.COMWEALTH55 lIfeStYle RohIt JaGGI

Twin temptations

he wide runway fills the PHOTOGRAPHS BY Aircraft with two engines from US flight examiners. But for now he is keen windscreen; potholes STEVE FRANCK manufacturer Piper, however, such to go flying with his daughter — also a and grass growing in the as the six-seat Seneca or four-seat qualified hot-air balloon pilot. surface, cracks coming Seminole, demand hobnailed boots. It So we head back to Finmere. One into focus as we descend. was on such aircraft that I trained to delight of flying from an uncontrolled Tim Orchard, owner of fly multi-engine planes, and while their airfield is the lack of a radio or even tthe aircraft I am flying controls in general are not particularly a radio procedure — many of the for the first time, raises the pressure by subtle, flying on one engine requires other aircraft that use Finmere are saying: “The banks of earth you can see huge force on the appropriate rudder microlights with no radio equipment. that look like the end of the runway — pedal to keep the aircraft straight. The big glass screens of the Tecnam’s there’s also a fence in front of them.” On the P2006T, though, with one avionics system make it easy to keep RAF Finmere, near Buckingham, is engine not producing power, the track of where we are, and while we an old second world war airfield, one are both keeping a careful eye out for of the many scattered across England’s other aircraft, I am otherwise free to Midlands. Of its two runways, less than controLs are so Light, the concentrate on the flying. half of the east-west one is still in use; aircraft couLd be fLoWn And so to the landing. The banks of trees and buildings cover the remainder earth — and the fence — are looking of the former landing strips. Like many in deLicate itaLian Loafers rather close now. But delicate touches former wartime airfields, Finmere is on the controls yield proportionate privately owned, home to a few aircraft pressure needed to cope responses by the aircraft. Speed and belonging to the owner and friends. with the asymmetric glide path look good. The landing roll, The aircraft we are flying is a thrust is astonishingly small. Even newer according to the book, is just 623 ft, Tecnam P2006T Twin — a four-seater aircraft, such as the four-seat Diamond so there should be plenty of room. The with two piston engines that turn DA42 Twin Star, which first flew in wheels kiss the uneven runway surface, propellers. Being relatively low-tech 2004, are not so benign. and moderate braking brings us to a and low on running costs, it fulfils most With less effort needed for flying, I halt well short of the fence. of the reasons why people buy twin- can take advantage of the high-wing Being able to operate from short engined planes. design to look at the lush green fields strips is not the only benefit of the Those who buy for personal 2,000 feet below. P2006T. Its engines can operate on any use want the safety of two The grand estate sort of car petrol, even those blends that engines, though the of Orchard’s include ethanol. Many aircraft engines Rotax 912 S3 neighbour, Lord still need to use 100 low lead, which is engines in the Rothschild, not only fearsomely expensive but also Tecnam are passes under becoming harder and harder to find. very reliable. Those us. But it is a bright, The Twin’s engines sip fuel at less than who buy for a business such as a flight calm day and Orchard is keen to 10 gallons an hour, combined, and with training school should welcome running drive off to indulge another aerial a cruising speed of 140 knots, even the costs that can be £150 an hour cheaper passion — hot-air ballooning. In fact, modest tanks give a theoretical range of than many aircraft used for teaching, he tells me, his status as a pilot of both nearly 750 nautical miles. says Orchard. He is the UK importer Concorde and hot-air balloons is likely The ¤395,000 starting price for the for the Tecnam, which is built in Italy to remain unique, as there is not exactly glass-cockpit version of the Tecnam — by a manufacturer better known for much demand for people to fly new extras such as a ¤25,000 autopilot will its smaller, single-engine aircraft that supersonic airliners. add to that — also looks like a bargain. have a reputation for being easy to fly. His time with British Airways was a The four-seat Seminole, for example, Notcounting the extra pressure for my View a slideshow springboard for a varied set of interests. starts at $697,100. With flight training first landing, the aircraft has proved of Rohit Jaggi Apart from being the Tecnam importer rates usually based on the costs of exceptionally unstressful to fly. Controls piloting the and ballooning as a hobby, he lectures expensive, thirsty American aircraft, the are so light to operate, the aircraft could P2006T Twin at on aviation and acts as one of the UK economics of the P2006T make setting be flown in delicate Italian loafers. ft.com/wealth Civil Aviation Authority’s elite crew of up a school look attractive. W

56 |ft.com/wealth running costs can be £150 an hour cheaper than many aircraft used for teaching

Stress-free progress: the Tecnam P2006T is easy to fly and cost-efficient to run. Rohit Jaggi with Tim Orchard, far right

ft.com/wealth|57 AMBITIOUS WEALTH STEPHEN FOLEY

Fintech finds new friends

hen Michael Lost in finance: be enough to make local talent think Devonshire is meant to solve one of Bloomberg the robo-adviser twice about going west. the enduring difficulties for fintech gave the of the future? A particularly ambitious initiative entrepreneurs: access to financial data. commencement just got off the ground in Boston, using The cost of computing power and address at money and expertise from Devonshire storage may have crashed, but it is hard Stanford in 2013, Investors, the private investment arm to bootstrap a fintech start-up in the Wtowards the end of the Johnson family, who own asset face of high data prices. of his tenure as mayor of New York, he management giant Fidelity. Devonshire has created a non- couldn’t resist selling the graduates of Boston is the historical home of profit that will offer data for free to Silicon Valley’s elite university on the entrepreneurs, from partners that benefits of moving east, to the “Silicon include Thomson Reuters, to help Alley” of his own city. FINTECH SANDBOX AIMS TO them build and test their investment “I believe that more and more SOLVE THE DIFFICULTY OF models and software. Although Stanford graduates will find themselves entrepreneurs anywhere can apply, moving to Silicon Alley, not only ACCESS TO FINANCIAL DATA those in Boston have access to a shared because we’re the hottest new tech office space. The aim, says Devonshire scene in the country,” he told them, partner David Jegen, is to establish “but also because there’s more to do some “connective tissue” between the on a Friday night than go to the Pizza disparate fintech start-ups in the city. Hut in Sunnyvale — and you may the “buy side” of the finance industry, What gives the project, called even be able to find a date with a girl hosting investment institutions such as FinTech Sandbox, an ambitious twist whose name is not Siri.” Fidelity, State Street and MFS, which is that developers and entrepreneurs Part of the Bloomberg mayoral established the first mutual fund in the will be asked to feed back technical legacy is New York’s vibrant US in 1924. By rights, the city should expertise and lessons from the data start-up scene and behind his be streets ahead in developing a to an online forum. It could create a cheerleading and his jokes financial technology, or fintech, large resource for the world beyond there is a serious point: keeping start-up scene. Yet “robo- Boston. The model is similar to a site talented entrepreneurs and advisers”, the latest trend Abby Johnson’s father, Ned, founded technologists away from the in investing, are springing to share news and scientific papers gravitational pull of California. up elsewhere: Betterment on experimental treatments for It is the same war for is in New York, Wealthfront Alzheimer’s disease (slogan: “Alzforum: talent that Google, Microsoft hails from Silicon Valley and networking for a cure”). and Facebook fight among WiseBanyan just relocated from The start-up scene gives wealthy themselves every day, being New York to Las Vegas. individuals invested in the success of played out at municipal level. In Fidelity Labs, an in-house their local economies a chance to make cities across the US and beyond, incubator,has stepped up its efforts an exceptionally large impact, whether the fight has been joined not only to look outside the companyfor it be funding incubators, as JB Pritzker

by local political leaders but also ideas. has done with Chicago’s 1871 (a venue DREAMSTIME by the municipalities’ wealthiest “We want to hear those ideas and named after the year of the city’s great T/ AR citizens. The Pritzkers in Chicago we need to keep thinking about the fire), or trying to fashion a whole start- and the Johnsons in Boston have next generation of investors. We up district, as Dan Gilbert, founder taken a keen interest in their local know we need to disrupt our own of Quicken Loans, is doing with the

start-up scenes. internal processes to break that Madison Block in downtown Detroit. WISCONSIN For minimal outlays, chain of inertia that can happen New York’s tech scene, meanwhile, businesspeople and when you have a big company,” is in quiet mourning for the end of the philanthropists might help Abby Johnson, the third- Bloomberg mayoralty and the return PERICH;

galvanise a home-grown generation Johnson family to private business of the man they SCAL

entrepreneurial community that, chief executive of Fidelity, told called New York’s “entrepreneur in PA while it might pale in comparison a start-up conference last year. residence”. Who will lure the Stanford with that in Silicon Valley, could The new initiative from grads of the future? W PHOTO:

58 FT.COMWEALTH