Category Archives: Startup

Getting Investors to Invest in Your Tech Startup

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Having a great idea is one thing. Having the money required to transform your business plan from concept to commercialization and to move your company from startup to IPO – that’s a completely different matter altogether.

Many people do have great ideas but fail to grasp that others may not share their enthusiasm, sometimes simply because they don’t understand what you are trying to achieve. In order to convince other people – specifically Angel Investors and VC’s – to invest into your business, you need to be able to understand exactly what those people are looking for when evaluating a business.

Too many technopreneurs fall in love with their idea and expect everyone else to immediately “get it”, once they start talking about their business. They sometimes forget one simple yet very important point about business: the only reason for a commercial business to exist is to make profit. And any investor in your business will want to see how you can create profit, and by doing so ensure a healthy return on investment for them. So if Angel Investors and VC’s are interested in your company you need to remember that your presentation should be focused on how you can make money for them, and not how great the technology is behind your business idea.

With this in mind here are 8 important messages you want to convey when meeting with a potential investor:

    1. What is your business all about? Investors usually have a very short attention span. You need to be able to convey the essence of your business idea to them (and anyone else you meet for that matter) within 1-2 minutes.This is where the elevator pitch comes in.The elevator pitch has its origins in the idea of meeting the CEO of the customer you are targeting while stepping into an elevator of a high-rise office building in the ground floor, and using this opportunity to convince him to invest in your company while riding the elevator up to his office – presumably on a high floor in this office building.

      If you can’t convince someone within 2 minutes that your business may be worth investing in or at least interesting enough to listen further, then you won’t be able to do so in 45 minutes either.

 

    1.  What is the problem you are trying to solve? Before you embark on explaining the intricate detail of your Tech Startup you need to ensure your counterpart understand the problem you are trying to solve. The bigger the problem, the more important your potential solution and the more exciting your business proposition. Don’t assume everyone understands the problem as well as you do, and don’t cut short on this part. Make your audience and your potential investor understand how big the problem is, make them feel the pain of the problem and get them really interested in what you can do to solve the problem.

 

    1. What is the solution that you offer? Now you can expand on how exactly you plan to solve the problem you have just explained in detail. Try not to go into too much technical detail unless your counterpart is as technically savvy as you are (and most probably they are not). Investors usually don’t want to know the exact programming language, database or API’s you use to solve a specific problem. They just need to be convinced that you know what you are doing, and if you are able to keep it simple, you come across more confident – which is potentially more important than coming across as a tech geek.

 

    1. Why are you the best team for this job? Once you explained the problem and the solution you may want to give the potential investor more background about yourself and your team. VC’s invest in people more than they do in a technical solution, and they really would like to know what you bring to the table with respect to experience and expertise that should convince them to part with their money and invest in your business. If you have started a few companies before that made money and were sold at a healthy profit – now would be a very good time to mention this and give examples.

 

    1. How big is the market? Here the usual principle applies: the bigger, the better. Investors would like to know that the potential target market is big enough to build a sizeable business that can create the returns investors are looking for. Don’t necessarily limit your target market to your local environment, but think big and see how you can create an offering that might be attractive to a larger audience.

 

    1. Who is the competition? An answer like “we are so unique, we have no competition” is not the answer you want to give. If there is no competition to provide a solution to a bigger problem, then you most probably don’t have a viable business. Remember that competition can come in many forms and variety. Air Asia build their business plan not competing with other airlines, but competing with busses and all other travel means. Your competition can and will come not only from companies doing exactly the same as what you might propose, but from related industries.

 

    1. How will you make money? Investors like to see that you have thought through your revenue model in detail, and understand how you will commercialize and monetize your business idea. Having many fans, customers or visitors will get you started, but only profits will make you rich.

 

    1. What do you want from the investor? You need to have a fairly clear idea what your expectations are from the Angel Investor or VC. Do you just need money to fund your regional or global expansion? Are you looking for subject matter expertise to complement your existing board? Do you need access to networks and potential partners, or do you need a strategic partner providing guidance in your growth?

 
There you have it – 8 questions that angel investors and venture capitalists will ask you for before investing into your business. If you can answer those questions in a convincing manner, then you have significantly increased your chances of securing funding and getting your investor on board.

 

 

Points to consider before registering a company

You have thought long and hard over whether you want to leave the safety of a corporate environment and start your own business. You have counted your savings and decided that you have enough cash in the bank to give it a fair shot. You have spoken to your peers and potential customers about your idea, and the feedback has been encouraging. Now it’s time to take the next step.

Before you start putting your idea into reality, you first need to make a few decisions, and you need to understand the implications of those decisions. So what are two of the critical decisions you have to make before starting off?

  1. Get the right legal framework

As an entrepreneur in Malaysia, you have in principle two options:

–       Sole proprietorship

–       A company limited by shares (Sdn Bhd)

If you are a foreigner, the choice has been made for you already: only Malaysians and permanent residence are eligible to register for a sole proprietorship.

Advantages of a sole proprietorship:

  • All profits generated by the business are your own personal property. You will only have to pay personal income tax, not business tax
  • No reports of accounts are required

Disadvantage:

  • you are liable for all business debts, and you will be personally responsible for all risks and failures in the business

Another difference is that, unlike a sole proprietorship, a Sdn Bhd can have more than one owner. In addition a Sdn Bhd creates a significant bigger impression when you meet potential clients – and that could mean the difference between getting that sale and coming in second.

For those reasons (growth possibilities in issuing new shares, limitation of person liability, and image) a Sdn Bhd is most probably the preferred option if you start a business with the idea of growing it big.

      2. Choose your name wisely

Before you can register your company, you need a name for your business venture. This name needs to fulfill the following criteria:

  • you must really like the name (personal preference), and it should be a name that you will still like 5 years from now
  • the name should ideally reflect what the business is all about
  • the name is original and ideally sticks in the mind of our target audience
  • the name is available and acceptable to SSM for registration.

Example: we have decided to call our business INCUBE8. It does fulfill all the above criteria:

  • we really like the name – it’s kind of funky with the pay of letters and the number 8. (well, that’s a personal preference)
  • the company helps to grow companies. We are like an incubator with a host of added services, hence incube8 (spoken: “incubate”) reflects exactly what we do
  • Incube8 sticks. People like “8”, as this a lucky number. And it takes people a bit to figure out exactly what “Incube8” means. During that time they thnk about our name. People remember us.
  • Due to the use of the number 8 in our company name our name is unique (at least in Malaysia), and not part of the list of words requiring approval by the ministry.

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Taking the plunge – from employee to entrepreneur

Starting your own company – for many people this is the ultimate dream, and the sure-fire way to get rich. Being your own boss conjures ideas of flexible working hours (i.e. sleeping in until late), the possibility to make your own decisions, and the freedom of not having to report to anyone.

Unfortunately, the sad reality is somewhat different. If your idea of flexible working hours is something like 24/7 working hours, if making your own decisions for you means making decision which are guided by your empty wallet, and if freedom of reporting does not include the need to report to your customers, then you may want to contemplate starting your own company.

Before you do however, this are the top 5 things that you have to have in place before you hand in that resignation letter to start your own business. This is what we think you need:

1. A great product / Service

You might want to field test your idea a bit. Do other companies have similar products? Are they successful? If not, why? What will you do differently? What will be your unique selling proposition (UPS) that no one else can offer? Why is your UPS so important to potential clients?

2. Enough money in the bank to last

You need to be able to last without income for at least 6 – 12 months. If you don’t have enough money put aside to be able to do this, consider to delay your start into entrepreneurship, as you may not have the staying power to see your company through the initial hard times.

3. A potential client to start with

It is very helpful if you already have had discussions with a potential client – and we don’t mean stealing a client from your current employer. If you already have someone who will be your first client upon you commencing your business, you’re off to a good start

4. A trustworthy and capable team to work with

While you can do it alone, it is a lonely path. You should start your business with 1-3 other like-minded people, who ideally have complimentary skill sets. If all of you are technical engineers, this may not work. A great company is like a soccer team. You need strikers, defenders, goal keepers. A soccer team comprised out of 11 best strikers in the world will still loose against an average team with a better balanced composition.

5. A proper legal setup

As an entrepreneur you won’t be able to rely on others for the boring legal and accounting work. You need to set up a legal entity, and identify how you will manage accounts before you get into business. I recommend you set up a company, instead of a sole proprietorship, as allows for easier growth.