The buzzword in today's new economy is "dot-com". You have heard so much hype about dot-com companies
sprouting everywhere and in every market niche. Younger technopreneurs are becoming overnight millionaires and
e-angels (incubators and accelerators). They are playing a bigger role in nurturing dot-com start-ups. Are you
thinking of riding on this hype and become a technopreneur yourself?
The path to technopreneurship is rarely smooth and can be an arduous one if you do not have a clear vision, solid management team, innovative business model, and most importantly, funding. To help you even out the rough path and heighten your chances of realising your dot-com dream, we spoke to two industry players to hear their views and learn their experience.
Johnnie Tng is the Director of SilkRoute Capital (SRC). SRC is the private equity and venture capital arm of the SilkRoute Group. It focuses on providing adequate funding for SilkRoute's projects and incubator companies, and selectively invests in other companies and start-ups that fit its investment criteria.
Landy Eng is the Founder of Hao Ventures Pte Ltd, a venture accelerator.
What are the current market trends on VC/angel funding for dot-com companies in Singapore? How has this industry evolved over the past 12 months?
JT: Following the recent meltdown in Nasdaq and the failure of Boo.com, VCs were more cautious about investing into Internet projects. We now see more interest in the B2B space, compared to the B2C space, given that customer acquisition cost in the B2C space is usually high and stickiness of the business model is never strong. The focus now has been to concentrate, not on the revenue potential or worse IPO potential, but on revenue visibility within the next 2-3 quarters and perhaps earnings visibility within 12-18 months."
LE: Twelve months ago, no one knew what an angel was really all about. Today, they have half a concept. The other half of the concept is how to be a good angel. To him, to be a good angel, you have to put the risk behind you once you have faith in the people. But 12 months ago, the risk was always at the front no matter how good the people were. Angel investors never trusted them. It has changed now, but there is more to be done. Besides money, angels offer valuable information like legal advice, connections to a sponsor or even technology.
What are the 5 most important factors for technopreneurs to keep in mind when seeking VC/angel funds?
|Johnnie Tng's list|
|1||A well-thought plan|
|2||Clearly identified market niche|
|3||Considered competitive nature of the market|
|4||Open to suggestions to business models, if advice is from someone knowledgeable|
|5||Committed in making the venture succeed as a business (not merely to profit from the deal)|
|Landy Eng's list|
|1||Present a clear concept paper or business plan|
|2||Present your management team and highlight competence|
|3||Show how you have a stake in the deal|
|4||Be clear on the connections you have and how they can help you such as corporate connections|
|5||Be clear on what you are going to spend the money on|
What characteristics do you look for in a start-up that you invest in?
JT: We look at the business model and the management team but we put more emphasis on the latter as it is critical to be flexible in this highly competitive space unless the idea is very unique and one has the technology to do a quick roll-out. A good model will need good people to execute them. We value people who have clearly identified the competitive space that they are about to venture into fully cognizant of the Plan-Bs that they may have to execute to overcome those competition."
LE: Must have good people, must be Asian-based, must be Internet-related business and must be able to show a viable and sustainable revenue model.
How much do you usually invest? Aside from money, how else can a start-up benefit from your investment?
JT: The amount of investment ranges from US$250,000 to US$2 million, depending on the business. But then again, SRC only invests in the B2B space. SRC has not only incubated Internet companies, it has also made investments in the various regions. Together, investee companies of the SilkRoute Group can collaborate to provide even more compelling solutions or services.
LE: Hao Ventures invests not more than S$1 million in Asian-based Internet start-ups. We provide angel money, advisory board assistance, management, corporate, PR advice, and assistance in recruiting the right management and board of directors. We have so far invested in eAngelz.com and we are soon to sit on the board of WebOffice.com.
What are the 5 most common mistakes made by technopreneurs?
|Johnnie Tng's list|
|1||Lack of relevant management team|
|2||Not aware of the competition already in the market space|
|3||Commercial application/acceptance not "tested" before full launch|
|4||Not watching cashflows|
|5||Not knowing what skill sets are needed to run the business|
|Landy Eng's list|
|1||Not having a clear idea of what they are going to do|
|2||Trying to do too much at the same time (not focused)|
|3||Choosing the wrong people to work with|
|4||Too worried about image and not enough of reality (not truthful)|
|5||Should not overvalue your company|
What, besides a solid business plan, does a start-up need to have before approaching you?
JT: I treat every start-up equally, whether backed by any prominent angel or not. I need to satisfy myself (based on the attractiveness of the plan) that the idea will work. Again, a good management team in place will provide more comfort... otherwise, we'll need to put some good people into the company.
LE: Most VCs/angels do not have the time to screen through very thick business plan. For us at Hao Ventures, we would require a short Powerpoint presentation, an introduction to their website and they have to bring in their management team.
What advice would you offer technopreneurs so as to improve their chances of receiving funding from VCs/angels?
JT: If the idea is a very unique one, chances are most incubators will be more than willing to give it a shot. Otherwise, start-ups should usually comprise the relevant management team... basic marketing, finance people and someone with the experience of running a normal business. Do think through plans thoroughly... be open about the competition... address how competition can be mitigated... and be willing to dilute shareholdings if company is able to bring valuable talent on board.
LE: Talk to everybody, work into networks and maybe one of them will be your angel. Last but not least, don't give up!
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