Sticking to your guns

earth9.com is developed and wholly-owned by Amoeba Interactive Pte Ltd, a local Net start-up that develops and maintains websites for major corporations such as SilkAir and Tradewinds established in April 1998 by four founders. It is a web-based collaborative platform on the Internet that allows users to manage resources and information the way they naturally do - across multiple groups through categorisation.

earth9.com bought out its angel investor several months after it successfully secured its first round of financing of S$1 million. We spoke to Mr Chua Koon Beng, the Business Development Director of earth9.com Pte Ltd to find out why and what were the important lessons learnt from that unanticipated twist of events. Also, he will share with us their experience on raising VC/angel funds and some tips and advice for new Internet start-ups.

How do you view the current market on VC/angel funding for dot-com companies in Singapore? How has this industry evolved over the past 12 months?
Mr Chua : Six months ago was the optimum time for VC/angel funding but we had our angel funding before the optimum time - about a year ago. Past 1-2 months were very bad due to the recent Internet stocks crash around the globe.

When and how did you start seeking for angel/VC funds?
Mr Chua : We started off in April 1998 with a concept of getting money from investors, business angels or institution money, which was practically unheard of in Singapore at that time. VC/angel funding for Internet start-ups was, at that time, a very niche market.

In 1999, with the various government initiatives and moves highlighting the growing need to nurture Singapore technopreneurs and getting VCs interested, the scene got heated up but it was still about 1-2 years behind the US.

Did you approach the various VCs/angels or did they approach you first?
Mr Chua : We were once under the NSTB Technopreneurship-Incubator Programme which we later realised was not a scheme for us because we have way passed the seed and product development stage. We were looking at launching a product so we needed more money and needed to move much faster.

As such, AsiaOne was a possible option (because they approached us earlier when we were under the NSTB scheme) and at that same time, there was a business angel who was courting us as well. So, we did not actively go and look for money.

Our Company's growth potential caught the attention of Mr Tan Boy Tee, the Executive Chairman of Labroy Marine Limited, a Singapore-listed company. His right-hand man was scouting around for Internet start-ups for him and came to know about us through a common friend of ours.

How did you convince him to pump S$1 million into your Company?
Mr Chua : Basically, we worked on our business plan and came up with some projected figures. For things that we did not know how to project, we talked to people who have done it before for some guidelines to derive the figures. Ours was really a willing buyer and willing seller case. It took us about 3-4 weeks to negotiate on the amount, and that was considered a relatively fast process.

How did you prepare yourself prior to knocking on VCs'/angels' doors?
Mr Chua : We need to understand the business and how we want to grow the business. We also had our management team in place and unlike many other technopreneurs, we already had the experience of starting a company from scratch - Amoeba Interactive.

We used the revenue earned from Amoeba to fund our research and development and we built earth9.com from there. Before the funds came, we had about 12 staff. Now, it has grown to 35. The S$1 million was largely used to grow the business - for expansion purposes.

What happened after that?
Mr Chua : We already had plans to go for two rounds of funding when we first started the Company. However, there were some interesting twists of events. We actually bought out our angel investor about few months back. He put in the money for about 6 months and we realised that we actually have very different opinions about how to grow the business.

When the money came in, according to our first business plan, we were supposed to grow both our business units; earth9.com and Amoeba. At some point, we realised that we could not focus on two businesses at the same time and we rejected some jobs for Amoeba.

As we couldn't agree on how to go forward and the best way to settle it amicably was to buy them out. So, the ownership of the company fell back to the 4 co-founders again. Now, we are going for our Round A funding.

What we have learnt from this mistake is, although business angels could close deals much faster, they might not be able to bring you the kind of help you need. So, the most important thing is to get 'Smart Money' - money plus the intangibles that will help your business.

For our Round A funding, now that we are a lot more experienced doing it for the second time and the Company has since built up its reputation, we actually receive as high as up to 10 VCs talking to us at one time, not to mention the business angels. When we appeared at Comdex and the Internet World, we actually garnered a considerable amount of interest.

So, what are your selection criteria?
Mr Chua : Not necessarily the highest valuation but the one who can help me the most - someone who can provide me with the greatest business value in the long run.

What advice and practical tips could you offer potential start-ups on their chase for VC/angel funds?
Mr Chua : I realised that for young start-ups, what most VCs or angels fear is that they might not have enough management experience. So, it is always good if you can actually source for yourself some people who are relevant to your industry and who have good contacts to be on your board.

That at least will give the VCs and angels some comfort zone. Secondly, start your planning early so that you are in control, you know what you need and can source for all the potentials. Thirdly, be frank about your business. Lastly, do your groundwork and prepare documentation that can help them better understand your business.

In retrospect, which areas do you think you would have done differently if you were to start your funding process today?
Mr Chua : We have learnt not to rush and have lots of back-up plans.

Do you have any plans to go public in the near future just like many other dot-coms?
Mr Chua : Going public is not one of our top concerns because it is usually an exit strategy for investors. Our focus is always on building a strong company with very strong fundamentals that can eventually be profitable and self-sustainable. We will never be deluded with the IPO mania.

Any last words?
Mr Chua : It's gonna be tough and it will be tough. Press on and believe in what you can achieve.