Startups vying for the attention of Venture capitalists (VCs) - part 4

OOI Boon Sheng, founder and chief executive officer of Web Bytes Sdn Bhd, was fortunate to have found a good match in Chok Kwee Bee, managing director of venture capital firm Teak Capital, when he set out to look for a partner to help his retail management services company grow to the next level.

Venture capitalists (VCs) play a unique role in the entrepreneurial ecosystem.

They provide startups with funding in exchange for equity in the company. In addition, VCs are often given a say in how the company will operate and grow.

Ultimately, the goal of such partnerships is for VCs to make a profitable exit at a later date either through the sale of their stakes or an initial public offering.

Chok, who sits on the board of Web Bytes following Teak Capital’s investment in the startup, takes an active interest in helping Ooi develop the company’s product.

As Web Bytes grow with the guidance of Chok, so does its value, allowing Teak Capital the chance to make a profitable exit in the future.

Somewhat like angel investors, VCs have a wealth of resources, expertise and network that startups can tap into.

However, VCs tend to fund early-stage startups that have already gained some traction in user base and revenue, but are still new enough to be considered a risky investment for traditional banks and debt funding.

In identifying suitable startups to invest in, VCs are naturally drawn to early-stage companies with technologies that have the potential to generate high returns. Ideally, products developed by these startups are not in overly saturated markets.

VCs also analyse the market to ensure that it is robust enough to support the entry and growth of a startup.

The startup’s management team is also taken into consideration as VCs typically look for a team that is passionate, persistent, experienced, dedicated and organised.

According to Chok, having the right people is as important as having the right idea as the right people would be needed to make the ideas work.

“We have seen more than 1,000 companies since our formation in 2008 and only invested in less than 10, with an average investment of RM2mil to RM3mil.

We look at the team, the product and the market potential,” she said.

Startups are encouraged to build a good working relationship with VCs, not just for the funding element but also because investee companies will be spending a lot of time with mentors from their VC partners.

Many startups, like Web Bytes, have indeed benefited from the active participation of their VC investors. Among Teak Capital’s portfolio of startups, Web Bytes has seen tremendous growth after a year of active mentoring.

But the venture capitalism in Malaysia is still in its early days.

Malaysia Venture Capital Management Bhd (Mavcap) chief executive officer Jamaludin Bujang noted that while there is an increase in demand for capital, there are only a handful of VCs in the market.

Currently, about 60% of VC funds come from Government sources, with only nine private VC firms in the country.

Jamaludin says VC firms should look at pushing out more Series-A funding. Series-A is the first significant round of funding for startups that have progressed beyond the seed-funding stage and have started generating revenue of between RM200,000 and RM1mil. With things heating up in the local startup scene, both Jamaludin and Chok agree that more needs to be done to encourage more entrants into the field of venture capitalism.

“The startup scene is picking up. And a lot of them are actually going to Singapore for funding. So I think we need more Malaysian VCs in the market,” said Chok.

By Lim Wing Hooi

  Related post3:

• Playing angel to startups as some successful Malayian entrepreneurs made it big part 2 & 3

• Brewing a startup - part 1

Playing angel to startups as some successful Malaysian entrepreneurs made it big - part 2 & 3

How successful entrepreneurs can give back to their younger counterparts

JUST as it takes a village to raise a child, it also takes many different players in an ecosystem to raise a successful startup.

And one of the most valuable players in the startup ecosystem are those who have walked the path of an entrepreneur and succeeded in their own right. These players have a wealth of experience and expertise as well as capital to plough back into other budding startups.

Most times, they invest in the capacity of an angel investor.

By definition, an angel investor is an affluent individual who is willing to invest in a company at its earlier stages in exchange for an ownership stake, often in the form of preferred stock or convertible debt.

They typically fill the gap in startup financing between seed funding, likely provided by friends and family, and formal venture capital funding in later stages once the startup has gained some traction.

Angel investors are usually entrepreneurs themselves and have successfully cashed out of their ventures with deep pockets to spare.

Over the years, scores of entrepreneurs, who have tasted hard-earned success, have increasingly been giving back to the ecosystem by reinvesting their time, money and knowhow into other startups.

Unlike other sources of funding such as government grants and venture capital funds, the angel investors’ involvement in startups is vital given their experience in building successful companies.

This would enable new startups to tap into their network and expertise, giving them a higher chance at succeeding.

As some entrepreneurs note, “one entrepreneur betting on another is a great validation of the idea.”

Some Malaysian entrepreneurs who have made their mark in the startup scene have sowed back into the ecosystem. They include the likes of Azrul Rahim, founder of application launcher for PalmOS, Facer, and Mark Chang, founder of JobStreet. com, who recently expressed interest in backing entrepreneurs from underprivileged backgrounds.

Notably, like every investment, there are risks involved when investing in early stage startups.

To recap, startups are experimental by nature and therefore are meant to fail several times before they succeed. As such, it is important that angels understand that a high percentage of the startups they invest in may likely fail.

However, as with other types of investment, angel investors should have a portfolio of high growth startups to invest in. And in that basket of startups, a gem or two will return a big reward.

Take Berjaya Group’s Tan Sri Vincent Tan, for example, who is known to make quite a few bets with budding companies.

While not all of them have been known to be successful investments, Tan certainly uncovered a jewel in MOL, which he bought for US$3.2mil (RM10.5mil) in early 2000s and listed on the Nasdaq this year. He reportedly pocketed a cool US$200mil from the listing exercise.

The government is also increasingly encouraging more early-stage private investment in startups with the introduction of the Angel Tax Incentive, which is administered by a unit within Cradle Fund Sdn Bhd.

Angels who are eligible for the incentive are high net worth individuals with total wealth of more than RM3mil or high income earners with gross annual income of more than RM180,000.

Angel investing is indeed becoming more visible and formalised with the formation of networks that connect entrepreneurs and angels.

Most recently, local entrepreneur-turn-investor Khailee Ng, who co-founded GroupsMore and SAYS. com, was made managing partner at 500Startups. Through the fund, Ng has invested in multiple companies across the region.

The local startup scene can indeed benefit with the involvement of more angel investors. Entrepreneurs who have achieved their milestones should think of investing in the future and giving back to younger entrepreneurs.

Entrepreneurs who have been there understand the satisfaction of nurturing another venture.

So if you have succeeded with your company, perhaps it is time to consider investing back into the ecosystem by sharing your expertise and resources as angel investors.

Malaysia has more successful tech startups than many people realise

Investor interest: MyTeksi has managed to raise a total of US$90mil in funding over the past 12 months.

Much has been said about this being the best time to launch and grow startups due to the availability of funding, infrastructure and an accommodating environment.

Additionally, mergers and acquisitions suggest that there is much value to be derived from startups. Foreign corporate moves include the US$966mil (RM3.1bil) price tag that Google paid to acquire navigation app Waze and the US$22bil takeover of messaging app Whatsapp by Facebook.

No doubt, many budding entrepreneurs aspire to follow in the footsteps of these successful startups. In a globalised market, the success of startups is not limited to those with connections to or within the vicinity of Silicon Valley.

With the right experimentation and innovation, a startup can succeed even in a risk-averse culture. It is not impossible for startups to grow rapidly and achieve high revenues in a short time.

But budding local entrepreneurs often lament that there are few local heroes to look up to in order to benchmark the ability of the local startup scene in producing successful ventures.

Although they are few and far between and are generally below the radar, there are some local gems that have scaled up very quickly, attaining regional success in just a few years, and have caught the eye of internationalinvestors.

One such company is MyTeksi Sdn Bhd. The Internet-based taxi booking service provider, which was launched in 2012, has already established a strong presence in Singapore, the Philippines, Thailand, Vietnam and Indonesia under the brand GrabTaxi.

The MyTeksi app has reportedly been downloaded onto over 2.1 million mobile devices with more than 400,000 active monthly users in six countries and more than 25,000 taxi drivers registered with the network.

Most notably, the company has managed to raise a total of US$90mil in funding over the past 12 months, counting US-based Tiger Global Management, GGV Capital and Vertex Venture Holdings as some of its investors.

One of the key reasons for MyTeksi’s success, says co-founder Anthony Tan, is its focus on solving a real social problem. In this case, providing an efficient and safe platform to match taxi drivers and passengers.

Another homegrown startup that is shaking up its field is banking solutions company Juris Technologies Sdn Bhd.

When the company was founded in 1997, co-founder and CEO See Wai Hun said its main agenda was to market a data mining system. But See quickly realised that no one was interested in data mining because people were reeling from the shock of the financial crisis.

Thankfully, she was equally quick at spotting an opportunity to create software for bad debt recovery which would help financial institutions manage their workflow with their litigation team.

Juris was set up with the help of an angel investor but See noted that the company eventually bought back its shares within a few years of incorporation. The team has grown from 10 people when it started to a staff strength of 80 today.

Its product range has also expanded from just a component of the debt recovery software to software for debt collection systems, loan origination systems, credit scoring systems, conveyancing and loan documentation systems.

To-date, 11 banks, 900 lawyers, 200 collection agencies and 100 property valuers are using its systems and See is expecting revenue to hit a high of RM30mil this year.

Most recently, Juris joined the ranks of Endeavor Global Inc’s global network of high-impact entrepreneurs, being the second Malaysian company to do so.

The achievement gives Juris access to global investor network and partnerships that will enable the company to scale up for regional expansion.

Malaysia has seen other startups, including the likes of iMoney, Softspace, FashionValet, Piktochart and TextbookAsia, take flight and achieve success in various fields.

Local entrepreneurs can take heart that some of the action does take place on our home ground. It is possible to nurture the local startup ecosystem to provide startups with a good platform to thrive and contribute significantly to the growth of the country.

With the right combination of policy, infrastructure, funding facility and mentoring, the local startup industry could unlock another key growth driver in our economy.



By Joy Lee  



Related post:

Brewing a startup - part 1

Time to change!

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LADIES and gentlemen, we are now moments away from 2014. If you are an employee, most of you will be looking forward to this time of the year as it may mean year-end holidays and bonuses.

Some of you may also be busy making your New Year resolutions. But if you are a business owner, you may be busy coming up with your business plan for next year.

Planning for the year ahead requires a bit of both reflecting on the past and looking forward to the future. Apart from my own annual business plan, as a marketing consultant, I also help some of my clients come up with their marketing plans for the year ahead, or elements of the plan.

The first order of the day is to narrow down the objectives and then come up with goals and plans to achieve those goals.

Naturally, the goals and objectives are always positive and geared towards growth. But any marketer or business owner will tell you, the marketing plan is always one of the plans that are changed the most throughout the year. Depending on what the company is offering and which market they operate in, for some companies, the marketing plan can be so fluid and dynamic that it can be changed as frequently as once a month or week.

Marketers have it tough and I often tell people who aspire to be marketing managers or want to be hired as one that if you are the type of person who likes routine work or following a set of rules, you are not suitable to be a marketer. People who are successful marketers are not just required to be able to change quickly when it comes to their marketing activities but also know how to run faster than the pack. Basically you cannot provide strategic marketing direction without knowing what is ahead or at least having the foresight to understand what will take place.

But change is something not everyone can embrace with open arms, especially for entrepreneurs. It always feels safe to stick to the same business model or plan every year. They think that as long as that plan is not “killing” the business, why not? For example, I am always amazed by one of my friends who is still using a very old handphone (I think it is eight years old) while I have already changed three phones in the span of that period.

He can afford a new one, but stubbornly refuses to get one. Two years ago, his nephew had enough of his stubbornness and bought him a touchscreen smartphone. When I met this friend again recently, I saw he was still using the old phone. I asked about the new phone and he said it was sitting in his drawer as he found it just too troublesome to transfer all his contact details from the old phone to the new one. He was comfortable with the functions of the old one and did not feel like learning the functions of the new phone.

He does not realise just how much he is missing out on.

While there are few people like my friend, I think sometimes entrepreneurs can be like that when it comes to things they need to change in their business. It could be a non-performing employee whom they know they should have let go a long time ago, but just did not want to for fear of rocking the boat.

So they end up paying for non-performance year in and year out, to the detriment of the business.

It could be products they need to retire from their offerings or offices or outlets they need to relocate. It could also be about learning new things or new technology and starting from zero again.

All are hard and uncomfortable decisions especially when change is involved. Change is risky and can be a scary path, but if deep down we know and realise that the change will bring about something better, then we should not be afraid to change. Now is the time.

Contributed by Jeanisha Wan

Jeanisha doesn’t like last minute changes, but equates the need to change with water that needs to be constantly flowing to be fresh. She is more fearful of having her business end up like the water in the Dead Sea. Talk to her at talk2jeanisha@gmail.com. Happy New Year!

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Five steps to business success for 2014

Preparations: A well-crafted business plan is like a roadmap for the year.

 How to develop a business plan for the new year

Here we are at the end of another year. For many business owners, it’s the right time to map out a strategic plan for next year. A well-crafted business plan is your roadmap to success and an easy way to stay on task for future growth, projected income and increased profits. Take one or two days now to develop a plan and you will save time, energy and maybe even a few dollars. Here’s how to develop a business plan for 2014 in five easy steps.

Set projected income

The very first thing you need to do when creating a business plan for the year ahead is to decide how much you plan on earning and what specifically you are looking to achieve. Setting these goals is only the first step, because outlining your plan for future months describes how you will get there and is the true blueprint for success.

Reflect on your current business models and income sources to help you determine your ideal income. If you’re having difficulty, evaluate these factors:

• ·Do you need to identify a different profile that can spend more?
• ·Would including a recurring element to your business increase profit?
• ·Should your pricing be re-evaluated?
• ·How is your marketing plan? How can you expand it to achieve more?

Set incremental goals 

The key to success in creating a business plan is detail and consistency. And every goal needs to be broken down into smaller tasks and objectives to ensure you are reaching your target audience and you have a plan for how to obtain your new income level.

Even the best plan is useless without milestones and success at reaching large goals comes from knowing how to create smaller, more attainable objectives. Simplify your income goals by this equation: Income per client x number of clients x frequency of clients = income. Clearly defined and manageable objectives- six months, monthly and weekly- will give you the momentum you need to reach difficult milestones while keeping a larger goal in view. Besides, this process gives you a bird’s eye view of exactly what income level needs to be reached within a certain time frame to stay on track for success.

Map out marketing

After determining what your income stream should be, it’s time to create a formula for acquiring the clients. The most effective way to reach a target audience and the only way to secure new customers is through marketing. After all, if no one knows you exist, no one will buy your products or services.

Take a long hard look at your current marketing activities and decide which strategies are effective and can be reused, even expanded, and which should be discarded. The right marketing can bring a steady stream of new clients, as well as build brand loyalty and solidify trust with existing customers.

Here are the most effective and commonly used platforms for acquiring new clients. Make sure to allocate sufficient time and budget for each:

• ·Strategic Print Advertisement (Appear in front of your ideal prospects)
• ·Online Marketing Strategies (Content to educate and entice)
• ·Media Recognition (Position yourself as the expert authority)
• ·Social Media (Facebook, Twitter, LinkedIn, Google+)
• ·Networking and collaborations

Develop your team

Now that you have clearly defined, obtainable goals and a strategic marketing plan, it’s time to start thinking about how you are going to make it happen. It’s nearly impossible to achieve all of your goals by yourself and the best plans are always complemented by a strong team. Decide who you need and how they will help you achieve your milestones within your deadline.

Virtual teams are always an option, and can execute elements of your business plan simultaneously. On the other hand, you can also evaluate a current team or bring in someone new to free up time for you to execute growth campaigns.

Evaluate expenses 

Unfortunately, like everything in life — business costs money. However, by carefully evaluating all of your marketing activity and tracking return on investment stringently, you’ll have a better idea of where the money is going and how best it should be spent. Many business owners make the mistake of looking exclusively at gross profits, neglecting net profits. Make certain to record everything and be very clear about profits before taking on any new activities. This disciplined approach will help ensure that your ideal income is indeed profits.

Crafting an effective business plan is easy with a few good tips and the right information. By defining incremental goals, developing a marketing strategy, building your team and keeping an eye on expenses, you will be more than ready to charge into 2014 with spirited enthusiasm as you watch your business transform.

Contributed by Pam Siew

> Pam Siow is the founder of ThinkSpace. A renowned business coach within the region, Pam helps hundreds of business owners and corporations gain true success and profits with her knowledge and real-world experience. Find out more at ThinkSpace.com.my/ Internetbizownersclub.comnow.

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