Event Coverage: Treading the VC Waters
Treading the VC Waters: Securing Venture Capital for Start-up Companies, Saturday 13 January 2007, 2pm – 4pm, Library@Orchard
Interestingly, the Chinese phrase for “crisis” is actually a combination of two words – danger and opportunity. According to Douglas Abraham, Partner and Managing Director of Parallax Capital Management, the word sums up exactly the world of venture capital.
Abraham was addressing a large audience of some 100 people, at an event organised by Startup@Singapore, on what venture capitalists look for in a start-up.
“Early stage venture capital is probably the highest risk asset class you can find out there,” said Mr. Abraham, who is also an associate professor who teaches entrepreneurship at the National University of Singapore. “It’s a high risk, high rewards business.”
He outlined the various factors that entrepreneurs need to be certain of when presenting to potential investors:
1. Innovation – Is your product something new and useful, or is it a “me too” business?
2. Value Proposition – What problem does it solve for your customers?
3. Market Identification and Analysis -Â Who areÂ your customers? How big is the market for your product?
4. Marketing Strategy – How do you reach your customers?
5. Competitive Advantage – How do you sustain your competitive advantage when others enter the market?
6. Business Model and Financial Plan – How do you make money?
7. Team – How strong is your team?
He warned that the audience that it may not necessarily be a good thing to have a “first mover advantage” for a business. “In fact, there is such a thing as first mover disadvantage,” he laughed. “In the case of the bubble tea or luo han fish phenomenon, the first mover merely built market demand. Can you compete when others enter the market?”
“Investors therefore like to see some form of intellectual property in your business so that others won’t find it so easy to emulate,” he emphasized.
Abraham made it very clear that a strong team was vital in ensuring business success, declaring that ‘proper execution determined whether businesses succeeded or failed’. “In our trade, there is what we call an “A” team and a “B” team. An “A” team can make anything work, while a “B” team can screw up the best of plans,” Abrahams said. Ideally a team should have between four to six people, and should be able fulfill these critical functions:
a. CEO – to give direction and to make decisions,
b. CTO – to take care of research and product development,
c. CMO – to oversee sales and marketing, and
d. CFO – to take charge of finance and cash flow.
One of the tips that he gave his audience was that venture capitalists tend to make their decisions based on a decision tree. Therefore, he adds, it is vital that you satisfy their questions at each step. “Otherwise they’ll be polite and nod, but their mind is already thinking about golf or the next meeting,” Abraham said.
Abraham’s presentation was followed by a talk by Vincent Low, Regional Director of Sales, Southeast Asia, Netgear, who presented the same material he did at the recent JTC Entrepreneurial Workshop on 6 January.
Daniel Goh is the founder and chief editor of Young | Upstarts, as well as an F&B entrepreneur. Daniel has a background in public relations, and is interested in issues in entrepreneurship, small business, marketing, public relations and the online space. He can be reached at daniel [at] youngupstarts [dot] com.