The business of the 21st century is driven by tech guys who are pionnering solutions that are going on to change the world. Some of the most profitable and value driven companies of the moment are either core tech companies or those who are in one way or another heavily dependent on tech to prosper and deliver results.
The problem however, is that most times, the guys who start these businesses are not high on financial education, business modelling and many other things that go beyond tech. This makes it somewhat difficult for them to court and get the attention of money bags who can support and help them grow fat very fast by moving from idea to a profitable business.
This article provides some points to help tech entrepreneurs attract more investors into their businesses.
1. Understand the business aspect of your idea and create a business model that reveals that to investors. Make sure your business model is tight and go beyond ideas to business. Ideas don’t make money, what makes money is the business side of the idea and this is what your business model should be quick to reveal. According to Ms Omobola Johnson, Partner at Nigerian venture capital fund TLcom Capital, “You’ve got to tell us how you’re going to make money. It’s about the business model, not technologies. Show me a pitch deck that’s only 4-5 slides and no more than 5-10 minutes. Show me a 3-5 year plan and we can talk more.” Investors are extremely interested in justified ideas and you do this with facts and figures.
2. Be disciplined and stick to plans. Many tech guys use many dark years to code and produce a solution. Therefore, some might make the mistake of seeing investors’ money as an answer to their prayers and a reward for their lovely days. At such, they might forget the purpose of the money and that the money isn’t theirs. When this becomes the case, such entrepreneur tends to engage in activities that will not favour either the investor or the business in the long run. Richard Wnuk, a senior advisor at Blue Heron Ventures said his fund used to adhere to a “spray and pray” strategy of investing in many promising startups. But now they insist on seeing serious discipline in the entrepreneurs before paying attention to them no matter how brilliant their ideas might be. This shows that your discipline as an entrepreneur is part of what the investors are investing in.
3. Make it easy for your investors to cash out. All investors hate to be trapped and some like to make their money and leave very early to pursue other ventures.In your pitch, plans and models, show them on time how they can leave and make it easy enough for any of them who wants to leave to do so profitably.According to Wnuk, “What we’ve been seeing is a big disconnect between the entrepreneur with a tech background and the business plan,” said “What we as investors are interested in is: “what is the exit strategy?’”. This is important if you want to attract profitable attention and money.
4. Stay focused on the market and not you. Most tech entrepreneurs lose it. They come to a point where they confuse personal needs with market needs, because the idea in question might have started as a personal project or a hobby. There is a high tendency to believe that the market should want or accept what you want. Founders need to understand that this is wrong. Create for the market what they want. Even if it has to do with modifying or even abandoning your original plan, do so if you want a business and the support of investors. Investors hate heady entrepreneurs and tech guys have this problem most of times. They believe that since they have the technicalities and expertise, everybody should equally be listening to them. This scares investors away and leaves many techies broke and broken with beautiful ideas that nobody wants to have or invest in. The need to create a feedback loop and observe what exactly the customers want as against what the entrepreneurs wants or has created is very important. According to Nathan Millard, CEO & Co-Founder of G3 Partners, “Chase your customers, Find out who they really are and Make sure that they really need your product.”
5. Never go alone if you want to go far. If you want to make your ideas work, get a team of believers who are equally skilled in other areas to go with you. This helps to boost investors’ confidence. Investors are not usually very comfortable trusting their money with people who have concentrated skills. A pool of different talents and knowledge base is better as it will improve creativity, engagement and profit. Tech entrepreneurs surround themselves with people that have skills in finance, legal, marketing, and the likes, so that they are not lost in the product while forgetting other areas that need to work for the product to make money.
6. Regulatory risk should be addressed. Investors want to stay safe from government hammer. This then suggests that tech entrepreneurs should show clear path and plan on how they intend to navigate regulations or comply as the case maybe. This shouldn’t be left to guess work and speculation. Investors are willing to go with any Founder that shows strength in handling the government slaps of their individual countries as many investors have lost funds due regulatory cases and uncertainties. They have just gotten wiser and unwilling to fly blind anymore in that respect; you should as well.
7. Don’t be desperate. Desperation stinks and investors can smell it mills away. This will scare a lot of good investors away while few will come and hand you easy money which tends to choke you and your business in the future. You need to be sure that the investors you are bringing into your business align with your philosophy and also accept you on your own terms. Though you are looking for money, you should also put your foot down on certain issues to avoid diluting your ownership so much that you sell yourself short and out of your business.
Entrepreneurship is an interesting journey which must be diligently embarked on. It has its own unique set of challenges and those who play the game to win must learn how to set themselves up for that right from the beginning.
I believe that if tech starters pay close attention to these points raised above, they can stay safe and build a business they would be proud of in the long run.