ThinkingNectar

This is a follow up post to the breakout session that I was in, following the keynote presentation and different startup pitches that follows in the recent Unconference 2008.

What makes attend this breakout was the fact that I love money, but seriously, it was a good opportunity to hear from Bernard who was the moderator (I am not sure if this is the correct term) of the breakout. I for one had been part of a startup that was fuelled by funds from family, friends and fools. Actually we have private investors (one of the fs) who took some equity to fund the development phase.

I skip the textbook stuff of having a business model, sound marketing plan and superb team before looking for funding. I will in fact focus on an issue raised by Bernard (as posted in his blog too!)

Young Singapore Entrepreneurs don’t care about Execution Risk

This strikes me, as that was an issue that was way too obvious to me from day one. Execution risk is very real. Yes, there may be an outstanding idea, coupled with great and intelligent people, but there are still execution risk. The issue raised by Bernard is that entrepreneurs asked too much from low end fundings.

I was fortunate to be in a startup that can generate revenue from day one of launch. Hence our risk was slightly lower as the team can partially roll on itself from launch. The risk that the investor beared totally was for development and some marketing expenses. Looking at some startup around, most have to determine on advertising revenues while other paying customers who takes up the premium services. While I do not know which startups are made to be sold, I do have this impression that most local startup owners do not want to sell their shares.

So looking at asking too much. Most low end funds request an exchange of equity for cash. Something that is reasonable. But Bernard experiences shows that entrepreneurs are not too keen to give up the equity.

I was asked by Bernard during the breakout and my take if I was running a new startup again from ground zero, I take any fair deal for funding when I do not have a product. When there is just an idea and no product, the money have to some from somewhere. Money should be a secondary issue during development. And secondly, start the VC game early. Know and network some players from start. Do not expect to know anyone for a week and expect funding when you ask. Relationship takes time to build.

Take fair funding for equity for your developers

I am talking about web companies here. Developers are human and they deserve the respect for their dedication to the Art of the Bytes. Get the money, give them a decent allowance and keep their environment pro-developer. I learnt that morale is an important factor in meeting deadlines and releases. And having cash is essential to buying the simple comforts that makes everyone happy. I am not taking about slurping on video cards or anything like that, but a simple pantry fund is important for the flow of coffee and snacks. A decent chair to keep the spine happy.

Take the funding for breathing space

Buffer, buffer, buffer. Datelines will be missed. Sales target will be missed. Product will change and people might leave. You are taking all the risk in the time and effort and opportunity cost. Let someone else share some burden too.

Take the funding and start running the show

Execute the idea, get the developers working and let the valuation take care of itself in the long run. Honestly it the startup grows large enough, everyone will be happy. And of course, development speed is of the essence.

My stand is very clear. I take the funding if I just have an idea. Even If I have a product, I will still take the funding as I have invested effort and time into it and will more than happy to insure the life span of the product.