Week in Review: Growing the ecosystem, one exit at a time

By Karamjit Singh March 28, 2014

Only founders who have exited realise value of product over fast profit
Make for the best early stage investors, role models for other investors

Week in Review: Growing the ecosystem, one exit at a time LAST Friday in my Week in Review column, I wrote about this strong feeling I have that angel investors, and even early stage investors at the seed level, are harming their own investments when they focus on monetisation right away.

Very early stage investors need to realise that the startups they invest in are still at the stage of just getting their product right and getting the right team in place. And, of course the business model will change rapidly too.

But it all starts with the product. No business model, no business plan is worth the paper it’s written on without a product as the foundation, backbone and soul. Early stage investors need to understand this.

True, we have to accept that many will be investing for the first time in tech-based startups and with their limited exposure and familiarity with the ecosystem, will inevitably fall back on what they know and are comfortable with – that is, the need to see a revenue stream and path to profitability as soon as possible.

While we cannot blame them, how can their understanding of angel and early stage investing be fast tracked? Last week, I strongly suggested that these investors and interested investors join the Malaysian Business Angels Network (MBAN) and the many education and awareness activities it will be rolling out this year.

Then the coin dropped for me yesterday, courtesy of Azrul Rahim who, after 10 years, sold the company he built together with his wife, to iJoomla.

An active angel investor now, Azrul commented on my column, sharing that in his case, it was actually the company he invested in, that was preoccupied with making “small money instead of building a solid product and foundation for the future.” Apparently, the founder is fearful that Azrul wants an instant return.

Azrul said he was the one who had to help them focus!

Now why isn’t Azrul caught in the ‘can’t see the forest for the trees’ trap? Probably because he has ‘been there,’ ‘done it,’ ‘seen that’ and ‘lived it’ as an entrepreneur. He now brings that priceless school of hard knocks experience to the table when he invests in the dreams and hopes of those who perhaps remind him a little of himself 10 years ago.

I hope MBAN uses Azrul as a resource person when it starts its activities, and I hope Azrul makes the time to attend the structured programme MBAN conducts to get certified as an angel investor eligible for the Angel Tax Incentive.

There is probably very little that he will learn, but the other angel investors will learn a lot by just hanging out with Azrul.

There is also the sobering realisation that in our ecosystem, guys like Azrul are few and far between – that is, those who have been in the shoes of the people now seeking their funding and buy-in for their own dreams.

I guess you cannot shortcut the learning curve for very early stage investors, although MBAN will be the best tool we have while we hope and wait for more entrepreneurs like Azrul to exit and become investors.

Which means that we can only grow the maturity of early stage investors, one exit at a time. Let’s hope we see a few more exits this year, other than Mark Chang of JobStreet.