Finding the right fit

By Gabey Goh May 6, 2013

Once you’ve got your team together, you’ve got to think about funding
You have three options: Your money, government money or other people’s money

Finding the right fit I ALWAYS thought it was bad enough being a single girl in Kuala Lumpur trying to find a date (or a man that doesn’t make me want to slit his throat).

But listening to one too many technopreneur talk about the pains of finding and dealing with their investors has cured me of that petty notion.

Say you’ve got an idea for an application or service. It’s something you are passionate about and believe can serve a gap in the market.

Say you’ve found a co-founder or two, with expertise in areas you are not familiar with — be it marketing, business management or programming. They believe in your idea and think it will not only work, but also thrive.

With that settled, all you need is money to help fund your dream. Basically, you have three options –your money, the government’s money or other people’s money.

Most entrepreneurs will put in some of their own money anyway, but only a lucky few will have deep enough pockets to fuel a venture all the way.

Which brings us to government money. I once asked a friend working with a government agency how much in total was available in grants and funding for startups every year.

“Heck, I’d like to know myself!” was his response.

Finding the right fit It can’t be helped. Funding for startups is available across at least four different ministries, further subdivided among multiple agencies, each with its own portfolio of grants, and each grant with its own scope, ranging from digital content creation to business solutions.

Apart from figuring out where your idea fits (and what grants it qualifies for), one must also contend with a myriad of paperwork and the time to process it.

It says something when there is a cottage industry dedicated to doing just that.

Government money isn’t for everyone. It is hard enough to justify the viability of your idea, never mind spending an inordinate amount of time categorising and potentially pigeonholing it.

One entrepreneurs said the difference was apparent when he pitched his idea for a potential government-funded grant versus his pitch to a venture capitalist.

“The agency wanted me to give cases of where such an idea had been done before, while the venture capitalist recognised the potential of the idea straight away without me having to draw comparisons and I eventually got the venture funding,” he told me.

As one developer argued: “They [the agency] always seem to fund boring ideas that have been done before.”

Fair enough. I’m sure the people tasked with granting money to startups need to justify their choices.

At the end of the day it is taxpayer money, and this is a nation notorious for its “wait-and-see” approach when it comes to spending money on new things.

So that leaves other people’s money, which in this case means venture capitalists and angel investors.

Take a poll of entrepreneurs looking for funding and the majority would say they are most interested in this category of funding.

Less paperwork, no need to label or categorise your idea and you’re talking to people who not only understand the nuances of the technology scene, but also have a healthy appetite for risk. Your idea just needs to be good enough in their eyes.

It’s all about Asia right now, with many overseas investors establishing operations here to vet potential technology ventures.

Which brings us to the message of today’s column. For a startup seeking funds, it’s tempting enough to say yes to the first guy that looks like he wants to throw money at you – especially when you’re already running on fumes wondering where the cash for next month’s payroll is going to come from.

But a word of caution – even private-sector money comes with its own set of strings.

A few months ago, I attended a screening of Ctrl+Alt+Compete, a documentary produced by Microsoft, which followed five different startups in the United States as they prepared to make an impact at Demo, one of the world’s foremost technology-pitch conferences.

One industry observer interviewed said that startups spend so much time trying to woo investors that they forget to do their own research on the people they are trying to sell themselves to.

“Don’t forget, these things are a partnership with lots of money at stake, and you had better be sure you can get along with the guy and live with the conditions he puts down,” he said.

Or as another entrepreneur interviewed wryly explained, getting married is much easier than partnering up with an investor. Why?

“You see, after the first year, if you realise it’s not going to work, you can always file for divorce. On the other hand, with a venture capitalist, you’re under contract and locked in for another four years!”

This column originally appeared in the Metro Biz section of The Star and is reprinted here with its kind permission.

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