HAVING niche information and communications technology (ICT) applications with significant and marketable intellectual properties are must-have selling points for local technopreneurs seeking venturecapital (VC) funding. Apart from having proprietary in- house technology, technopreneurs must also have a committed team and are able to demonstrate the ability to leverage on first-mover advantage.Above all, funding requests must be realistic, based on all these elements.
These are the key ingredients that technopreneurs must have in place to be able to successfully tap into available resources in the market.
Unfortunately, said venture capitalists, local technopreneurs often lack such required combination, and this has led to failure in many attempts to get access to some RM2.54 billion worth of VC funds available in the market (as of last year).
For DTA Ventures Management Sdn Bhd, what it normally looks for are applications with the potential of being popularly adopted in the near future, be it software, hardware, or anything in between.
“It’s hard to positively identify the space the said applications are in beforehand since ICT is a huge area. But when we see a business proposal, we are able to size its potential business after undertaking a due diligence exercise,” said its partner and chief technology officer Dr Naim Yunus.
He said an application could be rejected for a host of reasons such as not falling within the “good idea” category, personality problems, being too ambitious, and lack of fit with investment strategy.
These sentiments were shared by Amanah Venture Sdn Bhd’s chief executive officer Zulkefli Yahya.
He said to be eligible for VC funding, entrepreneurs should have characteristics such as management skills or experience, a good business plan and an exit strategy. “If all the above characteristics are not present, then their proposal will likely be rejected.”
Zulkefli said the management team should have relevant experience and skills to manage the business. “Honesty, too, is important although difficult to determine from a business plan proposal,” he said, adding that the business plan must be detailed both in content and the financial projections.
“Funding applicants should be able to `defend’ or justify the business plan to the VCs. Entrepreneurs should develop an `open’ approach when dealing with VCs,” he said.
He added that like in any other businesses, VCs must have value- added returns from these investments. “Exit strategy can be in the form of initial public offerings, sale of shares ownership and third- party transactions, which will provide reasonable returns to the VC.”
Meanwhile, Koot Chiew Hwa, head of finance and business portfolio at the venture capital division of TH Group Bhd, said VCs are typically attracted to companies that have a solid marketing plan and products that address the needs of consumers, rather than nice- to-have items.
She said TH Group uses a 12-factor evaluation model when evaluating a potential opportunity to assist in its selection process. The main factors that will be evaluated are sustainable and attractive business model, strong and unique value proposition, and extensive distribution network and strength.
Others include attractive investment returns, meeting the VC’s investment return hurdle rate, experienced and solid management team, attractive market growth potential, and quality co-investors.
The remaining factors are strategic partners in place, technology edge, patent preferred, attractive valuation, strong and sustainable financial position, and manageable risk.
“An attractive opportunity would be one which addresses each of these factors clearly and scores well on each,” Koot said.
