The lore of geeks in the garage and entrepreneurs on couches is only part of the story
The humble beginnings of tech start-ups that would become multi-billion dollar companies are the stuff of legends. We all know the story of Apple. How the two geniuses both of whom were named Steve – Steve Jobs and Steve Wozniak – started what would become the Apple Empire in the garage of the parents of Steve Jobs.
Or the story of Airbnb’s founders Brian Chesky and Joe Gebbia who had just landed in San Francisco after having moved from NY. They still had not found jobs and were having trouble paying their rent so they were looking for ways to earn some extra cash. There was a conference in town and they noticed that all the hotel rooms in the city had been booked. They bought a few airbeds, put up a website to advertise that they could be rented out for $80 a night and the rest is history. Airbnb is now worth more than $25 billion.
The other side of the success story
While these stories and countless others are well-known, what is not so well-known is the actual process of how they raised the capital to go from start-ups to tech superstars.
Everyone is looking for the next Uber, Airbnb, Amazon – you name it
Most tech start-ups start with an idea of how to do something cheaper, better, faster – to make the experience more enjoyable and to fulfill a need for the end user that isn’t currently being satisfied by established products and services.
Uber made it easy and convenient to hail a cab. Airbnb made it easy to find inexpensive accommodation. Amazon changed the way we shop forever and heralded the beginning of the end for traditional bricks and mortar retail.
From the tech start-ups themselves to investors, everyone is looking to create and discover the next big thing. 100s of thousands of start-ups, do just that, they start, yet only a handful finish what they started and actually successfully launch – much less become the next Apple.
Growth depends on capital
The reasons for failure are many and varied, but a key factor as observed by Forbes magazine is that less successful entrepreneurs try to do everything themselves even if they don’t really have the necessary skill sets to effectively do so. This is especially true in such critical areas as raising finance, accounting and big-picture strategic thinking.
Successful entrepreneurs, on the other hand, understand that they must work on their business, not in their business. They need to focus on and leverage their core skill sets. They understand that sometimes they must look outside of their companies for the expert skills they need to get ahead. This understanding that they cannot do everything by themselves optimally can make the difference between success and failure.
You need more than a big idea – you need to attract capital
Cracking the next big idea is the fun part of the start-up, the sexy and exciting part that gets everyone fired up. But developing the actual product and getting it out into the market is a different story. It takes a lot of money to get out of the start-up zone.
Last year alone, more than $379 million dollars was raised for African Fintech start-ups. That is a lot of money, but there is fierce competition for it.
How do you make your start-up stand out from the 1000s of other start-ups out there to get the working capital you need to grow? You need a killer business plan. You need robust growth projections. A bullet-proof go-to-market-strategy.
In order to attract sufficient capital, it is essential that the financial projections of your start-up look robust and appeal to investors. This is no easy task. It takes experience and financial expertise to frame the projections in a way that makes them appealing but also attainable and not overly inflated.
In short, you need someone who has proven experience in approaching VCs for funding with all of the ammo and information they need to land the deal. For angel investors, they care about the devil in the details. Most likely, those skills will not reside in your company. When in doubt, bring in the big guns, seasoned professionals who do this for a living. That is exactly what most tech superstars who are now household names did.
Many professionals that raise capital will even partner with start-ups and put part of their fee at risk. If they don’t land the deal, they will cut their fee.
90% of start-ups fail
“Growth — fast growth — is what entrepreneurs crave, investors need, and markets want. Rapid growth is the sign of a great idea in a hot market.”
The bottom line is that if you want your start-up to become the next Apple, Airbnb, etc. sometimes you have to accept that you’ll need to bring in an outsider with the critical skill sets needed to get your start-up off the ground.
A highly experienced Director of International Businesses in the Transportation, Industrial and FMCG sectors including DHL, UNILEVER and WHITBREADS. FCMA / GCMA Qualified, Member of the Institute of Management.