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Raising Venture Capital for Developing IT Products

Altaf Khan

© Altaf Khan 2005-2006

To get the funding that you want, you have to know what the investor wants. Here we show how to go about doing that. The investor wants to assist the entrepreneurs in transforming their great ideas into world-class businesses so that the investor can make lots of money. Chances of making lots of money increase if the proposed business is based on: an innovative idea; unbounded target market; entry barriers; a reasonable execution strategy; a persistent, energetic, smart team. Moreover, the investor also requires an exit strategy.
To get the investment, you have to outline a reasonable scenario in which the investor ends up making a lot of money. You present that reasonable scenario in form of a business plan that includes: an executive summary; company description; product/service explanation; market analysis; competitive analysis; execution of biz plan; management team; capital requirements; financial analysis.

A key investment-decision criterion is the makeup of the team. What questions do investors ask about the startup team? They generally ask the following: Do they share a common vision, values? Are they flexible about their roles? Are they smart, energetic, persistent? Do they work with a sense of urgency? Are they worthy of my trust?

Finally, what should you look for in a prospective investor? Try to find out about heir track record, their contacts, and their people. For startups, the best investors are the mentor-investors. These are those investors who bring added value to your venture due to their inside knowledge of the target industry and industry contacts. They can lower your risk and reduce your time-to-market.

In summary, you can improve the odds of your startup's success by:

  • Actively seek value-adding partners and affiliates
  • Build an unfair advantage
  • Look for smart capital, mentor-investors
  • Leverage Pakistani expatriates
  • Focus on the customer
  • Outsource non-core tasks
  • Successful marketing is critical
  • Stay focused on your business objective
  • Be flexible; change your biz plan, if required
  • Create a high-energy organizational culture
  • Form a core team that is:
    • Homogeneous in terms of the vision
    • Heterogeneous in terms of skills and experiences

For further explanation, take a look at this presentation:

A. H. Khan. Raising venture capital for developing IT products PPT. Pakistan Software Export Board's Conference: IT's Made in Pakistan, Lahore, Pakistan, June 2004.



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