Connect with us

Entrepreneurship

The Story of How My Startup Dealt With Investment

Published

on

About 12 months ago I was all about seeking investment. We had decided that the only way forward for our startup, The Perch Project, was to secure cash investment. That became my top priority. That’s not the offbeat part of the story – many startups reach this point. Most of the time, an injection of cash is needed to expand, develop and/or market the product. Our primary need was development, followed closely by a marketing budget.

We had scraped by up until this point. We had leveraged the FFF network (friends, family & fools – minus the fools in our case) and managed to get a basic MVP operating. We had our B2B-facing auction system developed by a firm specialising in auction software. To save cash, we purchased an ‘off the shelf’ system and paid to have it modified and updated to suit our needs. We had the B2C-facing apps developed (both native iOS and Android, which I’m not sure I would do again) via Upwork. This was a very cheap job and our apps reflected that. Most of our resources went into the auction system, which only our venue clients can see.

I then hit the pavement and painstakingly talked around 50 venues through our vision and signed them up to the system. Excellent. Now we had basic tech, we had a solid base of venue sign-ups. We were just missing something crucial: consumers, customers, a B2C market. Without them, we had no value to offer to our venues. Sure, we had a little cash left to do some basic marketing and we had a couple of media based contacts to do a little initial coverage of our launch. This resulted in a very promising looking spate of downloads. The spate then slowed to a trickle and then something less than that. What to do?

We needed lots of users and we needed them fast. The trouble is, that costs money. Getting your app onto an individual’s phone is far more expensive than it used to be. Back in the ‘good old days’ you could bank on around 30-50c total acquisition cost for each download. This time last year, that cost was more like $1.00-1.20 per download.

A new app just isn’t greeted with the same curiosity and glee (yes, glee – app glee is a thing). To add to the squeeze, we knew that our little apps weren’t going to win any prizes for usability in the near future. We had all the UI/UX designs to fix it but we did not have the funds to develop those fixes. Furthermore, we had a cunning plan around how to growth-hack our user acquisition beyond the app stores, but we needed the development funds to implement it.

So, off I set with a pretty little investor kit tucked under my arm to find us some investment. It did not go well.

Firstly, I hit the pitch circuit. There are a few pitch events in Brisbane that will put you in front of investors. I applied to all of them. I even applied to events in Sydney and Melbourne. This can be a time consuming process. Each event has their own application method and each will have a different focus for the event that you will need to position your pitch to fit into.

Occasionally, I would get through into the live pitching, but mostly I wouldn’t get past the initial application round. Demoralizing? Of course! No one enjoys getting a ‘no,’ but hearing ‘no’ is a big part of having a startup. The result from the live pitching events was the same. No joy on the investment front. (On a side note, live pitching is scary but vital for a startup. Take every opportunity you can to pitch your business.)

Pitch events did not get us the result we needed, so we went to Plan B: VC firms. I arranged meetings with every firm I could. I think I almost saw every firm in Brisbane. I sat down and pitched over coffees and lunches and once to a room of people. I got the same feedback every time: “Well, it’s an interesting idea and you have done well to get to this point but the market is too crowded and you are too early stage.” In hindsight, they were all completely correct. It is a crowded market we are playing in, no doubt about that, and we were very early stage. At the time though, this feedback was very frustrating and, again, demoralizing.

Luckily, we had a Plan C. I went to see high net worth individuals who were not involved in the tech space at all. It was audacious, but this was the last card in our deck. So, off I went with a less tech-focussed investor deck and drank more coffee and ate more lunch. I met some truly impressive people during this time, all of them introduced to me through some well connected friends and family. It was quite a valuable experience spending time with these people and hearing their view on what I had to say and I am grateful for the time they all gave me. However, I couldn’t convince them to open their wallets or ask where to sign. Oh dear. Now we were fresh out of plans.

We still had a deep belief that we were on to something and that we could address a real problem but we had come up against a series of brick walls in the quest to move forward quickly. We resolved to keep pushing on as best we could. We went quiet and kept our heads down to put in more hard yards. And then something happened.

It was around this time that a friend introduced me to another friend of his, thinking that we could somehow work together. He introduced me to the CSO of a small tech company here in Brisbane who has a lot of experience dealing with e-commerce, m-commerce and digital solutions across a bunch of industries. Off the back of this initial introduction we went from chatting about content sharing to working together on a project and finally, he offered to take on all the development work in exchange for equity.

And there it was. We had an investment offer. It wasn’t the sort of investment we had been seeking, but it was almost exactly what we needed to move forward. It was a resource investment offer.

So, of course, I panicked. I went into hyper-worry mode. What if this was the wrong decision? What if this was all part of some dastardly plan to take over my nascent company? What if I lost all control? What if I am not competent enough in the face of this new partnership? Finally, after a good month of sleeplessness I came to the conclusion that this was a time to be brave and take the offer. We needed to move forward and this was the only bridge in sight.

It took longer to get all the formal arrangements in place – enter lawyers – but it got done and we had a shiny new business partner and some kick-ass resources. I have found this new partnership is a lot more than just access to development talent though. What I am finding really valuable is our weekly meetings where I have someone else to strategise with, someone who has a different point of view and whose main concern is moving the company forward. I love having another person who is just as excited about our achievements and who will waste no time in telling me to rein it in when I get too outlandish.

This type of investment didn’t by any means tick all the boxes. We still don’t have a marketing budget and, whereas a regular investment round clarifies a company’s value, this has actually made our company really tricky to value. We also have to be quite strategic in getting our dev work done because there are obviously other projects that our partner’s team needs to work on.

Despite all this, taking on this new partner has been one of the best decisions we ever made for our startup. Since we joined forces, the company has formed new partnerships with some of the most influential digital publications in lifestyle/food in Brisbane. We closed out last month at 30,000 interactions with our feed (as opposed to 1,000 the month before) and our expansion plans are both scalable and achievable. It’s an exciting time.

It may not be the most traditional form of investment, but exchanging equity for resources has meant that the position we’re in now is stronger than it has ever been. And, of course, I’ll always buy that friend who made the crucial introduction a beer when he comes to town.

___________________________

About the Author

This article is written by Simone Perkins, contributor of The Tech Street Journal. Simone is Co-Founder and CEO of The Perch Project. She has had the pleasure of working on Perch within the startup space in Brisbane for the last 3 years. Simone likes to drink shamefully un-craft beer and really dislikes the term ‘CEO’. See more of The Tech Street Journal.

Entrepreneurship

Is There A Coworking Space Bubble?

Published

on

An annual growth rate of nearly 100%, almost five years in a row? More than 60 coworking spaces in a city like Berlin? Are these the characteristics of a bubble? Nope, these are characteristics of a lasting change in our world of work, which has been further catalyzed by the recent economic crises in many countries. But what makes this change different to a bubble? We’ve summarized some arguments of why the coworking movement is based on a sustainable change. However, that doesn’t mean it’s an easy job to open a good working coworking space.

Five reasons why the growth of coworking spaces is based on organic and sustainable growth: 

1. Coworking spaces invest their own money and create real wealth

Already, there is a convincing argument supporting why coworking spaces are not developing in a bubble: the fact that they create real wealth.

Whether referring to the dotcom bubble a decade ago or the real estate crisis in Spain or the United States, the crisis originated in a glut of cheap money, in an environment in which the sender and the recipient were unacquainted. From funds and banks, money flowed in steady streams to investments which offered little resistance and the most promising returns – which only a little while later turned into delusions and ruined investments.

Redistributed risks create illusions. Those people who distributed the money rarely wore the risk of investment decisions. The risk was mainly taken by small shareholders or people who bought parts of those investments. This was because either both parties’ (better) judgement was drowned out by the noise of the market, or because shareholders were unaware of the risk, and were at the mercy of banks and funds for reliable information.

Another fundamental condition for the creation of bubbles are the sheer amounts of money that flow from various locations globally and are concentrated, by comparison, in much fewer places.

Most coworking spaces, however, receive their funding from local or nearby sources and do not operate within this financial system. In fact, the founders mainly inject the bulk of the required investment, and turn to friends or relatives for additional support. They wear the full brunt of the risks that are involved in small-time investment.

They have access to much more information, because it is their own project, rather than a foreign one thousands of miles away. This also includes failures and mistakes that are encountered along the way, but the risk is less redistributed, thereby decreasing the probability of failures.

2. Labor market changes demand on certain office types lastingly

Most users of coworking spaces are self-employed. The proportion of employees is also on the rise, in many cases simply because they work for small companies that increasingly opt to conduct their business in coworking spaces rather than in traditional offices. The industry of almost all coworkers fall within the Internet-based creative industries.

With flexibilisation of work markets, new mobile technologies that are changing work patterns, and the increase of external services purchasing from large and medium-sized enterprises (outsourcing), the labor market has changed radically in many parts of the world.

The long-term financial and emotional security of becoming an employee no longer exists, especially for younger generations of workers. Bigger companies are quicker to fire than hire, and precarious short-term contracts are on the rise. Promising options on the labor market are more often recuded to freelancer careers and starting your own company.

And that’s possible with less money to invest. All you need is a laptop, a brain and a good network. For years, the number of independent workers and small businesses has been growing worldwide – particularly in internet-based creative industries. Anyone who has sufficient specialized skills and the willingness to take risks may adapt more quickly to market conditions if they own a small business or are self employed; more so than if they were to work in a dependent position in an equally volatile market.

Coworking spaces provide an environment in which to do this. Once they have joined a (suitable) coworking space, these factors become apparent to coworkers, who will remain in their space for years to come.

Furthermore, independent workers rarely fire themselves in crises, and even small companies are less likely to give their employees the boot – compared to their large counterparts. This combination enables more sustainable business models – and less business models à la Groupon.

3. Coworking spaces don’t live on crises

Global economic growth is waning while the number of coworking spaces is continually growing. Do coworking spaces thus benefit from this crisis?

The current crises accelerate the formation and growth of coworking spaces, because they offer solutions and space for the resulting problems. Coworking spaces are therefore not a result of a crisis, but the product of change that pre-dates their existence. A crisis is simply the most visible expression of change.

The first coworking spaces emerged in the late 1990s; the movement’s strong growth started six years ago – before the onset of economic downturns in many countries.

4. Coworking spaces depend on the needs of their members

Most coworking spaces are rarely full. Does this mean they are unsuccessful? On average, only half of all desks are occupied. But the average occupancy rate of 50% refers only to a specific date.

In fact, coworking spaces generally serve more members than they can seat at any given time, since members do not use the spaces simultaneously. Coworking spaces are places for independents who want to work on flexible terms. Smaller spaces rely more on permanent members. Larger spaces can respond more flexibilty to the working hours of its members, and, can rent desks several times over.

If a coworking space is always overcrowded or totally empty, the purpose of said space would be defeated. Firstly, it is rather impossible to work in an overcrowded room. Second, it’s impossible to cowork in an empty room. Given the nature of flexible memberships, a coworking space only can survive if they fit the needs of their members. Members would otherwise be quick to leave, and membership would be much more transient.

5. The coworking market is far from saturation

Less than 2% of all self-employed – and even fewer employees – currently work in coworking spaces. Reporting on coworking may increase, but inflated reporting on the coworking movement in the mainstream media is still far away.

Coverage of coworking space are most likely to be found in the career or local sections in larger publications – front cover coverage remains the dream of many space operators. This is because the whole coworking movement can’t be photographed in one picture. What appears to be a disadvantage, however, is actually a beneficial truth: niche coverage allows the industry to grow organically, and avoid over inflation.

Conclusion

Coworking spaces don’t operate in parallel universes – like the financial market. Demand and supply are almost exclusively organic and operate in the real world economy.

For the same reason, there is no guarantee that opening a coworking spaces will be automaticly successful. Anyone who fails to learn how to deal with potential customers in their market, or is unfamiliar with how coworking communities function, will have a difficult time of making one work. In the same way that business people in other industries will fail if they do not understand their market.

Those who simply tack on the word ‘coworking’ to their space’s facade will need to work harder. The structure of most coworking spaces is based on real work, calculated risk, and real-world supply and demand.

_______________________________________________

About the Author

This article was produced by Deskmag. Deskmag is the magazine about the new type of work and their places, how they look, how they function, how they could be improved and how we work in them. They especially focus on coworking spaces which are home to the new breed of independent workers and small companies. see more.

Continue Reading

Callum Connects

Dextre Teh, Founder of Rebirth Academy

Published

on

Dextre Teh is a consultant and marketing guru, helping F&B businesses to tighten their operations and grow their businesses.

What’s your story?
I help frustrated F&B business owners stuck in day to day operation transform from a glorified operator into a real business owner. I’m a 27 year old Singaporean second generation restaurant owner and a F&B business consultant. Entering the industry at 13 years old, I have always been obsessed with operations and systemisation. At the age of 25, I joined the insurance industry and earned a six figure yearly income. However, I left the high pay behind because it was not my passion and returned to the F&B industry. Now I help other F&B companies to tighten operations and grow their businesses with my consulting and marketing services.

What excites you most about your industry?
The food. I’m a big lover of food and even have a YouTube show on food in development. But that aside, it is really about impacting people through food. Creating moments and memories for people, be it a dating couple or families or friends. Providing that refuge from the daily grind of life. So in educating my consulting clients and training their staff to provide a better experience for their customers, I aim to shift the industry in the direction of creating memories instead of just selling food.

What’s your connection to Asia?
I was born and bred in Singapore. I love the culture, the food and travelling in Asia.

Favourite city in Asia for business and why?
Singapore hands down. The environment here is built for businesses to thrive. The government is pro business and the infrastructure is built around supporting business growth. Not to mention the numerous amount of grants available in helping people start and even grow business. If I’m not mistaken, the Singaporean government is the only government in the world that offers grants to home grown businesses for overseas expansion.

What’s the best piece of advice you ever received?
Learning to do things you do not intend to master is a BIG mistake in business. Focus on what you are good at and pay others to do the rest.

Many business owners including myself are so overwhelmed by the 10,000 things that they feel they need to do everyday. We try to do everything ourselves because we think it saves us money. The only thing that, that does for us is overload our schedules and give us mediocre results. Instead we should focus on what we do best and bring in support for the rest.

Who inspires you?
Christopher M Duncan.

At 29, Chris has built multiple 7 figure businesses. He opened me to the possibility of building a business on the thing that I loved and gave me a blueprint of how to do it. He also showed me that being young doesn’t mean you cannot do great things.

Imran Mohammad and Fazil Musa
They are my mentors and inspire me every single day to pursue my dreams, to focus on celebrating life and enjoying the process of getting to where I want to be.

What have you just learnt recently that blew you away?
Time is always more expensive than money. Money, you can earn over and over again but time, once you spend it, will never come back.

If you had your time again, what would you do differently?
I am a firm believer that your experiences shape who you are. I am grateful for every single moment of my life be it the highs or the lows, the successes and the failures because all these experiences have led me to become the person I am and brought me to the place that I’m at so I will probably do things the same way as everything was perfect in its time.

How do you unwind?
Chilling out in a live music bar with a drink in hand, listening to my favourite live band, 53A. Other than that I’m big on retail therapy, buying cool and geeky stuff.

Favourite Asian destination for relaxation? Why?
Bangkok. It feels like a home away from home where the cost of living is relatively low, the food is good and the people are friendly.

Everyone in business should read this book:
Everything you know about business is wrong by Alastair Dryburgh. It is a book that challenges commonly accepted business “truths” and inspires you to go against the grain, think different, take risks and stand your ground in the face of the challenges that will come your way as a business owner.

Shameless plug for your business:
I’m the creator of the world’s first Chilli Crab Challenge. It gained viral celebrity earlier this year with 3 major newspaper features and more than a dozen blog and online publications featuring it in the span of two weeks. In the span of the two weeks, the campaign reached well over a million people in exposure without a single cent spent in ads.

Now I help F&B companies to tighten operations, increase profits and grow their businesses with my consulting and marketing services. Chilli Crab Challenge (https://www.chillicrab.com/nationalday)

How can people connect with you?
You can connect with me on Facebook (www.facebook.com/djtehkh) or visit www.rebirthacademy.sg for more information or book a 10 minute call with me @ www.tinyurl.com/dexclar

This interview is part of the ‘Callum Connect’ series of more than 500 interviews

Callum Laing is an entrepreneur and investor based in Singapore. He has previously started, built and sold half a dozen businesses and is now a Partner at Unity-Group Private Equity and Co-Founder of The Marketing Group PLC. He is the author two best selling books ‘Progressive Partnerships’ and ‘Agglomerate’.

Connect with Callum here:
twitter.com/laingcallum
linkedin.com/in/callumlaing
Download free copies of his books here: www.callumlaing.com

Continue Reading
Advertisement

Trending