Tips from entrepreneurs
The Beyond the Starting Blocks seminar, arranged by UCT in conjunction with the University of Stellenbosch and CPUT, as part of the Innovation Fund sponsored Student Business Plan Competition, yielded some great tips for new entrepreneurs from the seasoned entr epreneurs.
Presenters included Dr Greg Starke (Disa Vascular), Dr Justine Devine (Synexa Life Sciences), Ali Brey (Hot Platinum - a UCT spin-off company), Retief Krige (Retief Krige Industrial Designs CC) and Neil Hampton (ex StatPro). The speakers were drawn from a wide range of sectors to try and give as broad a spectrum as possible. There was a great deal of interaction, even amongst the presenters who were surprised by many common experiences that they had encountered.
Some key tips noted included:
Formulating a Plan
- It needs to be sound, not solely focussed on the technology - e.g. ensure that aspects such as market research and financials are not neglected
- Stick to the plan - it needs to be feasible from the outset, so that one does not need to 'reinvent' it when one gets going
- Do your homework on the difficult questions' that you know a funder will ask you
- Think out of the box with your marketing plan - be creative.
- Budget for your development carefully and ensure that you have adequate funding for your R&D
- Use a Gantt chart as a tool to develop and track your project plan.
Finding the money
- Investors are investing in the people - ensure that you have a strong team that can cover all the bases
- Look at what value a particular investor can bring to your business; it should be more than money. It may be access to international markets, or market experience and networks
- Fight for the value of your company at the outset - don't under value it. Often investors have an idea of the type of shareholding that they want and the money that they want to invest - they merely multiply their shareholding and money up to 100% to determine the value of the company, which is not necessarily the right thing to do! E.g. they invest R5 million and want a stake of 25% so they say the value of the company is R20 million. One needs to look at projected cashflows
- If your company establishes an international footprint, the overseas company can often access funding available in those countries, which can be really useful
- There are few funders in South Africa, so make a good first impression
- Having part of you business that can generate early money, whilst the more advanced products are developed is a key to success. This can often be in the form of providing consulting, or analytical services. This keeps the business ticking over whilst one is trying to get the product to market
- Investors are interested in cashflow!
Finding the people
- One often starts with friends. One needs to be sure that they have the right skills and are actually the right people long term
- Look far and wide - its amazing who is out there when you look - and look slowly
- Get a mentor - external review is important. Don't use the investor as your mentor, look for somebody else and try and get them onto your Board
- The wrong people create issues and divert attention! This is particularly bad news when they are a shareholder or partner
- Patenting is important, but one needs to look after the cost. IP needs 'love and care' like a product
- If you don't have the ability to defend your IP it's a problem - budget for defence, its costly
- Beware of solely focussing on the IP and neglecting the development of the actually product and marketing it. Else you will land up with great patents, but there will be few years of protection left by the time your product reaches the market and you will not reap the rewards that you should have
- Ensure that you have the freedom to operate - i.e. that you are not infringing other people's patent/IP rights
- Your PCT International Search Report and Written Opinion is very important for VC/funding. It's the first external assessment of the potential strength of your patents/IP
- Ensure that the work that you outsource is important to that service provider. Don't let it land up at the back of their queue, because in their eyes you are not particularly important (they have larger, established clients with big orders!). For success, you need to ensure that your development moves at an efficient pace, as you will burn your money whilst you wait
- Contract with clear milestones and deadlines
- Try and do as much as you can in-house - it will then be your top priority and you will come first!
- Its highly competitive out there, develop your products as fast as possible
- Be aware of what regulatory requirements your industry has
- If you need CE Marking, then focus on getting the systems in place from the start. It is easier to get them working when you are small and starting out. It adds value (which will impress the investor). Its difficult and costly to retrofit a quality system at a later stage
Market Channel and Understanding your Market
- Understand how your market works.If you want cardiologists to buy and use your products, you are going to fund their trips to conferences!
- Plan your events and develop relationships
- Carefully consider whether it is worth building up your own brand,or better to market through other established brands
- Decide whether it is worth having your own distributors or using other established distribution networks - especially overseas. But then you need to monitor them closely and if Agents underperform you need to move your business from them rapidly. Ensure that your contracts do not lock you into staying with them and don't be taken in by their explanations and promises of successful turnaround in the future
- Local market may not have the insight into the needs of the industry/the ability to take up your technology. By attending international expos one can assess trends and focus your product development by getting in contact with leading global users
- Look for international industry bodies - they can often provide excellent contacts and a network that aids market development and access
- Participation in competitions provide you with great PR, exposure and networks - especially if you win them!
- Establish a track record.That first client is all important. Its often worth discounting for them, but ensuring that you can use them as a reference client - this is especially great if they are a 'big name' in the industry
- Its about quality, quality, quality!
- Beware of free services that you thrown in with your product.Recognise their value - one can generate additional revenue from them that extends beyond the initial sale of your product. It creates an annuity type income stream
- Regular communication with your clients is essential to keep up with new ideas and opportunities, keeping your product on that upward curve - it also alerts you to budding problems so that they are rapidly addressed!
- Build in a long term view in terms of where a product is going, e.g. eventually to an overseas market
SA Company Challenges and Advantages
- There are often small local markets, which requires one to network on an international level
- We represent a lower cost vs. Europe or US in terms of technical staff employed at technology-oriented start-ups
- We have plentiful access to patients, an asset in the medical or pharmaceutical sectors
- Accessing export markets is challenging. You are competing against established brands, there are often import tariffs and agents get commissions that need to be factored into your business model