A market to mine? Check. A killer idea? Check. The time and energy to build a business? Check.
You might have ticked all the boxes but if your business is without capital, its growth will be slow to zero. Hamish Petrie, founder of Moshtix, explains the importance of investor support in preparing his new business ingogo – a free app that connects customers with taxi drivers – for launch.
“The investor team brings an incredible wealth of knowledge and experience needed to build and grow successful technology businesses,” says Petrie. “You can’t do this at scale without sufficient capital behind you – just the cost of building technology, building a team, marketing, some of the legal challenges. You’ve got to make sure that you’re well-resourced.”
Building the dream team
For ingogo, the challenge was not in finding support, but in fielding which investors could bring value to the business.
“We actually had the luxury of choosing who we wanted to get involved in the business. For example, Will Easton, one of the guys at Google, had seen some of the press we’d been getting and contacted us.”
Along with Easton, ingogo has recently taken on a number of external investors including Brad Shofer, co-founder of MYOB, and Stuart Fox, head of APAC Commodities.
“Up until these initial round of investors, I was funding it, so taking capital I’d earned from selling the Moshtix business and redeploying it into this,” Petrie explains. “That was pretty much to get the initial team together and develop the business plan and strategy.”
With firm foundations in place, the business was then able to attract investors and give them some assurance that the business could succeed.
“Having all that in place and some paperwork around what we’re doing then gives these other investors confidence to come in behind us and support us.”
Unlike Moshtix, which Petrie bankrolled himself without any external investment, and remained on as sole shareholder until he sold it, ingogo has been about opening its door and encouraging shared ownership. The market opportunity called for it, he says.
“I decided to do it differently this time around because of the scale of the challenge.”
His idea of an app-based taxi service was one that was hinged on market leadership, so the circumstances required him to act quickly and bring in outside investment.
“It does allow you to grow a lot quicker. You don’t have the same restraints on the business and we’re taking on some pretty well-entrenched, incumbent players,” he says. “This is a much different scale of industry and you need to have as much help as possible on your side.”
Of course, when taking on outside help, it’s not just about the money. The benefit of external investors also involves the wealth of knowledge they can contribute to the business.
“It’s very beneficial to have a network of investors out there that know a lot of people and can make things happen for you. It all accelerates the way we get things done,” he says. “If you’re a startup sitting there and you’re not well-resourced and you’re not well-networked, it’s going to take you a lot longer to get things done and for this type of opportunity you need to have that behind you. You can’t take a long time to pull this off.”
Tips to gaining (and getting the most from) external investors
1. Get the right people on board
Investors need to know their money is in the best hands. Get the right internal team together which can make your business go from idea to reality.
“Ultimately, they’ve got to get a return on their money, so you might have the best idea in the world, the market might be big enough, but if the people you have in place don’t have a track record of making stuff like this happen, that’s a big risk for an investor,” says Petrie.
2. Put the plan on paper
Just as you would document your business plan to apply for a bank loan, an investor needs to see your business vision in writing.
“You need to have a pretty solid business plan,” explains Petrie. “You need to understand the financial side of things, how you’re actually going to roll the plan out and how that will impact the business financially.”
3. Rally customer support
Is there a clear, identifiable market for your business? Ingogo determined the need for their product by asking interested customers to pre-register for the app – a very successful strategy which saw more than 40,000 potential customers visit their website since July.
“The ultimate thing for any startup is to pretty much validate where the market need for your product is and whether the market need is deep enough,” says Petrie. “If a startup can actually go out and prove there is some initial customer interest… that would give an investor some confidence that there is a market opportunity there.”
4. Be an open book
Open up the business to your investors and show them how you work and how you will succeed. Petrie believes “being open and transparent with investors” was a major factor in getting so many quality investors on board.
“We’ve kind of lifted the hood on everything, whether it’s positive or negative, and so they’ve got a very transparent view of exactly what’s going on within the business,” he says. “That’s been really important as well to build trust with investors,”
5. Don’t weigh yourself down
While Petrie sees his team of investors eventually forming a board in 12 months’ time, these kind of formalities are not essential at the startup stage.
“You don’t want to be distracted by all those protocols early on. In the early stages you’ve got to run pretty fast and you’ve got to make sure you’re getting results. If you had some of those processes, those big corporate processes, in place too early you can actually suffocate the business.”
Finding a balance between formality and flexibility, he says, is key to a fledgling business.
6. Don’t give up
Finally, Petrie reveals his biggest tip to attract investor support for your business.