Vishnu Deuskar helps entrepreneurs find funding from outside investors so they can start up a new venture. The managing director of Salvus Strategic Advisors in Dubai talks about what aspiring business owners need to know to secure financing.
Where should entrepreneurs look for funding?
Typically an entrepreneur will start with friends and family: a father gives US$10,000 (Dh36,730), a cousin gives $3,000. The next stage could be what you call the angel investors; there are many groups in the Middle East of investors who are willing to individually put in $50,000 or $100,000 but not bigger amounts. The next stage could be a venture capital fund.
What should aspiring business owners have ready before making a pitch to a potential investor?
The first thing they need to have is a credible plan. The promoter could be very passionate and believe his or her story. The person who's investing is pretty cold at heart. The investor wants to see whether you've thought through your business: a market analysis; whether you have addressed all the risks; how are you going to execute your plans?
Then how do entrepreneurs go about convincing investors to take a chance on their concept?
First, the investor has to like the idea. Then he has to buy the story, because you can have a great idea but it's got to work. If someone says, "my background is in fashion, I've trained in this institute and interned with this fashion house and now I want to set up a boutique of my own", it gives a track record and some credibility to the person. Investors will make an assessment of that.
How should entrepreneurs negotiate an agreement with an investor if they do get funding?
Typically an entrepreneur is concerned about losing control. They need to make a realistic assessment of how much money they need. How much money they take in will determine how much [value of the company] they will give away. This is easier said than done because not every entrepreneur starts out as a financial whiz.
So what is the bottom-line on negotiating?
Basically he has to have some idea of how much he's willing to give. He needs to have a realistic "walk away" number. The common theme is people don't want to give up a majority of the business
If funding comes through, how long does the entire process normally take?
Months. Don't forget the process doesn't end with the handshak.e Once I agree on the price then there's a phase of due diligence to verify everything I'm saying I have to give you my books of account, access to my records or staff. When the due diligence is finally done the deal closes.
[ nparmar@thenational.ae ]
