10 Startup Tips
Chapter 10: Raising Capital
Sometimes starting your own business makes you hesitant
to develop your business idea.
You need to spend money to make money.
Below are the most common sources of financing.
Financial sources
Your savings:
At this point in your mind,
you always think about spending your sweat and tears.
This is also a good sign
because other investors may want to do business with you
when they know you will take the same risks with them.
However, don’t spend all your savings,
keep some.
The immutable rule is
that you often need more money than you think.
Therefore, keeping a little money gives you peace
of mind knowing you have some money left in case of an emergency.
Business Secret:
Always save
Set aside a savings every month.
It helps you limit spending money when not needed.
Tax relief: If you’ve paid taxes for several years,
you may be considered for a tax break
when your business doesn’t make a profit in the first year.
Family and friends:
This is the cheapest place to get a loan.
However, the emotional debt is huge.
If you intend to borrow money from friends and family,
do it professionally.
Draw up an agreement
that spells out what you’ll get from your investment
and how you plan to pay.
Business Tip:
Be Careful With Credit Cards
There are many stories of bold
and determined American entrepreneurs
who started their businesses
by borrowing a lot of money from credit cards.
This sounds simple but is actually very risky and expensive.
The risk is that you will fall into a spiral of debt,
use one card to pay for another,
and always incur high interest rates.
You don’t have to put up with that pressure.
Venture capitalist:
Anyone who thinks it’s a good idea to start a business
with easy money should read Boo Hoo’s book on the rise
and fall of boo.com.
As soon as it went live,
the site’s value almost doubled
because a venture capitalist misread the dollar sign
as the pound sign in a fax machine,
and then converted that value back to the dollar.
But in reality you will never find something like
that for your business.
Investors always have very high requirements
when bringing money to invest.
Basically, they are usually looking for an exit for their investment
(after three years they will seek to cash out of the business
by selling the business,
selling shares or floating the business).
More attractive ways to attract capital are:
In business, you create life
Business people:
That is participating in the program “Start-up”1.
Business nobility is usually a wealthy individual
(or sometimes an organization);
They will make a long-term investment in your business.
Like the venture capitalist,
this person will claim shares in the business.
Their profits will often be personal in that business
and they will get a tax break on their investment.
Another important thing is that in addition to capital,
they also have professional experience.
This gentleman often has a remarkable track record in business.
Therefore, they can help you on your way to business
as well as introduce you to many important people for your business.
There are many potential investors that you can approach.
Or you may already know a certain wealthy person
who can both make a profit
and be interested in your business.
Iain McGlinn has a small garage.
A friend of his set up a shop selling beauty products
and wanted him to raise capital.
He contributed £4,000,
equivalent to 25% of capital.
When that company was sold,
Iain earned £150 million for his shares.
Banks:
Sooner or later you will go to the bank,
whether you come to save money or borrow money.
Many people feel stressed
when they go to the bank.
The trick is to think of banks as “money stores”:
they want to “sell money” for a better outlook
– they can only profit from the interest on the loan.
How do banks lend you money?
They give me an umbrella when the weather clears
and take it back when it rains.
This is the most commented on the bank.
During the economic recession,
many banks made ill-advised lending decisions.
However, they are now more cautious when acting.
Their business is not for charity.
After all, it’s up to you if you don’t want it to happen to you.
Prepare a business plan:
The first step is to show them your resolve
(review Chapter 8).
Show up to them in a professional manner.
Show them that your business plan is serious.
If you show that you have a variety of sources
of financing such as savings,
from other sponsors or customer orders,
they will feel more confident.
Check the product price:
Like any other item,
when you want to “buy”,
you need to check prices.
If no bank accepts it, don’t worry.
There are many other sources of money
and they won’t cost too much.
Make an offer early:
If a friend in a desperate situation wants to borrow money from you,
even though you’re sympathetic,
wouldn’t you feel nervous about lending it to them?
The trick is to always ask for more than you need
and to make the offer early.
The bank will be very impressed with your careful work
and a long-term plan.
Stay in touch:
As with any customer or supplier,
it is important to maintain a good relationship.
When you start a business,
send a notice or article
with information about your company to the bank.
It is easier to lend money to someone you know,
that is love and trust.
Matt, who was in my college room,
It had a very good relationship
with his bank manager.
After each vacation he sent beautiful pictures of the country
he had visited to the bank manager,
and he was usually very comfortable extending Matt’s sizable excess.
Except for the last time when he returned,
the manager was no longer working.
Apparently he took early retirement to travel.
Vietnam’s IDG Investment Fund IDG Ventures is a chain of venture capital funds
with a global network under management of more than $3.7 billion.
Over the past 15 years,
these funds have invested in more than 220 companies.
The IDG Ventures network consists of six investment funds operating independently
in North America and Asia.
Each investment fund representing its group is International Data Group (IDG)
– the world’s largest information technology media group,
which has full control over the investment.
Venture capital is unique in that it invests in startups
or new companies that are in business for a period of two to four years,
which are in the process of building products and markets.
IDG Ventures Vietnam mainly invests in private companies.
The Fund will review and appraise all investment plans for potential growth,
market opportunities, management team and leadership,
competitive position.
Estimated investment costs for companies will be divided as follows:
40% for the early stage,
40% for the middle stage,
20% for the developed and developing stage.
IDG selects companies to invest in based on defined investment criteria.
In particular, to be invested,
a company needs to meet the following criteria:
Have a talented executive team with strategic vision,
experience and determination to build a successful company.
Have a superior profitable product or service
with clear market segmentation.
Able to use technological
and commercial advantages
to maintain its advantage in the market.
Understanding the geography,
customs of the market as well as customer preferences.
Ability to quickly adapt to market changes.
Comply with international standards for operational
and financial transparency.
IDGV entered Vietnam in 2004.
In the first five years,
the amount of capital this fund is expected
to spend on the Vietnamese market is about $100 million.
In the next five years,
the capital is expected to triple,
depending on the evaluation results at the end of phase 1.
After three years of operation,
the fund has invested in more than 25 companies in the field
of information technology. media, in which,
many typical projects in the Internet field such as:
yeuamnhac.com (online music),
Goldsun Focus Media (advertising on LCD screens), zing.vn,
baamboo.com (searching on LCD screens), zing.vn,
and baamboo.com online), diadiem.com (online map),
123mua.com.vn, chodientu.vn (e-commerce),
sanotc.com, vietstock.com (stock information),
cyworld.vn (social network) assembly),
clip.vn (online video sharing).
10,000 billion VND to invest for young people to learn jobs
and start a career
The Government of Vietnam has approved a project
to support young people in vocational training
and starting a business with a total investment capital
for the next five years (2008-2012) of VND 10,000 billion!
Accordingly, the Government has agreed to assign the Central Youth Union,
the Ministry of Information and Communications,
the Ministry of Labour,
Invalids and Social Affairs,
the Ministry of Education and Training,
the Vietnam Chamber of Commerce and Industry,
VTV and other agencies.
Authorities implemented a three-year propaganda
and advocacy program (2008-2010) to create awareness changes in society.
An important part of the next content is the organization honoring young businesses
and good economic people.
The Government has also agreed to implement a preferential credit program
to support and foster young entrepreneurs.
Under this program,
about 20,000 to 25,000 young people will be supported to start a business.
Supporting young people to start businesses
and start their own businesses is a big program.
The Central Youth Union will coordinate with the Ministry of Labour,
Invalids and Social Affairs,
the Vietnam Chamber of Commerce and Industry to develop this strategy.
The goal of this program is to promote young people with aspirations
to start a business and get rich.
For young business owners,
the program will also support them with business knowledge
and skills domestic and international laws
with the desire to minimize losses in production and business.
