As former General Manager of the Escalator Programme at the Economic Development Agencies of New Zealand (EDANZ), now running his own consulting company, Mark Robotham offers insights on how Kiwi tech companies can prepare themselves for capital raising and better market themselves.
“We are a nation of great craftsmen but many of our business founders don’t put enough emphasis on the aspects of the business beyond the product” says Mark.
He explains that many tech companies are often very product-oriented, whereas the investors they look to for funding want to know how much margin they will make, how the business can be scaled and how IP will be protected.
“Fundamentally, it’s just learning how to talk. Companies can be poor at their sales pitch and telling their story in the appropriate manner, particularly in a short and concise way.”
With the investment market flooded with companies putting their hands up to raise money, Mark says businesses need to stand out from the crowd.
One of the most common issues he sees is that many companies either haven’t considered the option of raising capital for their business, or they have but don’t know how to go about it or position themselves appropriately to potential investors.
One of the biggest issues, he says, is that tech companies are unrealistic about timeframes when it comes to raising capital. “A consistent message we get from start-ups is ‘it took a lot longer than we thought’ so people need to start sooner rather than later. Usually it takes 6-24 months to raise money, and companies typically don’t allow enough time for this process. Even if an investor is engaged early on, it can still take awhile before they’ll write out a cheque.”
He also believes Kiwi tech companies undersell themselves and don’t spend enough time getting clarity and focus around their value proposition as they do actually developing the product.
“While focusing on the technology of a product will work well for your early adopters who are typically very technology-focused, sales can start to taper off if you haven’t put enough thought and effort into your sales pitch.”
It’s about focusing on something that really adds value rather than more technical bells and whistles. If you have no value proposition you have no business,” says Mark.
His 3 key messages to Kiwi tech companies:
• Put some effort into getting clarity around your sales pitch. Making sure it is very clear how you add value to your customers and how your product will generate revenue.
• What about your product will make it a low risk investment? How can you reduce some of the risk in what is typically a high-risk environment?
• Be realistic about the valuation of your company and the value of the products you provide. If you can secure a first round of funding, then it can be easier to secure subsequent rounds. If you value your products and company too high, there is the opportunity cost of not attracting any investment funds at all.