Keep a tight rein on budgets, expert urges
Bootstrapping for as long as possible instills discipline in start-up companies and helps the founders hang on to ownership.
That was the advice of Kiwi entrepreneur Jonty Kelt, who addressed about 500 people at the 2012 Canterbury Software Summit in Christchurch yesterday.
Kelt heads United States-based global technology firm Group Commerce from his New York headquarters and dispensed some practical advice for local start-ups wanting to expand overseas.
Running firms independently on a tight budget for as long as possible instilled discipline and minimised dilution of the founders' ownership, Kelt said.
Group Commerce helps media companies to sell products online and includes The New York Times among its clients.
The key to securing clients and investors was identifying a real problem for a big market, and finding a scaleable repeatable solution that had margin.
Investors were interested in the market a business was targeting and who was in its team.
A pretty standard trajectory for start-ups obtaining investment in the US was 75 per cent dilution within two years, with the founder left holding 25 per cent, Kelt said. "You have to bootstrap for as long as possible. It also has the benefit of minimising dilution. Bootstrapping makes you disciplined."
The funding process typically took 12 to 16 weeks before the money hit the bank account, he said. "Get a good lawyer. Minimise dilution and keep control."
In a funding presentation, the simpler the better. "Ultimately, an investor wants to look you in the eye and see your conviction. You've got about 30 seconds to connect with your investor.
"Get an experienced board of directors in place who will challenge your views. You don't want yes people around you."