PropertyGuru has been profitable since 2010 and was a clear market leader in Singapore. As such, they decided to expand to 3 new markets to solidify their market position in Southeast Asia in 2011. Unfortunately, they underestimated the challenge of this ambitious undertaking and faced many issues in hiring the right people and tailoring their product to fit different markets, among other technical problems. These problems took 3 years to iron out and almost broke the company.
It was their foresight in securing the right type of investment that helped them to ride out these issues and helped them have the resources for a successful expansion.
As PropertyGuru found out, scaling is a tricky decision. For many, this will be a true trial by fire because for the first time, they’ll need to take a long hard look at the systems they have in place – current system bottlenecks, technical difficulties, and more – and solve problems for a successful expansion. Investment is often needed to finance this expansion to deal with these problems. After all, what used to work for a small startup will not work for a large regional player.
How then does a startup founder make the right decisions during this expansion while minimising risk?
The first step is to consider your source of funds. Founders can explore getting funding from Venture Capitalists (VCs), acquisitions by Private Equity Firms (PE), or loans. These come with their own set of challenges and risks and the choice will differ based on a company’s financial needs and vision. VCs will want some degree of ownership, PE firms will want complete ownership, and loans come with increased financial burn rates.
For those that decide on the VC route, the choice of investor will also matter significantly. Depending on your end goal, you will want different things in an investor. What an investor brings to the table is as important as the funding he is willing to provide. Are you looking for connections, strategic advice, or specific opportunities? Find a good investor and you’ll be able to succeed. Smart money does trump dumb money every time after all.
These are just some examples of things you should consider when choosing an investor. Once you’ve made your choice of bed to lie in, you can’t get out.
Let’s talk about investments for scaling!
For anyone who’s facing such issues, you won’t want to miss next week’s AMA with Steve Melhuish. He will be sharing his view on securing investment for scaling in next week’s AMA : Cash is King – Investment to finance Scaling. With his experience raising over $280 million over three funding rounds, he has invaluable insights that anyone can benefit from.
He’ll be covering everything from your capital options, the amount of capital to ask for, and how to choose your investors. You’ll also discover what to do when things go bad, how to deal with them, and more!
Leave your questions in the comment section below and Steve will tackle them during his AMA on March 29 (THU), 4PM SGT. Don’t forget to turn on Facebook notifications for our e27 Facebook page to be notified when Steve goes live!
Only for TOP100 Participants: We’ve sent out a special message in your email for you to leave your questions. We’ll be giving those questions priority so don’t forget to reply to that message!