Published on the 29/09/2009 | Written by Newsdesk
Investors looking to buy into fledgling technology companies want to hear business plans, not product details, says Mark Weldon …
Owners of technology start-up companies need to give more focus to pitching the strength of their business plans and put less effort into explaining the products they are developing.
That is the view of Stock Exchange chief executive Mark Weldon, and a message he shared with attendees at recent NZICT meeting in Wellington.
Computerworld reports Weldon told the meeting he was concerned start-up and early-phase ICT companies searching for capital give potential investors little real information about their business.
“It is extraordinary how little [New Zealand] CEOs know about their business,” he was reported as saying.
“That is why capital markets don’t fund them. They want information about the company. What they continue to get out of the ICT sector is information about the product.”
Product information was almost irrelevant, Weldon said, because what mattered when business owners talked to potential investors was that “you’re just asking them to buy a dream”.
He cited local software-as-a-service accounting solution provider Xero as an example of a business that had done a good job pitching its business model to key investors.
“Raising capital and doing it well are different,” Weldon said.
“Xero has gone back to the market several times. Most companies think of capital raising as a one-off exercise. But if you want New Zealand to be more than an incubator for the rest of world, if you want to generate New Zealand companies that stick around, then you should aim to minimise the cost of capital over a period of time,” he said.
“The ones that struggle are those that fight for the last cent the first time.”
