Kuwait workshop imena group

How to Attract Support & Investments for Internet Businesses?
How to Attract Support & Investments for
Internet Businesses?

Table of Contents
Executive Summary .................................................................................................................. 3
Business Idea............................................................................................................................... 4
 Proven Business Model................................................................................................. 4
 Addressable Market ....................................................................................................... 4
 Scalability .......................................................................................................................... 6
Pitch Deck...................................................................................................................................... 7
The Problem ............................................................................................................................. 8
The Market................................................................................................................................ 8
The Business Model ............................................................................................................. 10
 The Product................................................................................................................. 10
 Revenue Streams..................................................................................................... 11
The Competition.................................................................................................................... 12
Minimum Viable Product (MVP)....................................................................................... 13
The Team................................................................................................................................. 13
Growth Plan ............................................................................................................................ 14
Required Funding ................................................................................................................. 16
Pro-forma Financial Statements..................................................................................... 17
Where to Find Investors?...................................................................................................... 19

Executive Summary
One of the main reasons for the high failure rate of start-ups globally is the
lack of investments and support. Some very good ideas go to waste, not to
blame investors; but entrepreneurs have to work harder in order to convince
the investors to put money and offer support.
Attracting an investor is not a simple task, especially for a start-up. An
entrepreneur can only attract investors for a small business with preparation,
planning, strategy and proper research. Finding an investor may be the key to
launching a start-up business successfully.
Before speaking with any investor, an entrepreneur has to prepare a well
thought of, well-researched business plan, and that cannot be simply
statements about how successful the idea will be. Statements must be backed
with proof in the form of case studies and research studies.
Start by researching the business model you are launching, research the
industry and the market, conduct simple surveys, and do some simple market
tests. Gather information about potential competitors, and how you can set
yourself ahead of others in your industry. A convincing and thorough business
plan is key to attracting investors.
Save a significant sum of your money to invest in the business before seeking
investors for the rest. If you approach an investor after you have put your
money on the line, they may take your idea more seriously. Technology
entrepreneur Tim W. Knox calls it "having skin in the game." If you're not
willing to invest in yourself, he asks, "Why should anyone else be willing to
risk his or her money in your business idea?"
Leverage your own network and attend networking events, business fairs, and
industry events to pass out business cards and start establishing these
connections. And always, ask for face-to-face meetings with potential
investors.
Again, raising funding for a start-up is no simple task, it comes with
preparation, having a strategy in hand, and going fully-prepared to launch the
next “Big Thing”!

Business Idea
The traditional cliché of entrepreneurs is that they want to change the world.
The word “disruptive” has been exploited and exhausted. So what makes a
business idea appealing to investors?
 Proven Business Model
A solid business model is the core of any successful startup, no matter how
cool an idea is, a startup must have a viable way of making money that is
worthy enough for future investment and to sustain itself.
Emerging markets are following the steps of the emerged markets, adopting
businesses that solved problems and made it easier for people to live their
lives!
20 years ago, people used to go to print newspapers to list their used cars in
the classifieds section in order to sell them, others used to buy the
newspapers to look for such cars, the process was costly, time-consuming and
inefficient. The likes of Craigslist (http://www.craigslist.org/) which was
founded in 1995 in the U.S., managed to find an efficient way of creating a
marketplace that connects buyers and sellers with an up-to-date fresh
content; an online classifieds portal. Print newspapers started looking for new
revenue streams to overcome the drop, users were shifting from using the old
way into using a much more efficient way. Now in the Arab World, you can
find businesses like OpenSooq (http://www.opensooq.com/) a mobile-based
classifieds platform that adapted to the shift of the users from using the old
print newspapers, and the high smartphone penetration rates in the GCC and
localize the process to address the market’s needs. It adopted a proven
business model from emerged markets, and localized it to address the local
market in the MENA region.
 Addressable Market
The majority of startups fail within the first few months of launching. While
there are many reasons why businesses fail, including some that have nothing
to do with the founder's skills, it’s also possible that many of those startups
failed because they couldn’t get enough customers to use their product or
service. In other words, the founders founded their startups based on a
strategy of “build it and they will come” where, unfortunately, the customers
never came.

First of all, start by asking yourself those questions;
i- Is the product addressing a real market need?
ii- Who are the potential customers?
iii- How big is the potential customer-base?
iv- Is there competition in this domain? Is it direct or indirect, local,
regional, or global?
v- How distinct is my product?
A market research will help you verify if the market needs your solution, and if
there are customers willing to use such a product or a service.
 Desktop Research
Desktop research is one of the simplest and most crucial steps in validating
the viability of a business model. Start by reading about the model and
looking for statistics to prove your business’ thesis. What need are you
addressing, how big is the market that you are addressing, how do people
deal with such needs, who is your competition, do you have direct or indirect
competition.
 Google It
One of the very simple tricks in validating a business idea or testing the
market is by using Google search, type in keywords that must be used to look
for a similar service or product like the one you have in mind, and pay
attention to the paid ads, that should at least give you an overview of the
potential direct and indirect competition.
Researching the market will help you determine if it is being underserved or
possibly saturated with the product or service that you are thinking about.

 Collect Feedback
Take advantage of your family and friends. Ask about the product, how
familiar the model seems, will they use it? why would they use it? is it solving
a problem? Then use some simple online tools to do surveys, the collected
data will give you an early-on indication of whether the product or service has
an addressable market or not.
Detailed demographic data can show that even if the market contains
significant competition, you have an opportunity to successfully introduce a
new business or improve the performance of an existing one. Demographics
such as gender, age and marital status will help you better understand who
your potential customers are. Analyzing the price points of your competitors
will also provide insight into why people might be buying a particular product
or service. And that’s what investors will ask about!
 Scalability
How scalable is your product? Where are you going to expand next? How much
will it cost you? Those are all questions that the investors will ask, they want to
know how scalable your business is, and what is the potential of adding
incremental revenues.
Starbucks is a great business, but you would need to open a new store in order
to increase your sales; which will lead to slower growth and greater capital
requirements. Internet businesses are magical as they give you the ability to
build and grow global companies in record times – just look at what Google,
Facebook, Amazon and many others accomplished in less than 10 years.

Pitch Deck
Going to an investor with only an idea hoping that they will put money and
offer support is like going to war barehanded, you hope to win, but your
chances are null. All your ideas, the problem, the solution, the market data,
and everything in your head must be organized in a pitch deck. So what do
investors look for in a pitch deck?
First of all, you need to know that your pitch deck must be inter-related;
meaning that every piece should be tied to the other pieces in order to create
one big story! Throwing in different pieces with no linkage would lose the
investors’ attention, and you will end up out of the office with nothing in hand.
You need to start with a high-level summary of what are you pitching. The
need that your business is addressing, the way you are addressing such a
need, and the market you are addressing with your business. One page or
slide to give an introduction at a high-level on what are you discussing with
the investor. Then you can take them into the deep-dive on how you reached
that your business is the “Next Big Thing!”.

The Problem
First off, you need to start with the problem, what is the problem that
consumers are experiencing? State out the pain points, and keep your
primary focus on your targeted audience.
This statement will lead to a discussion whereby you need to validate your
business hypothesis; How big is the problem? And how big is the addressable
market? Which will be answered in the Market section.
The Market
Investors are usually market-oriented, you need to show that you are tapping
into the right market, that appeals to the investor, and that has the potential
to generate a high return on investment for them. Tapping into a $10 billion
market might not be the right market all the times. Investors want to see that
you are tapping into a market that has potential to grow, and to see that you
are tapping into that market the right way.
The market research will help you in validating your business hypothesis
before going into the fund-raising process. The more you are convinced of the
market, the easier for you is to convince the investors.
Start with presenting the macroeconomics of the market that you are
approaching, then take a deep dive into the micro data of that market, slice
and dice the data and start going into details of why the data proves that you
are tapping into the right market.
Tip; always use credible sources and keep them obvious.

Example: You are starting a new digital fashion catalogue smartphone app
for retail stores in Kuwait; what data do you need to present, and what data
do you need to prove the business hypothesis?
Below are some of the data that you might need to look for;
1- Macroeconomic data about Kuwait to show the spending potential in the
market
a. GDP per capita
b. Disposable income for Kuwaitis
2- Retail market size to show the size and the growth in the industry that
you have chosen
a. What is the share for fashion and clothing?
b. The growth over the years
3- Where does retail stores advertise? – to lead to the rational on how your
business will make money
a. What portion does the online expenditure constitute?
b. How many stores do actually have an app?
4- Internet Usage in Kuwait – to show that user adoption can be high
a. Growth in Internet users and Internet penetration
b. Smartphones adoption rate
c. Usage of apps in Kuwait
5- Present the shift in the trend (searching online; buying offline)
a. Show how people are using the Internet to search for products
before buying
b. Show how people are comparing prices online before going to
stores
6- Include market surveys to prove your business hypothesis
a. Show how much retailers are actually willing to advertise on your
app
b. Show how much people are willing to use your app
Take a bird’s view of your business, play devil’s advocate with a trusted friend
to see what investors might ask for. The collected data will be used in your
sales pitch for the retail stores themselves, present it like a story, make it more
interesting to read, and include only relevant data.

The Business Model
 The Product
After presenting the idea at a high level, and after presenting the market data;
investors will have a good idea what are you talking about. Now they want to
see how are you addressing the market need in details.
Thousands of startups are launched every day, and most of them die very
quickly; what’s your offering? Why is your startup different? And why should
the investors risk money with you?
Start by presenting the problem; and point out what are the pain points for the
consumers (you might be a marketplace or middleman, so you need to point
out the problem for both sides – sellers & buyers for example).
Use the Value Proposition Canvas in presenting the solution; Match what your
product do, and what the customers need.
 Product
o Benefits
 What does the product do?
o Features
 How does your product work?
o Experience
 How does it feel like using the product?
 What is the user journey like?
 Customers
o Needs & Wants
 What are the pain points for the users?
 Why do they want to use it?
o Fears
 What are the risks associated with switching to your
product?
Using such a model will show how your product works, and what exactly is it
addressing. It shows the business logic, and how the user journey looks, the
investor will be in the user seat, they need to see why and how are they going
to use such a product.

 Revenue Streams
After showing how your product works, and why users would actually use it,
investors will ask you one very simple question; how are you going to make
money? Revenues are the bloodstream of a company, and choosing the right
revenue streams is no easy task.
List down the different revenue streams; do not expand the list to cover all
possible ways of making money in the world, keep it tied to your growth plan
and the product growth cycle; example:
1- Is it a subscription-based model?
a. Is there a need for users to switch and start using your product
immediately?
b. Or do you need to educate them slowly?
c. Are they willing to pay money from day 1?
d. Or do they need to test your product first?
2- Is your business based on advertisement revenues?
a. Are you reaching the right market?
b. Who are the advertisers that wants to advertise to such a market?
c. Are you going to provide performance-based advertisement? Or is
it regular advertisement?
3- Do you depend on commission?
a. Who are you charging for the service?
b. Would they sacrifice their cut because you are offering a better
medium for them?
Each revenue stream will have its own list of questions; you need to cover all
the questions before meeting any investor. Show how similar models globally
worked and use the market research that you did to show the market size.

The Competition
One key area where investors focus is competition. This is similar to how you
pitch your startup to investors, investors need to know who else is out there
solving the same problem. It’s not a wise idea to leave competition out of your
pitch, it is not a great way to start a relationship with your potential investors
by hiding market information that they can get, or realizing that they know
about the market more than you do. Your job is not to hide competition, your
job is to outline what they are doing, and outlining how and why are you doing
a better job than them.
Start by creating a table and list the competitors;
1- Organize them by direct competition vs. indirect competition
o A direct competition for an online classifieds portal is another
online classifieds portal, and an indirect competitor might be a
print classifieds paper.
2- List down their focus areas, services and products offered
3- List down the areas they are doing a good job at, list down their
strengths and area of focus
4- List down the areas they are failing at, list down their weaknesses
Such a table will allow you to create a go-to market strategy, to show investors
how are you going to attack such a market, and how are you going to deal with
competition. By way of an example, you could outline how you plan to target
different niches or cater for a slightly different demographic or market
segment.

Minimum Viable Product (MVP)
Let us start with the definition of a “Minimum Viable Product”; which is “the
first version of a new product which allows a team to collect the maximum
amount of validated learning about the model and the customers with the
lowest risk.”
A minimum viable product is the best way of testing the market, and learning
about the user experience and journey for any new startup / business, with the
lowest risk possible. It validates the business model at a high level, and
validates the way a business is addressing a market need.
Investors look for dedicated entrepreneurs, even if you have not left your job
yet, dedicating the time to build an MVP and testing the market will show that
you are a “Dedicated Entrepreneur”; putting the money and effort to build what
you believe in, as well as showing that you are a “Smart Entrepreneur”; testing
the market before going all-in, both of course appeal to all investors.
Having an MVP helps in driving investment discussions in a different way, it
provides an on-ground in-hand data about the model and the market. Driving
the conversation with investors into an operational discussion rather than an
ideation discussion increases the chances of taking the entrepreneur much
more seriously.
The Team
A startup’s team is considered the pillar of future success. Investors are not
only investing in ideas; they are investing in teams that are going to build the
“Next Big Thing!”.
Dedicate a section in the pitch to talk about the team. Add the background of
the key members, highlight any of their successful ventures or exits, and try to
relate it to the startup. Add your background too, and relate it the startup as
well. Investors like harmony between any startup’s members, so if applicable,
emphasize that your team has worked together in the past.
If the startup already has any mentor or advisor, it’s preferable to highlight
who the advisor is, and add a background about them too.

Growth Plan
Where do you see the product next year? Where do you see the business in the
coming 3-5 years? What markets are you going after?
All of the above are questions that will be asked by investors, they want to see
how can you leverage the scalability of your product to address bigger and
bigger markets, or at least how are you going to cover a certain market and
create a leader and a winner.
There are 3 main types of online businesses;
1- The Local Product
This is the type of product that addresses a local market need and that cannot
be expanded into other markets. This is similar to KNet
(http://www.knet.com.kw/) in Kuwait, SADAD (http://www.sadad.com/) in
Saudi Arabia or eFawateercom in Jordan (https://www.efawateercom.jo). This
type of product is built to cover a need for a certain market and it is directly
linked with the local consumers and market; in this case creating a safer and
easier payment method backed up by the central bank.
Innovation, improvement of user experience, operational excellence, and
establishing high barriers-to-entry are key to create a leader.
2- The Regional Product
This is the type of product that leverages the similarities in close market like
the MENA region, the European Union, or more like the GCC to address a
consumer’s need. CashBasha (http://cashbasha.com/) for example is
addressing the issue of the low credit card penetration and the lack of online
payment trust in the region to shop from Amazon with cash.
This product can also be created to address a need for a certain market with no
geographical focus; similar to what Mawdoo3 (http://mawdoo3.com/) created,
addressing the lack of Arabic encyclopedias online by creating a Wikipedia for
the Arab World.

3- The Global Product
A product that addresses a universal need, a product that disrupts an already
existing model and builds on top of it, a product that can expand seamlessly
into many markets using economies of scale. Google
(https://www.google.com) for example created a global search engine that can
be used by any Internet user all over the world. ReserveOut
(http://www.reserveout.com/) created an online restaurant reservation
platform and a restaurant management solution that can be used by all
restaurant owners.
You need to define in which category your product falls, and map out the
product’s growth plan, be it introducing new features as it grows, or the
operational expansion in different markets. Once you categorize the product
and map out the growth plan, investors would want to know what would it take
for the company to take the product to that stage. Start by breaking down the
roadmap of the product and the expansion / growth plan into phases, and
create a forecasted budget and costing sheet for each phase. The cost
associated with the growth plan will be included in the overall required funding,
and this will show the investors where is this product will be in the coming
future.

Required Funding
How much are you looking for? That would be the typical question that you will
hear from the investors at this point, and you need to be prepared with a
scientific answer and logic.
This question will be a test for your business logic, and your operational
mindset, so you need to show the investors the breakdown of the amount you
are about to ask for. There is no secret sauce on how to breakdown the
required funding, but there is one important thing; always ask for funding that
will cover the businesses expenses for at least 12 months.
Breakdown the required funding into 3 parts;
1- Product
a. Tech team – the team that will build and maintain the product
b. Software needs and other services (hosting…etc.) – that are need
c. Hardware needs for some businesses
2- Operations
a. Operations team – that will run your business
b. Business development & sales team – that will collect the
revenues
c. Office needs and expenses
3- Marketing – a scientific breakdown for the amount of money you need
in order to acquire as many users as possible in a given period of time

Pro-forma Financial Statements
Many entrepreneurs ignore or underestimate the importance of a proper
financial model. Not only does a financial model summarize what you have
been trying to pitch, but it is the best source for the investors to financially
forecast the amount of money that they will put in and the return on the
investment that they are about to make. But a typical statement by many
entrepreneurs is that they don’t come from a financial or a business
background, so how can they create one?
You don’t need to be a banker or an accountant in order to create a financial
model, it all depends on the market data that you have, the market analysis
that you did, the operational breakdown, and most importantly the
assumptions that you are using to prove the business hypothesis.
Start by creating an assumptions and an input sheet on excel, insert all the
relevant market data that you need, and use benchmarks for penetration rates
and adoption rates. Try to reach to the big numbers in a scientific way step by
step.
Example of using assumptions;
 Reaching to how much am I going to spend on marketing - Using
Customer Acquisition Cost (CAC)
You are launching a new startup, you have released and tested your MVP,
spent a couple of hundreds of dollars on online marketing, so what’s next?
1- Calculate the market size – the total number of users who are able to
use your product if you can reach the whole market
ReserveOut – the online restaurant reservation platform would research
the number of restaurants that accepts reservations, and in need to
collect customer-intelligence in order to provide a better service.
2- Benchmark regional and global players’ data, try to calculate the
adoption rates each had in their own market and benchmark it
Going back to our retailers’ application, you would research the
breakdown of global advertisement spend online vs. offline for retailers,
benchmark it against your addressable market, and create a more
scientific approach to come up with forecasts.
3- Calculate the growth rate that you can achieve
Use the same benchmarking methodology as above
4- Calculate how much will it cost the business to acquire a new customer
(CAC – Customer Acquisition Cost) - using the data that you curated
during testing your MVP, the global benchmarks, and the local market
data

5- Assume a certain and realistic optimization level that you can reach to
lower your product’s CAC
Based on by how big is you market, how much realistically you can grow every
month, how many users you can acquire, and the CAC that you have; you can
calculate your marketing expenses.
Tip; Many of the data about global players and markets can be found online,
you can find many players that are publicly listed, you just need to analyze
their reports.

Where to Find Investors?
Looking for investors is not the easiest task of all, but doing it in a smart way
will save you months of fund-raising efforts. Success is not only about how
much money you raised, having the biggest funding doesn’t guarantee success.
Breakdown the business funding needs into strategic & financial.
1- Strategic Investors
While most entrepreneurs look at investors as a cash resource, strategic
investors bring what all startups need most; distribution. In the startup
world, it is not always the best product that wins; it is the product with
the best distribution and best path to customer acquisition that wins.
Strategic investors usually bring along many pros beside the money,
they can create connections, open doors, create shortcuts, extend
operational help, leverage their economies of scale for your product, and
provide managerial and operational mentorship.
2- Financial Investors
Financial investors constitute the majority of the investors in the world,
whether individuals or corporate investors, financial investors provide
money and the space for the entrepreneur to prove the concept.
After mapping down the real business needs of the startup, the journey to find
an investor begins;
i. Networking
Attend local and regional startup events, meet the people in the
industry, network and discuss your product and their products, you will
find synergies and you might as well find your investor right there.
ii. Incubators & Accelerators
Incubators & Accelerators are the best places to start your small-
business from; especially if you are in need for physical office space,
mentorship, direct access to angel investors, and have no problem in
giving up some equity in return for the services they provide. In
addition, Incubators & Accelerators are the best for you to meet other
entrepreneurs and tech-savvy teams, and share experience.

iii. Crowdfunding Platforms
Crowdfunding platforms provide startups access to many different types
of investors; from the general public with an interest to participate in the
“next big thing”, to philanthropists who believe in helping others realize
their dreams, to accredited investors seeking new ideas to fund.
iv. Angel Networks
Angel networks can provide you with a list potential individual investors
who not only will invest in your startup, but will also sit on your
shoulder, offering mentorship, solid advice, and provide access to their
network of contacts. Such investors usually demand a bigger equity, but
that is because they are sharing a bigger risk with you, spending not
only money, but time also.
v. Venture Capital & Private Equity
Both can be the best providers of cash & support for your startup, but
you need to analyze the strategic added value beside the money. Look at
the portfolio, try to find synergies, and tell them why do you think they
are the best choice for your startup. Such investors usually come at a
later stage; the growth stage.
At the end, attracting support & investments for your startup is not a simple
task, it requires dedication, strategizing, building a proper product, and
mastering the pitch!

Pitch Deck Checklist:
1  The Problem
2  The Market (Macro data, Micro data, market analysis,
technology usage…etc)
3  The Business Model
3.A o The Product
3.B o Revenue Streams
4  The Competition
5  Minimum Viable Product (MVP)
5.A o Product Features
5.B o Market Learnings
6  The Team
6.A o Key Members
6.B o Advisors
7  Growth Plan
8  Required Funding
9  Pro-forma Financials

anas@imena.com

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