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What do your customersreally want? Dr Graeme Codrington answersthe question

Vinny lingham, a small town South African, turned a desireto run his own successful businessinto reality through commitment,persistence, carefully managedpersonal networks and a never say die attitude.

AREWE ENHANCING ORINHIBITING ENTREPRENEURSHIP?
J ULY O 9 I S S U E0 2O _ 4

a businessin the midst of a recession Expertadviceon bo-otstappingyour start-up
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9 Compelling reasons to start

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HOTIIST TECH GUIDE 20-page supplement
F S G UI DE O R T A RT I NGI M P RO V I NG SIN ESS & A BU

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PHOTOS ED'O BY RILEY

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gt"* up in a small town in SouthAfrica,a boy watching movies like Wa11 rcef and Sf wanting to be somethingmore. I always kn ew I want ed t o r un m y own s uc c e s s _ ' ful bus ines st,hat t didn' t want t o lea d a bo r ing lif e. lt ' s pr obablya f air ly r y pi c a l story of many entrepreneurs, I guess but what s et sm e apar t f r om ot her sis t ha t I don't fear failure in the same way that many do. Sure, I don,t want to fail, and I do everything I can to avoid it, but the fear of failure doesn't prevent me from taking big risks. I think I have courage. And this willingness to take risks with my own money was definitely a big factor in landing the funding we did for Yola. I think it made a big difference that I had personallv invested about R2 million of my own money into the business. It showed a willingness to put my own neck on the line, which showed a real commitment to making the business work. And I think that we had a great idea as well. I '' lT ALt STARTED lf{ GAPE T0W1l. I was runnins one of mv previouscompanies Iled Cl icks2Cust ca omers,unJ *" crea tei website-building software for our own internal use to build websites faster for our customers.We realised there was a mar_ ket for businesses be able to build their own websites,instead to of having to pay someone elseto do it for them. The idea made a lot of sense,particuiarly in the mass market targeting small to medium-sized businesses. Every business needs a web presence,but entrepreneurs often lack the capital to pay a company to ffeate one for them. If we could give them the tools to create their own website for Iree, we would be on to something big. We alsoknew that the world was changing and that software was moving increa._ ingly to the web, so the idea was to put the software onlin= instead of selling it to people on a CD which they would therhave to install. Taking the company online would also oper. up access an enormous giobal market. With that, I decicie: to to leave Clicks2Customersin 2007.I bought the technolo:. and the intellectual propertv out of the company and sp.*: off a new company, Sr.nthaSite March 2007which is rr-r-.:: in eventually becameYola in -\pril 2009.

I TRIED UilSUCCgSSFUttY ABOUT FOR FIVEIIIIOIITHS TO GET FUI{DII{G BOTII I]I SOUTH AFRICA AI{II TIIEUIIITED
STATE$.But the South African venture capitalists didn,t realty get the businessconcept - they didn,t think it would work _ and the US venture capitalists weren't really looking to rnvest in a South African-based company. So it made senseto run the company from the United States.However that brought with it its own set of problems. The funders wanted to know how I was going to get into the States,how I was going to organise work permits and the like. At the time I didn't have any really good answersto those ques_ tions. I had to do researchto find out about the visa process, and let me tell you, it's complicated. The only way to really get into the US is to apply for what's called an L1 Visa which means ]'ou ha\.e to work for a South African company and then get transferredto an associated company in the United States. So that's n.hat rve did. We set up SynthaSite in South Africa and an associated company, and then applied for visas.It took US four months and a lot of paperwork, but we succeeded. I had given myself a timeline of three to four months to get runding, but it took me closerto nine in the end. Fortunately I had equitv built up that I could draw on ancl I liquidated some sharesI had in other companiesin order to keep the companv at-loai.

rH 2007,wE mAilAGED RA|$E Mil.u0lt FRoM T0 $5
COLUilBUS UEIITUREGAPITAI, which at the time was part ci JorarLnRupert's Richemont.Getting that initial investment r..-a.: irig boost for us. It enabled us to set up offices in the U::::j Statesand to keep paying salaries,o thut we could :.:.:nue to n'ork on developing and improving the product. L:rding that initial amount wasn,t easy.Generally you need :: :.:\"-esomething to show funders before they are willing So - - -r..1'est. firstly, we raised what's known as a convertible : --,: - a small amount of funding which was put in by fam_ :--. =: ;riends just to keep the businessafloat. This stabilised -:-:.:. and allowed us to get to the point where we had built : - :.=::tng that investors might be interested in taking a bite -, ,. I: s easierto start with lower tunding requirementsand - =: ::ild up to the bigger investment amounts.
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The processhvolves paperwork and patience.The first thing vou har-e to do is put together a short businessplan - something readable that you can distribute to potential investors. This is the pre-funding businessplan. It focuseson the core market, shows the opportunity and reveals why the busines. is scalable. really speaksmore to the'blue sky'and the busiIt nessmodel, while the post-funding businessplan gets dor,r'n to the nitty gritty of how you are going to make it happen. Part of writing a winning business plan is to understand the difference between the two. The first is a salespitch; the second an execution plan. You put together the post-funding business plan once you have a term sheetfrom interestedfunders - it's longer and shows the details of how you are planning to spend their investment to make the business work. I was very fortunate when we were writing the busines. plans to have a Harvard MBA intern, Brian Elliot, working ir. the company. This is one of the many benefits of being selected as an Endeavor entrepreneur.Endeavoris an NGO that mentors and grows entrepreneurs in developing countries, of which South Africa is just one. Having Brian as an intern was an enormous help in putting together the post-fundinr businessplan.

BEEil THERE, tT DoNE
VtNNy LINCHAM NtW ihechaitenge lSNoT t0 cf slarttng a busine$s faisins end fun.iing.fact, someihing ald In he's afan hand. getnisprev!0u$ Ta lnt*rnet ssa!'ch markeiing cOmpnity, incuBeta, th* gruund. had OverfiOmefa0t off h# t0 ihe that p*t*ntial inve$tOf$ didn't sinply iLnderstanC th* business *r howit lvnuld make rnofley. a cilmm0n it's challsnge f0i" particuiarly thatarepinneering sta*-ups tnelTsect0r, in tha$e nsr'.J ff0del$ ways dtingbusin*ss" i,santed and of Banks tn "sse just $tOsk" before they'd "lt invest. was elsfir they that didn't uncierstand iftternat what Search Marketing and was howit couid make milney," said. hs 8utrescur*efulne$swillingn*ss bigpers*nal and a t0take risks part are 0fi-ingham's fj* sald hause *rd*r fund *NA. hi$ in tl "i thcushiI lcst house ttte incuBsia. if th* and i:usiness then failsd get I'djust a joband acccmmadation rest mylife. rent forthe af T*ffe theth*ught nct*lrJnin$ cwnbusiness r4,0!"$f cf my was than thilught i*sing hcuse n*ver the *f my and being tobuy abfe anOther hr says. thsRl2$*flfi frcmthesale h!$hOuse s*e," To 0f h€ad{isdfurihe!" 0*0fund*d hiscredit a R75 frnm cards. Asr,vith taking per*onal pairl in*uB*ta a Yola, a risk *ff" mad* proflt almo*t immediately att!'act*d aild a fr70fi sum 0*C frrm 'l *quiiy thebusiness" *n ailg0l invsstor took 3!/o whc in lnlinding funding Yol*, far Linghaffi hav* mighl been playeis, ;.1js talhirig biggei figilrc$ bigger t0 but pnil*silphy ha$ ycu femaiiled same: thf; befar* ex:lecl sc+etfie t0fund slsg y*urbusin*$s invsst *rsnircn3!' ii anai y0ilf idee. ii'r srflffte someti]ing inveating wa*h in.

GETTIIIG IUITIALFUT{DITIG OilLYTHEFIBSTSTEP, THE IS H0WEVER.you'rehoping attract If to morefundrng, r\-e as
were/ you need to show investors that you can really run with the business and make a successof it. So we workei really hard at optimising the Yola product. The first thing we needed to do was make it easy to use. We're technologr people but we understand that most businessowners are technophobic and that they'd only use Yola if it was simple. We developed it so that userscan choosea template and then simply drag and drop text and images on to the site.You car. add whatever capabilitiesyou want and then you simply hit the'publish'button and it goeslive to the web. It can take ten minutes to build a simple site or a coupie of hours to builc something more complex.

SOHOW II'E *IAKE MOI{EY DO FROIII FREE A PROIIUCT?
It's simple really. Users can chooseif they want to have their own domain name, such aswww.entrepreneurmag.co.za, a or Yola domain name like www.entrepreneurmag.yolasite.com. The Yola domain name is free but we sell the other domain names.This is one income stream and we've calculatedthat ii one in even- 30 people purchases a domain name, it covers the costsof the other 29 who choosethe free option, and allows us to make a protrt. -\s the ratio of paying to non-paying customers improves, so the br-rsiness makesmore money. We also har-e plans to launch a template marketplace, which will pror-ide a second income stream.We will buy templates from designers and sell them on to users who want them. It's a bit like iTune: -,r:1erethe software is free but the content is paid for. Horr-erei. *>e:: are still able to get a completely free website if ther -,..'::.: -rat': our selling point. They will just have paid-for o::- - . : :. -,..'e should they wish to choosethose. 11,

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pRSFILE I EIUTREPREIIEUR

Iil t2 M0ITHS WE'UE hioEE ADBED THAIrW0 fftttnil
USERST0 OUE DATABASE.People embracethe productbecauseit's easyto use and we help them along the way. We've developed comprehensive tutorials and help pages so that people have access as much assistance to and information as they might need. There's 24/7 email assistance and a community forum where users give each other help and advice. We're aiming to have four to five million users this year, which we believe is totally doable. Becausewe focus on the SME market, the economic downturn is actually really good for us. Small to medium businessesare looking for ways to save money and boost their businesses and a Yola website can help them do both at the same time. Based on our initial success, landed a further $20 milwe lion in funding from Reinet in February this year. The deal is based on an equity structure and although we can't mention the percentage of equity they own, we can say that it is less than 49%. We always knew that we'd need visionary investors to backthis business, because althoughwe weren'treinventing the category, the concept was new. Of course, we had to sell the vision to them. But by then we had establisheda track record based on the initial $5 million investment and what we'd managed to achieve with it. Reinet was createdout of Richemont, so there was a connection there.

THE SUGCESS FAGTORS
e A gr*at pr*durt speaks that dirsctly existing tc:n neac! e Anexperisiiceci, irch-sauvy sntrsprf;neur pci$istence with and l}a$$ion c The i,viilintness t! mak* per$snal a invssi.*ent inihe per$Onal e0npany take and risk$ t A n*twOfk c0ntacts rivai netw0fks, upcver y*ars 0f to all bi.iilt people building 0t ffiBetinU and m*tuaiiy-benefici*|, value-addiilg relaiionships

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Anabilig10ettraet lT lalent iop sventhough wasa stefiYrla upwithoili longif&ck-fec*rd a Theability learn aboljihcwtil $etup a ccmpany a tn fast in foreign *ouniry . .,, . ,....-.-,=,:

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believe personal relationships make all the difference. And I genuinely like peopleso that helps as well. But uitimately the key to successfulnetworking is to stay in touch with people, and to offer them something valuable rather than to look for what they can give you. So I don't look for opportunities - I look for the opportunity to build relationships.I think it alsohelps to learn as much about your subject as you can so that people can rely on you as an expert. FoRlauEsTons, BEUEVE EI{TREPREI|EURThis means they will use you as a valuable resourceand this I TltE tS A$ IHp0RTAIT, HoTHoRES0 THAI| tF THE EUSfitE$S in turn will raise your profile and help build your network C0HGEPT.For this reason it's essentialthat you are a person further. When you spread yourself too thin and you try to be with credibility and a reputation for doing businessin an open, the'go to' person for everything, you make a mistake. Add transparent and ethical way. I don't think you can build credva1ue,give back, be genuine, interested and interesting. That's ibility; I think it's something that you prove. You either have it what I tell people when they ask about how to build the kind inherently or your don't and then you prove that you have it of netn ork that's really valuable. by the way you conduct yourseif. I know lots of guys who have no credibility becauseof the way they do business.They're THoUGH, FUl|DfitG utTliIATEIY, THE J0UEHEY G0IUIES unethical and no one wants to invest in someone like that. D0tHll T0 PERSISTEHGE. And persistence pays off. Many And make no mistake, once you've earned a bad reputation, it people look at me and say,"F{e's Iucky to have landed such so sticks. You'll never get away from it. a big investment in his company//but honestly, it has nothing I can honestly say that I could have made a lot more monev to do rr-ith luck. It's purely about hard work. Success may look being unethical in the past couple of yearsbut that's not what like it happened overnight but that's very rarely the casein it's about. Doing unethical businessis cheating, and you might realiir-.\ou har-eto be prepared to put in long hours, take make millions but you can't call yourself a businessman. Hon' nsk and make personal sacrifices. And ideally, the best time you build your wealth and how you make your moner.is :.. ::ake them is rvhen you're young, which is why I encourwhat's important, not how much you make. i:= ','ounSentrepreneursto go for it. Understand that it's . --- tr err. th ere, be prepared to be patient but keep chipping PEOPLE OFTEIISK IIO|TTHEY GAIIGET TOUGH III WTH :-,..':..- r-our dream. You'll gei there eventually. n :i

llluEsTon$,At|0 FoE ME F CAffED0U$tT0 pERSo[At I|EflUOEKS. I addeveryonemeet oneof my social I to ner-

works, either Facebook or Linkedln and I'm in those neiworks every day. I am very'out there' media-wise and I t.to maintain a good media presence,although until fair-'.' recently I didn't have a PR agency. I blog and I also atte::: Iots of networking events. My philosophy is that if I or_,-.' meet one worthwhile person at an event, it makes that er .:_, worthwhile. I also try to be personal with people becau.= _

OTI.ITE EXCI.USIVE ,

: - : ': : '" a n e u r m a g . c 0 . z a l e x c l u s i v e . h t m l

LETRflIXG FROM FAILURE. : : : : : : :, :' t- . " ny Lingham\ learned from hisf rst-handtasteoffailure when ' : : : :, ., : .. can -,.preneur All tao often,such experiences porolyseentrepre '., . : : :'. - :, :, :c kerisks again. Find aut mare about how to learnfrom fail ure .-:: : . :-,.=chtina s)irit intoct. :

J U LY 2009

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