This Man Raised $20m In Funding

mrcpre neur

JU L Y2 OO9

this man

;tr\.]J! t

$20milliod

Jrtl FIJ)I!llJs

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

SF€CXS,t MKP(3RT

What do your customersreally want? Dr Graeme Codrington answersthe question

AREWE ENHANCING ORINHIBITING ENTREPRENEURSHIP? J ULY2O O 9_ I S S U E 40

llfitllfr rfitl .llililillilLlllllillltrl R29. 9sI r N C LV. A T ] Nam ibi a N $ 2 s e s t 0 u t s i d e RsAR2 5 .2 7 T HE UL T IM AT E

"H0 W_ T0"

9 Compelling reasons to start

a businessin the midst of a recession Expertadviceon bo-otstappingyour start-up xiA

AqAq

€ -

HOTIIST TECHGUIDE 20-pagesupplement G UI DEF O RS T A RT I NG & I M P RO V I NG A BU SIN ESS

ETTREPRENEUR $A$FIEE I

ITE ?H=3?!:*DLE CI A ffL*SALffruAlU*IAL fffi$SES F5*&T ffiS EVf;HYSffE TALKSFS* &***g :{*WTUil*!*€G E$ISX/fPG$SIBLE TfrfiET&ru*H*bVALLYStlCAru NG !$ F**US*# S**VlvAL,*3*€$trlJTFt AFAIS&zu rf{TREpREffEuH FtA$LA$\ESf;n A $2* ruFg-LF*Fs Er*VFS€#eru5 F** trls $llrctrruH&LLry$?flRT-tF"WgUruy Ltr1iGFtAts, r#lltr*Hffi *FTffiE€ **-E€-YSISRSEIF WESSITS SIJILPIruG #OMPAruY, YSLA, g€LLS ptTSVlAru, fftS$yssyT* JljLtET PHOTOS BYED'ORILEY

;'' gt"* up in a small town in SouthAfrica,a boy watching movies like Wa11 Sfrcef and 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, but I guess 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 previouscompaniescaIled Cl icks2Cust omers,unJ *" createi website-building software for our own internal use to build websites faster for our customers.We realised there was a mar_ ket for businessesto be able to build their own websites,instead 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 accessto an enormous giobal market. With that, I decicie: to leave Clicks2Customersin 2007.I bought the technolo:. and the intellectual propertv out of the company and sp.*: off a new company, Sr.nthaSitein March 2007which is rr-r-.:: eventually becameYola in -\pril 2009.

I TRIEDUilSUCCgSSFUttY FORABOUTFIVEIIIIOIITHS TO GETFUI{DII{G I]I BOTIISOUTH AFRICAAI{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 associatedcompany in the United States.So that's n.hat rve did. We set up SynthaSite in South Africa and an associatedUS company, and then applied for visas.It took 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 T0 RA|$E$5 Mil.u0lt FRoM 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 firstly, we raised what's known as a convertible - - -r..1'est. : --,: - 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. rLy 2c::

<

-

,rsK E N TR E pR E N E U R .co.z f As5

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.It really speaksmore to the'blue sky'and the businessmodel, 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, DoNE tT VtNNy LINCHAM lSNoTNtWt0ihechaitenge cf slarttng a busine$s endfaisins fun.iing. Infact,he'ssomeihing afanald hand. Tagetnisprev!0u$ lnt*rnet ssa!'ch markeiing cOmpnity, incuBeta, offth* gruund. h#hadt0 OverfiOme ihefa0tthat p*t*ntial inve$tOf$ sinplydidn'tiLnderstanC th* business *r howit lvnuldmakernofley. it'sa cilmm0n challsnge f0i" particuiarly sta*-ups intnelTsect0r, tha$e thatarepinneering nsr'.J ff0del$ andwaysof dtingbusin*ss" Banks i,santed tn "sse$tOsk" before they'dinvest. "lt waselsfirthattheyjust didn'tuncierstand whatiftternat Search Marketing wasand howit couidmakemilney," hssaid. 8utrescur*efulne$s anda willingn*ss t0takebigpers*nal risks arepart0fi-ingham's *NA.fj* saldhi$hause in*rd*rtl fund "i thcushi incuBsia. if I lcstth*house andtttei:usiness failsd then I'djustgeta jobandrentacccmmadation fortherestafmylife. T*ffe theth*ught cf nct*lrJnin$ mycwnbusiness wasr4,0!"$f thanthethilught *f i*singmyhcuse andn*verbeing abfetobuy anOther s*e,"hr says.TothsRl2$*flfi frcmthesale0f h!$hOuse h€ad{isd a furihe!" R750*0fund*d frnmhiscredit cards. Asr,vith Yola, taking a per*onal riskpairl*ff"in*uB*ta mad*a profltalmo*timmediately aildatt!'act*d a fr70fi0*Csumfrrm *n ailg0linvsstor whctook'l3!/o*quiiyinthebusiness" lnlinding funding farYol*,Linghaffi mighlhav*been playeis, pnil*silphy talhirig biggeifigilrc$ t0 bigger but;.1js ha$ femaiiled thf;same: befar*ycuex:lecl sc+etfieslsgt0fund y*urbusin*$s y0ilf*rsnircn3!'ii'rii anai idee.invsst srflffte someti]ing wa*hinveating in.

66

|

GETTIIIG THEIUITIALFUT{DITIG IS OilLYTHEFIBSTSTEP, H0WEVER. If you'rehopingto attractmorefundrng,asr\-e 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.

SOHOWDOII'E *IAKE MOI{EYFROIIIA FREEPROIIUCT? It's simple really. Users can chooseif they want to have their own domain name, such aswww.entrepreneurmag.co.za,or a 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 11,should they wish to choosethose.

pRSFILE I EIUTREPREIIEUR

Iil t2 M0ITHSWE'UE hioEETHAIrW0 fftttnil ADBED 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 accessto as much assistanceand information as they might need. There's 24/7 email assistanceand 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,we landed a further $20 million 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, becausealthoughwe 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.

THESUGCESS FAGTORS e A gr*atpr*durtthatspeaks dirsctly tc:n existing neac! e Anexperisiiceci, irch-sauvy sntrsprf;neur withpci$istence andl}a$$ion c Thei,viilintness t! mak*a per$snal invssi.*ent inihe e0npany andtakeper$Onal risk$ t A n*twOfk 0fc0ntacts to rivaiallnetw0fks, bi.iiltupcvery*ars people 0t ffiBetinU andbuilding m*tuaiiy-benefici*|, value-addiilg relaiionships

.'

i.

Anabilig10ettraetiop lT lalentsventhoughYrlawasa stefiupwithoilia longif&ck-fec*rd Theabilitytn learnfastaboljihcwtil $etup a ccmpanyin a foreign*ouniry . .,, . ,....-.-,=,:

,i.-".,...,, ,..,...,..-.=...-.

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,I BEUEVE TltEEI{TREPREI|EUR tS This means they will use you as a valuable resourceand this A$ IHp0RTAIT,tF HoTHoRES0 THAI|THEEUSfitE$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 utTliIATEIY,THoUGH, THEFUl|DfitGJ0UEHEY 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'sso Iucky to have landed such 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. Successmay 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|TTHEYGAIIGETIII TOUGH WTH :-,..':..-:i r-our dream. You'll gei there eventually. n

llluEsTon$,At|0 FoE ME F CAffED0U$tT0 pERSo[At I|EflUOEKS. I addeveryone I meetto oneof my socialner-

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\ learnedfrom hisf rst-handtasteoffailure when ' : : : :, ., : .. -,.preneur All tao often,such experiencescan porolyseentrepre '., . : : :'. - :, :, :c kerisksagain. Find aut mare about how to learn from fail ure .-:: . : : :-,.=chtina s)irit intoct.

J U LY 2009

ASKEN T R EpR EN EU R .C O . ZA|

57