The Malaysian Insider

SINGAPORE, Nov 23 — Have a bright idea on using the Internet? Here’s the money. Go run with it. Over two years, that’s what 150 groups did.

Armed with an idea, they approached the Media Development Authority (MDA) for S$50,000 (RM121,900) grants under its Interactive Digital Media’s Jump-start and Mentor (i.JAM) scheme.

Except that, for 100 groups, their ideas never bore fruit or the projects are plodding along.

Some of those who failed had quit their jobs in the hope of becoming dot.com entrepreneurs. They ended up returning to the labour force instead.

Others struggled on solo, abandoned by team-mates but still intent on coming up with a money-spinning business model.

The exact amount blown on these failed projects is hard to pin down, as each group is given an initial sum ranging from S$10,000 to S$25,000 and further pay-outs are made after the groups meet certain milestones in their projects. The estimate is likely to be a seven-digit sum.

Only 25 projects have evolved into businesses, which are attracting millions of users, the MDA said.

Aaron Chua, who administers these projects, said the attrition rate was part and parcel of entrepreneurship. “What’s important, is that a culture of innovation, experimentation and risk-taking takes root, with individuals and start-ups encouraged to pitch their ideas in a competitive marketplace.”

To qualify for funding, the ideas are evaluated by a panel of three industry experts appointed by MDA. About one in four applications for i.JAM received funding.

Those which flop are not required to pay back the money, although the hardware bought with the funds must be returned.

Each group is attached to a mentoring body, known as an incubator, which helps bring their projects to fruition.

Nicholas Chan, a director of one such incubator, Azione Capital, said there had been cases of start-ups abusing the funds and spending recklessly.

One group, he said, hired IT developers and submitted a bill of S$20,000 to its incubator. In actual fact, the people hired were not doing real work and were friends of the founders.

Another start-up folded barely six months after receiving its initial funding, said Chan. “It had been going around, approaching many incubators for funds, and was always turned down as its ideas were not innovative.”

Azione Capital recently lowered its initial sum given to start-ups from S$25,000 to S$15,000. This is to ensure that start-ups do not spend unnecessarily and focus on meeting milestones which will provide them with the next lot of funds.

Those who failed blame it on business inexperience; they could not find a way to make money from a bright idea.

For example, one group came up with an idea for a website which allows a user to contact his friends via SMS, e-mail or phone call. While the service was useful, no one wanted to pay.

Others said they would have benefited from guidance from an experienced hand who could see an idea through to the marketplace.

Chew Choon Keat, 32, gave up after a year of trying to make money from a web program he developed which lets users leave notes on any webpage and share it with other users.

He now works as an IT developer. “I started off without a co-founder, a grave mistake to make for such an endeavour.”

What aspiring entrepreneurs need, he said, are mentors and peers to provide critiques and guidance. ‘Money and funding can come in after the products show signs of gaining traction.”

There are 10 incubators in all, and they can claim up to S$10,000 per project from MDA for providing services such as mentoring, legal guidance, and matchmaking with venture capitalists.

They are also required to invest in each company they mentor, by a minimum of 10per cent of the funding received. In return, they usually take a small share in the start-up. This gives incubators a stake in the company, making them more motivated to ensure they succeed.

Each incubator usually has mentors who are established entrepreneurs or successful businessmen, who either coach full-time or part-time.

The mentors usually do not get much in return apart from a small allowance.

The problem is, there is a lack of experienced mentors willing to devote time to guide budding entrepreneurs.

The Nanyang Technopreneurship Centre at Nanyang Technological University, for example, does not have full-time mentors.

Its director, Associate Professor Raymond Abelin, said: “We don’t have the money to hire full-time mentors. We have to rely on favours and our graduates.”

Matching entrepreneurs to mentors is not easy, he said. Some designated mentors may not be in the right field of expertise, or may simply not be interested in the company.

“It takes a lot of initiative and relationship building,’ said the former banker. ‘Good relationships are what get you through, as there is a lot of deception...a lot of people want to take advantage of young start-ups.”

Professor Wong Poh Kam, director of the National University of Singapore’s Entrepreneurship Centre, agrees that more mentors are needed to give start-ups access to people who can help them.

“Social capital, or who you know, is just as important, if not more important, than financial capital,” he said.

The centre has seven full-time mentors and office spaces for start-ups. Wong also heads a firm which invests in and helps entrepreneurs — Business Angel Network (South-east Asia).

There is “a gap in Singapore’s entrepreneurial eco-system” which the incubators and angels are trying to fill.

Such entities make money by investing in promising companies, of which only about one in 10 will grow to be a big and profitable business.

By investing in the high-risk early stages of start-ups, they can obtain a greater share of the company stocks, which can translate later to large profits.

Azione Capital, which started in 2006, mentors 25 companies, including nine i.JAM start-ups. None of these has folded, says Mr Chan. He said the priority of a start-up is to find a way to make money, as initial funds do not last long.

“Too often, aspiring entrepreneurs are inspired to start up for the wrong reasons, like wanting fame, or to call themselves a big name, like CEO, and making money without working hard.”

Start-ups which have survived usually have a committed and passionate team, a revenue-making business model, and products which can go global.

Vinod Nair, 27, knows the difficulty of turning a good idea into a money-making proposition. His idea was for websites listing homes for sale and rent on a geographical map. But he and his four partners did not know how to make the idea pay.

When their i.JAM funding ran out, his partners left. Unwilling to give up, Vinod focused on an idea which could make money.

He developed Smartloans.sg which helps Singaporeans compare home mortgages. His company now earns US$10,000 a month from what banks pay him for referrals. And just in time too.

“I forked out the last of my savings for this new idea,” he said. — The Straits Times