As an entrepreneur or a startup founder, if there is only one agreement you can ask from a corporate lawyer for your company, what will that agreement be?

They are many business agreements out there. Let’s do some guessing game. Are you going to choose an employment agreement? Non-disclosure agreement? Non-compete agreement? A purchase order? Licence agreement? Website terms and conditions? Privacy policy? A purchase agreement? Or any other type of agreement?

After being involved as a corporate lawyer for over a decade on a wide range of legal work for bootstrapped startups to venture-backed companies, I believe there is one single most crucial agreement that every business owner, entrepreneur, and a founder should have is an agreement covering the following items below.

These agreements are usually known as a shareholders agreement, stockholder agreement, founders agreement, and also known as a partnership agreement in some places. Although they may be called by different names, entrepreneurs and founders should ensure that they cover the following issues in such an agreement.

By default, if you don’t have a shareholders agreement in place between the shareholders (at the initial early stage of a company, usually only between cofounders), the “fallback” positions for the commercial terms will be based on the existing companies laws. In other words, the default positions under the statutes covering such issues that may or may not be in your favour.

If you don’t have this agreement in place addressing these commercial issues below, you may likely get into a dispute that may you up in a courtroom (that means expensive long legal battle!).

In my experience, I have seen entrepreneurs losing their business because they failed to put any agreement in place. I also know founders like to ignore the importance of discussing these important issues for the sake of trying to avoiding a ‘difficult conversation’ with their team members.

If you don’t want to address these issues upfront before you start the business, you may end up getting into a major disagreement once you start running the company especially in stressful times like fundraising or even scaling a business. If you don’t want to have this difficult conversation for fear of upsetting the other founder, you may be doing yourself a favour and be better off by not starting a venture with the person.

Also Read: Hey angel investors and startups, here are legal templates you can use

The company may not be able to survive a deadlock when there is no way out in a shareholders’ dispute, especially when there is no agreement in place to resolve such conflict.

When drafting a shareholders agreement, make sure you work with a corporate lawyer to address and answer all these important questions.

Setting out and recording different contributions by the founders

Different founders bring in different expertise and skillset to a business. What are the specific contributions that will be made by the respective founders to the business? What if one founder puts in cash? But the other founder only provides his sales skills? How will each of these contributions get treated and be valued in monetary terms?

Putting up a fixed decision making framework on business decisions

In practice, when there are only two founders, both founders tend to agree for their equity ownership to be owned equally 50/50 by the founders (personally, I do not recommend this). How will you both decide if there is a deadlock between both of the founders? In other words, both of you can’t agree on a matter and ended up with a tie vote?

Will the voting deadlock get fixed by a third party independent and trusted person (like a neutral friend) to come up with a final deciding vote? Or even trigger a buy/ sell agreement (usually known as a ‘shotgun agreement’) for a founder to acquire the shares by the other cofounder when both can’t agree on a decision), or mediation, arbitration or another method?

Managing transition of key people in a business

What if an existing founder decides to leave the business after six months after starting a company with you because he decided to accept a different role or leave the country to start a new venture some place else? What will happen to the shares that have been issued upfront to the outgoing founder (usually known as a vesting schedule)?

Will it get forfeited or can it be retained by the outgoing founder? And how will the business handle the departing founder’s exit and his equity interest? And how will the business onboard a new founder?

Clarity on ownership of intellectual property assets

What if a founder develops a new software? Will the founder be required to assign the ownership of the software to the company? How will the founders decide what type of intellectual property assets needs to be assigned to the company? Can a founder merely licences out the platform to the company for a fee?

Minority shareholders protection

What if one of the cofounders only has 30 per cent equity ownership in the company? Or an angel investor that came on board in your company at pre-seed stage only has 5 per cent stake? What are the safeguards in place to ensure that both of them are protected against critical business decisions as a minority shareholder?

Some of the usual critical business decisions include:

• deciding on the salaries of the staff
• hiring new staff or firing of existing staff
• buying new assets or selling assets owned by the company
• changing the business direction
• agreeing on a budget
• on boarding new founders
• taking up loans or issuing loans
• getting the founders to put in additional capital contributions (also known as a ‘capital call’)
• entering into a contract or terminating an existing contract
• investing in other new ventures
• winding up i.e. closing down a business

Board composition and appointment mechanism

How will you decide who gets to be a member of the board of directors? How will the board member be elected? Will certain founders have a right to be on the board or to appoint a number of directors? How will a director get removed from a board seat? Only for certain grounds or for any reason? How will vacancies on the board get filled?

If the board of directors decides to set up new committees like an advisory committee, how will the members of these committees gets selected, removed and replaced?

Confidentiality covenants

Are the founders of the business bound by confidentiality obligations? What amounts to “confidential information” in a business? What type of safeguards in place to protect the business from the cofounders disclosing proprietary information?

Exclusivity arrangements

Are the founders of the business required to dedicate their time exclusively on the business? Or are the founders agree not to undertake any other similar venture that may be in competition with the business?

Funding options for the business

What if the company’s cash runway is depleting in several months? What will be the first preferred mode of funding? Will it be equity funding or debt funding? What if one of the founders fails to contribute to the capital call?

Also Read: How to protect your early stage startup from unnecessary legal hassles

Profits distribution mechanism

Let’s say the business makes profits which allow the company to issue out dividends (i.e. the distribution of the company’s earnings to its shareholders). How will the founders decide how much the company’s dividends will be? Will it be agreed upfront or based on a certain threshold? And how often?

Managing expectations and performance issues

If a founder fails to fulfil his obligations to the company like failing to achieve certain business milestones or deliverables, will the founder be compelled to sell his shares? If so, how is the value of the equity interest will be assessed and determined by the founders? Will the founders agree on an upfront formula?

Or engage a third party valuer (like one of the Big Fours accounting firms)? Or a combination of the two? Also, which party will be responsible to pay for the fees and charges in relation to the equity transfer? Will the final purchase price for the equity be paid in a lump sum? Or can it be paid over a certain timeline?

Restrictions on transfer and disposal of shares

What are the restrictions and conditions in place if a founder wants to transfer his shares in the company? Can the founder transfer the shares to anyone like a competitor, an enemy, an ex-girlfriend, or anyone that may not be beneficial to the company? Will the existing founders or shareholders have the right to match any offer received by another potential buyer seeking to sell his equity interest?

Dispute resolution between shareholders

What if there is a dispute among the cofounders? How will the shareholders resolve their dispute between themselves? Will it be resolved by a judge in a normal court? Mediation? Arbitration?

Dealing with these commercial terms can be overwhelming for many new aspiring entrepreneurs or founders. But look at having a shareholders agreement as a statement or a record of your understanding between your cofounders.

So if there is any dispute, any founder can refer back to their shareholders’ agreement to find out what was the initial agreement in terms of the relevant roles and responsibilities agreed by the cofounders and even the investors in a company.

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The shift to remote work that began during 2020 is set to continue apace, with the technology industry leading the change. As the digital transformation across the economy accelerates, tech companies competing for in-demand talent are embracing remote work.

How they do this will determine whether they make the shift successfully.    

Digital acceleration

The pandemic has seen people  shop, study, and work online  With the technology sector among those least impacted by the economic fallout from the COVID response and with the strongest jobs growth through the second half of 2020, employers will be catering for a growing demand for remote roles in order to secure the skills they need to thrive.  

Indeed data shows sustained interest in remote working on the part of jobseekers. Searches for remote work in Singapore tripled almost overnight in early 2020 and have remained at that heightened level. For technology companies seeking to hire, this presents a clear imperative to implement remote work – and remote hiring policies. 

The market for technology skills is global. For employers in Singapore, that means they are competing for talent with companies in other markets with a much longer history of working and hiring remotely. 

It’s important for employers locally to remain receptive to both changing employee desires and established best practice to make the best possible shift to remote work and remote hiring. 

Restructure the culture

The traditional idea of a 9-to-5, physical office space has evolved to a more flexible, hybrid arrangement. Employee work arrangements should be arranged to balance the genuine requirements of the role and business with both the employees’ preference and safety.

Under Indeed’s recent working policies, employees will either be completely remote, work in the office full-time, or both, depending on their role. 

COVID-19 has challenged technology companies to rethink the work culture in addition to the practical aspects of work. As employees are increasingly comfortable with the flexibility of working from home and telecommuting, remote hiring and work options expand for hiring managers. These arrangements can expand access to quality talent and leverage the cream of the crop for their workforce.

Recent Indeed survey data revealed that the top policies and measures that employers in Singapore are planning to implement for 2021 are improved flexible work options (53 per cent) and increased work from home options (52 per cent).

Also Read: Improving work efficiency and ergonomic conditions for remote work proficiency in 2021

Almost a third (31 per cent) of respondents think that more employers designing jobs with flexible working options built in from the start will be a permanent fixture in the future workplace, in 2021 and beyond.

Our Singaporean job seekers and employers have maintained a strong interest in remote work throughout 2020. Being in sync with jobseekers means moving hiring processes online and using virtual events, networking software and hiring platforms to connect with talent. 

There are digital tools such as automated processes and video-based platforms that can maximise the experience out of the process. Interviews provide insights about candidates that resumes do not, so take advantage of the rare opportunity to interview candidates in a comfortable environment that allows them to really express themselves.

Pay attention to how they interact and how they think on the spot. Consider if they’re a good culture fit and take note on the ways that they can contribute to the team as a whole.

You should also look at how you structure and communicate your employee benefits in light of changed work practices. Some benefits, like on-site gyms and catering, will need to be reconsidered. Others may need to be deployed in a way that makes them able to be enjoyed asynchronously for employees in different time zones. 

You can’t install a ping-pong table in people’s home offices or buffets in their kitchens. Delivering these kinds of on-site experiences in a remote work environment requires a creative and fresh approach. When examining work culture incentives, look to desired outcomes rather than specific initiatives to determine what will be appropriate for a hybrid or remote work future.

Also Read: Why you shouldn’t resist collaboration and remote work

Those that create a shared sense of purpose and community should be prioritised to promote cohesion and combat the inherent isolation in shifting to remote work.

At Indeed, we have instituted wellness days to preserve the capability and productivity of our employees working remotely. We have doubled down on one-on-ones between managers and direct reports to ensure that any issues are identified early and that remote employees know their concerns are being heard and acted on. 

Tech employers should be aware of their leadership role in the shift to remote work as they will be providing the tools and knowledge that companies across the economy use to engage, manage and nurture remote workers. 

Tech companies who ensure that remote hiring, work and management is productive, supportive and mutually beneficial will emerge as both cultural and commercial leaders in the new world of work. 

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TRIVE Ventures, a Singapore-based early-stage VC firm investing in data-driven tech startups in Southeast Asia, announced today it has partnered with an undisclosed family foundation to co-launch a US$2 million venture philanthropy fund.

Termed ‘Tenacious Founders Venture Philanthropy Fund‘, it aims to seek out Singapore-based entrepreneurs who have shown “tenacity” in running their businesses but are struggling to build a successful business due to a shortage of financial resources.

The fund will issue financial support of up to S$100,000 (US$75,000) to each successful applicant, in the form of a redeemable SAFE (simple agreement for future equity) note. It seeks to support up to 10 founders in the next 12 months, with plans to support more should demand increase.

As per a press note, TRIVE will not take equity in the business. Rather, recipients of the fund are encouraged to repay the sum upon being financially positive, with returned funds used to fund the next successful applicant. Recipients also do not need to guarantee the SAFE Note.

Also Read: How to craft your startup’s financial projections

The VC firm is looking for founders with “proof of passion, tenacity and integrity” with plans to scale a profitable business. Applicants are required to nominate a known credible person in the business or startup ecosystem who can vouch for the above values. Besides, startups have to be based in Singapore with at least 2 years of operations.

“Through our past incubator, we understand tenacity is what drives an entrepreneur to success. The fund aims to be the short-term bridge for these founders who are tenacious and have a ‘never-say-die’ attitude. We hope to support such local entrepreneurs to succeed and for them to create a positive economic impact for Singapore,” said Christopher Quek, Managing Partner of TRIVE.

Launched in 2015, TRIVE has invested in 18 startups thus far. Among its notable investees are Agrimax, a Singaporean agritech startup focusing on increasing farm productivity; Park N Parcel, a Singapore-based logistics firm; and Coderschool, a Vietnam-based coding education company.

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Image Credit: TRIVE

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Mars Growth Capital invests US$4M in American SaaS startup Hiver

Story: California-based SaaS platform Hiver has raised US$4M in debt financing from Singapore’s Mars Growth Capital.

What the funds will be used for: Expansion of sales and marketing efforts to increase customer base and double revenues in 2021 and 2022

About Hiver: Founded in 2011, Hiver is a Gmail-based customer service solution created for businesses that use Google Workspace t0 manage everyday operations like email, calendar, and Google Drive.

It offers features like email assignment, tracking, automation, analytics, and SLAs (service level agreement) for companies to help them collaborate much easily from within the Gmail platform itself.

The startup claims to have more than than 1,500 companies from over 30 countries on its platform, including Vacasa, Upwork, AppsFlyer, Flexport, Harvard University and Kiwi.com.

Also Read:  TRIVE Ventures launches US$2M venture philanthropy fund to support cash-strapped founders in Singapore

About Mars Growth Capital: A joint venture between Mitsubishi UFJ Financial Group and Liquidity Capital, Mars Growth Capital looks to provide debt facilities to fast-growing startups in the Asia Pacific region. It tends to steer mostly towards e-commerce and SaaS verticals.

Revolut launches new feature to help children make better financial decisions

Story: Revolut, a global fintech platform headquartered in the UK, has announced the launch of Revolut Junior on its platform.

What is Revolut Jr.: A feature that will allow parents to create a Junior account for their children using their personal Revolut app.

Parents can send money to their children’s account and get instant spending alerts for their online and physical in-store payments.

Also Read: Revolut arrives in Singapore after a year of beta testing, providing more overseas money transfer option

According to a press statement, approximately 10,000 Junior accounts are being created each week globally.

“Digital technology usage is prevalent amongst young children and teens who are extremely technology savvy. At Visa, we believe the importance of educating youths on money management skills and digital payment usage starting from a young age and parental guidance is crucial,” said Kunal Chatterjee, Visa Country Manager for Singapore and Brunei.

‘Filipinos are the highest consumers of social media in the world’

The story: According to a report jointly released by We Are Social and Hootsuite, the Philippines holds onto its record for the most time spent on social media (4 hours 15 minutes) and the internet (10 hours 56 minutes) by internet users aged 16-64 globally.

Other key findings: Thailand and Malaysia are in the top 10 countries for consumer online purchasing and Singaporeans are the world’s most prolific QR code users (79 per cent).

More about the story: Christina Chong, managing director, Singapore at We Are Social, commented: “Every year, Southeast Asia demonstrates a thriving digital landscape. People here are some of the most digitally savvy in the world. It’s more important than ever that brands understand how to connect culturally relevant ways with online audiences.”

The report also outlines the expanded use of social media and the growing popularity of messaging platforms.

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Image Credit: Revolut

 

 

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According to government data, in 2010, Japan was declared as one of the worst-affected nations by the worldwide diabetes epidemic with type 2 diabetes predominating in both adults and children alike. With approximately 13.5% of the Japanese population affected by type 2 diabetes or impaired glucose tolerance, the disease was identified as a healthcare priority by the Ministry of Health, Labour and Welfare.

While the country has progressed a lot in the past decade, when it comes to diabetes, things haven’t necessarily changed a lot. As of 2015, Japan had over 7.2 million people diagnosed with diabetes. According to a 2018 survey conducted by the Ministry of Health, Labor, and Welfare, around 20 million people in Japan had either contracted or were at risk of contracting diabetes.

There are many small children who cannot produce insulin in their bodies and need to undergo painful finger pricking multiple times for their whole lives. The disease is equally common among adults, and this is not just in Japan. According to the World Health Organisation, the global prevalence of diabetes among adults over 18 years of age has risen from 4.7% in 1980 to 8.5% in 2014, and between 2000 and 2016, there has been a 5% increase in premature mortality from diabetes.

Launched in 2017, Quantum Operation, an IoT healthcare startup based out of Tokyo envisions revolutionising healthcare for diabetes affected patients by leveraging IoT.

The world’s first non-invasive glucometer: The future of diabetes healthcare

To help children and adults affected by diabetes in Japan and around the world, Quantum Operation is set to launch the world’s first-ever non-invasive wearable glucometer. The healthtech startup has two core goals at the heart of their operations: to help extend healthy life expectancy and provide preventive care. Quantum Operation’s wearable glucometer helps achieve just that. It utilises the startup’s proprietary technology and eliminates the need for invasive blood glucose measurement.

The device is compact and easy-to-wear and is easily connected to their app. The app connectivity allows for data coordination via open API in that they are able to leverage data analytics for accurate glucose measurement. As per Quantum Operation, the device is also capable of reading other vital signs, such as heart rate and ECG.

also read: Why a robust digital insurance distribution system is the future in APAC

To use the device, the wearer just needs to slide the watch on and activate the monitoring from the menu, and after around 20 seconds, the data is displayed. They are also building a big data platform to collect and analyse the data generated by patients. Currently, Quantum Operation is in the first stage of seeking certification for commercial use of the wearable device.

An inspired invention with a bright future in healthcare technology

Helmed by CEO Kazuma Kato, the Quantum Operation team is small but strong with members that bring in years of startup experience. Kato who grew up in a small bankrupt town in Japan where there was a severe lack of hospitals and healthcare felt the need to do something to help make healthcare easily accessible for all. He was moved by small children undergoing immense pain for the treatment of diabetes. As such, he set out to develop this non-invasive and not-so-expensive medical device with his team.

This year, during CES — the world’s largest technology trade show that takes place annually in Las Vegas, Quantum Operation showcased their noninvasive glucose monitor as well as their second product, an oxygen saturation measuring sensor (SpO2) that can be worn around the wrist. The program was conducted virtually this year and Quantum Operation’s wearable device got many queries from patients, doctors, investors and key stakeholders.

also read: How this Tokyo-based startup is protecting e-Commerce merchants against fraudulent orders

So far, the startup has raised 10 million USD in funding from Alfresa, a leading medical wholesaler, and a Japanese pharmaceutical company. Quantum Operation is actively seeking partners to sell its hardware to insurers and healthcare providers based on their B2B2C model wherein they have the capacity to provide hardware as well as software. They are also looking for investors for their Series B fundraise in 2021 wherein they plan to use the capital for expansion into Southeast Asian markets and the mass production of their flagship wearable device.

Find out more about Quantum Operation at https://quantum-op.co.jp/en.

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This article is produced by the e27 team, sponsored by 
JETRO

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Mandiri Capital Indonesia to launch 2 venture funds, step up investments; While Mandiri Venture Fund is slated to have a total corpus of ~US$50M, the fund size of Indonesia Impact Fund will be US$25M; So far, Mandiri Capital has built a portfolio of 14 fintech firms such as Mekari, Cashlez, KoinWorks, Amartha. More here

Goldbell acquires BlueSG, to invest US$52.3M in the e-car sharing firm over the next 5 years; Goldbell will expand BlueSG’s current fleet of 650+ vehicles, establish an R&D centre and develop new mobility algorithms, analytics and technologies; BlueSG claims it has processed over 1.7M rentals with 100K subscriptions sold since starting in 2017. More here

COVID-19-battered Traveloka may still be the best-poised Indonesian unicorn for IPO fight; The firm is just a click away from becoming profitable, said long-time backer Wilson Cuaca; It has been making groundwork for IPO since as early as 2017. More here

Thailand’s IPO Market is a success story in SEA this year; In 2020, the fundraising scene accumulated US$3.94B and had 23 impressive IPOs to report, even amid COVID-19 based economy stagnation; The 23 IPOs have raised more than half of the total stock market launches revenues in the region, while all the other SEA countries and their 77 IPOs made up the rest. More here

How the coup d’état would play out for Myanmar’s startup ecosystem; The effect of decreased foreign investment would have a greater impact on startups than traditional corporations given the increased reliance on capital faced by these early-stage companies. More here

CXA Group sells brokerage arm to Pacific Prime to focus on SaaS business; Following the deal, CXA will direct its resources to support banks, insurers, and payroll companies to leverage its benefits, health, and wellness platform and to enhance its financial and digital service offerings; Furthermore, CXA will expand into new markets across Asia and Europe. More here

PasarPolis raises US$5M from IFC; The two firms will jointly continue and strengthen PasarPolis’s mission to democratise insurance more broadly, one of which is through the development of micro-insurance products that are affordable and in accordance with the needs of the society. More here

Vietnamese hotel booking platform Go2Joy banks US$2.3M Series A+ led by HB Investments; The firm will start to explore the opportunities to expand service to other markets such as Thailand and Philippines; Go2Joy allows customers to book hotels by the hour or overnight and pay through e-wallet Payoo, Momo, Onepay. More here

MDEC seeks to encourage SMEs’ digitalisation with US$1.5M grant; The 66 local recipients hailed from a wide range of sectors including wholesale and retail trade, tourism, and education among others; The initiative is key to MDEC’s mission to assist SMEs and mid-tier companies to digitalise and thrive in the fourth industrial revolution, where digital processes are set to be the norm. More here

Betatron Venture Group, PTI join hands to invest in proptech startups in Asia; While the partnership can invest as little as US$250K per company, it typically prefers to invest between US$500K and US$2M; Betatron is a team of eight professionals led by two partners and includes a wider network of five prominent VC funds with a combined US$800M in AuM and more than 200 investments across Asia. More here

Is big tech now just too big to stomach?; The relentless rise of the big six tech firms – Facebook, Amazon, Netflix, Google owner Alphabet, Apple and Microsoft – powered US markets last year; Their eye-catching performance has prompted increased political scrutiny and the threat of heightened regulation from Washington. More here

Remote working jobs on the rise in SEA: report; A new report from LinkedIn said the year 2020 saw a rise in demand for digital and soft skills as employers shifted from hiring based on credentials to hiring based on skills held. More here

Vietnam digital ecosystem and transformation well on track; Tech firms have shown their increasing influence on the country’s social and economic life; PM Nguyen Xuan Phuc says the Vietnamese business community and digital tech have been vital in ensuring the wellbeing of the nation both for the economy as well as for citizens to live a productive, safe and sustainable life. More here

Applying AI to global cross-border e-commerce and digital marketing; AI is one of the most critical technologies to help marketers keep pace with international consumer behaviour; Global marketers are managing a lot of data about multicultural buyers, including language, traditions, seasons, device preferences, time zones and more. More here

What Google Singapore learned about e-commerce during the pandemic; Online retail has emerged as the preferred way to access goods and services all around the world during the pandemic; This newfound online habit driven by the pandemic has propelled the e-commerce GMV in Singapore to US$4B in 2020. More here

Fintech outperforms banks in Indonesia; Fintech payment services in Indonesia are the largest in SEA where e-wallets from fintech contribute around 72% of e-money transactions in the country; This preference has driven a wide range of online transactions including e-commerce, education and entertainment. More here

TranSwap expands into UK with plans to open new R&D centre; It is the cross-border payment platform’s fifth market after Singapore, HK, Indonesia and Malaysia; The UK is a pivotal market to accelerate TranSwap’s next phase of expansion. More here

Singapore’s IMM launches virtual mall on Shopee; The virtual mall aims to accelerate the digitalisation of IMM’s retailers and help them increase their online presence; With the virtual mall, retailers at the Jurong East mall who do not have an online presence will now be able to market their goods online. More here

Here are the 6 deeptech startups unveiled at Entrepreneur First Singapore’s 8th cohort; EF is a talent invstor that backs individuals instead of fully-formed startups; It claims to have helped over 2K individuals in its programme, who have gone on to build more than 200 companies with a total valuation exceeding US$1B. More here

An unlikely duo: Will banks and fintech have a happy marriage?; With the entry of fintech firms into the market, retail banks are faced with a new and direct competition; Both function as a financing option for businesses; However, there is also a seemingly ideal allyship in this scenario. More here
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With the COVID-19 pandemic causing a significant slowdown of economic activity, entrepreneurs and startups are having problems securing the critical financing they need. As banks review their lending practices and government assistance programmes are stretched to capacity, startups may have to look beyond more conventional channels and explore other avenues such as crowdfunding to attain much-needed capital.

The crowdfunding scene is primed to help startups during this challenging time. While the quantity of live projects on Kickstarter is down about 25 per cent year on year, support for Kickstarter crowdfunding campaigns and their success rate are consistent with pre-pandemic levels.

During the pandemic’s emergence last year, equity crowdfunding platform Wefunder saw investor volume increase 35 per cent in the first quarter of 2020, with crowdfunding investments doubling to US$63 million through November (up from US$28.2 million the year prior).

Government bodies also recognise crowdfunding’s potential to help take up the slack; the SEC recently updated crowdfunding guidelines so that companies can now raise US$5 million per year using equity crowdfunding (vs. the previous limit of US$1.07 million), while the EU harmonised crowdfunding rules so that issuers can raise up to EUR5 million across all EU member states.

With crowdfunding serving as a lifeline for startups and small businesses, how can you attract backers and leverage the power of the online community? What will make your project stand out from the others vying for investment?

The answer lies in how trustworthy your startup is perceived, especially when funders don’t have much else to go on. Our new study explores how a certain type of trustworthiness – based solely on an entrepreneur’s facial features – can play a role in crowdfunding success.

Based on previous research findings, certain facial features such as roundness of the face and wide chin are likely to be perceived as trustworthy.

Also Read: Bambooloo raises US$250K+ via equity crowdfunding to expand its plastic-free home goods into UK

Building on this premise, my team and I constructed a comprehensive facial trustworthiness index that uses machine learning-based facial detection techniques. We ran photos of entrepreneurs for technology-related projects on Kickstarter through the index to uncover these most applicable findings:

The more you look the part, the more likely you are to get the funds

Our study found that entrepreneurs who look more trustworthy are more likely to have their campaigns funded. Positive facial trustworthiness impacts both quality and quantity – not only do “more trustworthy” appearing entrepreneurs receive more in pledged amounts, they attract more funders overall.

Trust is more important than attractiveness

Facial trustworthiness plays a more important role in determining the crowdfunding success of female entrepreneurs versus their male counterparts. While some may argue that perceived attractiveness and not trustworthiness– is playing a role behind-the-scenes, we tested for this and found that facial attractiveness didn’t significantly impact crowdfunding success.

A trustworthy-looking face helps funders feel better about the overall project

Facial trustworthiness does really alleviate funder concerns about crowdfunding uncertainty. These perceptions can be key to the decision-making process in an investment environment where other project-related information is limited.

Facial trustworthiness is a thing, but some common truths remain

Projects with lower fund-raising goals and longer durations are more likely to be successfully funded, and entrepreneurs who include a video presentation have higher success rates, as this signals both high quality and preparedness– elements that build trust.

While it may seem superficial to have your face sway potential crowd funders, the study shows that the success of Kickstarter crowdfunding efforts don’t always have to do with the quality of a project, people need to be won over with trust. In order to win over a funder’s support, you really may have less than 34 milliseconds– the shortest amount of time needed for someone to judge a person’s trustworthiness based on their face.

By simply looking the part of a trustworthy entrepreneur, people may be willing to overlook shortfalls that currently exist elsewhere in your project, so put your most trustworthy-looking face forward to seal the deal!

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Editor’s note: e27 aims to foster thought leadership by publishing contributions from the community. Become a thought leader in the community and share your opinions or ideas and earn a byline by submitting a post.

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Fundraising is an ongoing effort that entrepreneurs and founders need to manage when starting and scaling an early-stage company. Savvy and well-read founders seeking to raise funds from investors usually use the phrase “smart money” to explain the type of investors they want to take a stake in their business.

“Smart money” means money raised from an experienced, smart and well-informed investor. A “smart investor” provides both cash and invaluable benefits to your company like opening new doors to other strategic investors, partners, or potential new customers.

“Dumb money” means exactly what it means. A “dumb money” usually described an investor that invests in nothing more than capital with no real influence on growing the business.

Unfortunately, many entrepreneurs and founders can quickly end up as “dumb entrepreneurs” by making frequent and easily avoidable mistakes. These mistakes often create another risk of the venture and startup success and expose the entrepreneurs to even criminal offences.

After helping venture funds, funding agencies and early stage companies for the past several years as a venture and startup lawyer, I have seen several founders and entrepreneurs ended up becoming “dumb entrepreneurs” by making some of all of the following mistakes below.

Using an introducer to secure investment

In your entrepreneurial journey, you may come across people claiming to link you with this investor and that investor.  In exchange for securing the investment, the introducer will get a ‘success fee’ (also known as ‘broker fee’ or ‘introducer fee’) that you have to compensate for his “expert” investor matching services.

Also Read: Meet these 10 verified investors that are ready to connect with you

Consider the challenges of compensating a broker carefully. I have not met an investor who is okay for a percentage of his investment money is deducted to pay off a broker. I also know some investors that reject outright any pitch unless a cofounder or a senior team does it.

As an entrepreneur, you should ask yourself whether you are serious about outsourcing your investor pitch to brokers you don’t really know?

All or most investors I know are usually approachable people. You can reach them out easily on places like LinkedIn or even Twitter. Drop a note and ask if they are open to a quick phone call about your company.

So think carefully if you need to get a broker to help you with your fundraising. An early-stage company using a broker to get a pre-seed or seed round tends to be a ‘red flag’ and give a ‘poor signal’ to potential investors.

Approaching investors too early

Here’s a blunt truth. Elon Musk or Mark Cuban can raise money with only an idea.  The rest of us mere mortals need to have a strong and solid management team, unique products, innovative technology, a perfect and compelling pitch on the business potential on the targeted market and a visible exit strategy.

Suppose you try to raise money when you are not ready or even building a track record or demonstrate any form of success. In that case, it usually ends up a waste of valuable time (for both the founder and the potential investor as well).

We all have been to pitching competitions before. You would have seen how unprepared founders get slaughtered all the time by ruthless venture funds and investors. You need to know the hard numbers about your business and explain how you come up with their “X” mil valuation, financial model, revenue strategy, you know the rest.

There is also another challenge if you pitch too early to investors. Bad pitch can also result in you losing credibility, i.e. “social capital” among potential investors. It may be better if you spend some time building some tractions or solid numbers before you start pitching. And spend this time also to get yourself educated about what goes into fundraising.

Unreasonable timeline

 Aspiring entrepreneurs or founders may get a shock or disappointment whenever I tell them that a typical fundraising timeline is between three to six months.

Also Read: Top contributor posts this week: Building a remote work culture, fundraising from home and more

Institutional investors such as corporates or venture funds may even take longer than this depending on the intensity of their assessment and due diligence process. I’ve said this before, but I’ll repeat it. No investor wants to inherit your company’s problems. Remember that you are trying to get people to part with their (hard-earned) money.

They deserve to know what they are getting themselves into when they invest in your company, especially your company’s legal and financial health.

In other words, you need to have a fundraising roadmap to manage your internal expectations on your current funding needs and expected external funds. Many founders made a mistake of raising too little money. If you think about it, the physical and emotional bandwidth in raising US$250,000 or US$500,000 is pretty similar. To avoid having to start fundraising again just six months after you closed your last round.

Ask any entrepreneur that has been through a fundraising process. Or even founder that raised money on an equity crowdfunding campaign hosted on a crowdfunding platform. Fundraising can be emotionally and physically demanding.

Ignoring securities and companies laws

Early stage entrepreneurs like to think they are immune to company law. As a company, they are a set of securities laws that need to be satisfied before shares can be issued to an investor. If you are a director (which is indeed the case if you are a founder), you can face penalties and fines for failing to issue shares according to the securities laws.

Remember I told you earlier about the founder that took money from an angel without signing any paperwork? Doing future fundraising can be hard when you don’t have paperwork on your previous fundraising round (fixing the share capitalisation table can be a nightmare too!). It may also be unlikely for an investor to invest in your company if you have violated securities laws when raising earlier capital rounds.

Overvaluing or undervaluing the company

While vetting potential investors, startups, and founders need to avoid overvaluation or undervaluation of the business.

In my experience, it is surprisingly easy to get money from unsophisticated investors at unrealistically high valuation (for instance, taking money from your ‘rich uncle’ that has too much money laying around). But think about the implications of taking in too much money at such an early stage of a business.

You and your cofounders may end up with problems in the next several months when you want to do another fundraising with other investors at an appropriate valuation. It is difficult and may have to take up new money at a lower valuation (also known as a ‘down round’).

Also Read: How to protect your early stage startup from unnecessary legal hassles

You may end up having to address a group of frustrated initial investors that will be forced to accept an unexpected reduction of their stake and dilution of their ownership or rights as an earlier investor in the company.

Additionally, undervaluing your company can be just as bad. Raising funds at an unreasonably low valuation means you will give away too much equity to the investors. As a founder, you may reduce your potential financial success in the future during an exit scenario like an initial public offering (a corporate exercise where a private company becomes a public company and sells its shares to the general public for the first time) or a trade sale (like selling to a strategic partner or a corporate).

You may end up getting paid less because you get diluted too significantly at the early stage of the business.

Taking money from any investors that offers money

As a founder, you must carefully assess every potential investor as much as a potential investor is assessing your company. Different investors have different characteristics and preferences. Take your time to know them well before you agree to take their money.

For example, more angel investors, especially business owners and professionals, are now getting involved in pitching competitions to find good companies. News about unicorns and how investors achieved financial success in investing in startups attracted startup investing as another asset class.

I recall a founder who told me that an angel investor told everyone that the founder now works for him as his employee, simply because he decided to invest in his company. I also recall another founder telling me that an angel would invest in his company only if he agrees to designate the angel as another cofounder. In reality, the designation does not carry much difference, so the founder decided to such a request. This kind of stuff does happen.

You may end up struggling to manage your business while being obliged to listen to unsolicited advice on how to run your business from unknowledgeable or inexperienced investors. You need to know how to put them in a box (usually covered inside a good shareholders agreement) while ensuring that you don’t neglect their rights as investors like being regularly updated about the business progress.

Using a complicated and technical investment structure

There are only a few financing structures that can be used by a company like issuance of either issue ordinary shares or preference shares to an investor. The legal fees associated with such structures are generally reasonable.

In my experience, entrepreneurs who try to reinvent the scheme may incur more legal fees over the usual amount. In practice, creating complicated and onerous deal terms tends to create issues for future investment rounds when introducing new investors with non- industry-standard terms.

There is a general trend in Silicon Valley for early stage deals to be either two types. One is the Y Combinator’s accelerator “simple” investment agreement called SAFE (Simple Agreement For Future Equity) document. A second most popular option is the 500 Startups’ venture fund KISS (Keep It Simple Securities) convertible note.

Also Read: When does your startup need a legal department?

I won’t delve into details on the pros and cons of any of these instruments. But for any of them to work here in your specific country, the commercial and legal terms need to be considered and localised carefully to fit into the companies laws that we have in your local domicile.

On a side note, they are inherent complexities in both of these instruments (you can read them on the web like pricing the round and managing founders’ future dilution). So you need to know what you are dealing with before happily signing off on the dotted line.

It may be most appropriate to stick to a straightforward vanilla instrument like selling your company’s equity in practice. The usual way is to offer your company’s equity in exchange for money so that you can get back to growing your business.

Raising money for the sake of raising money

There is a common saying that “equity is the most expensive form of financing”.

Consider carefully, why do you need to raise outside capital. I do know some founders that fundraise because that’s what everyone is doing.

Some founders I met do not even consider bootstrapping (i.e. running a company using your personal savings or resources). Don’t get me wrong. I am not asking you to bootstrap forever. For example, you should try to generate revenue for your business before you attempt to raise money.

Some successful bootstrapped companies that have been successful are Mailchimp, Lynda, Shutterstock, GoFundMe, GitHub, Shopify and many others.

Ignoring the important legal and fundraising agreements

In my experience, early stage entrepreneurs usually like to brag on how their angel investors trust them so much by putting in money in their bank account. Once an investor invests in your company, the investor becomes another shareholder in the company and other cofounders. You should have a formal agreement in place (usually a shareholders agreement) setting out the rights and obligations between the cofounders and the investors.

Raising money from investors may be the most important corporate exercise you will undertake as an entrepreneur or founder. Treat it seriously and with respect.

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Blockchain technology continues to further permeate the world in which we live while disrupting legacy systems and improving efficiency. One area where this may be clearly seen is in the sphere of higher education, where partnerships between technology companies and universities are helping to develop some of the most exciting real-world use cases.

Blockchain technology in higher education primarily dates back to October 2017, when the University of Melbourne became the first university in the Asia Pacific region to issue recipient-owned credentials via the nascent technology — effectively ensuring that credentials remain owned by the recipient and verifiable by third-parties, even if the issuing institution ceases operation.

Though late-2017 and early-2018 was a speculative bubble for blockchain projects, a 2019 report from Gartner found that 18 per cent of respondents planned on deploying blockchain solutions within the following 24 months— a trend we indeed saw play out in 2020. 

Today, many institutions for higher education around the world — including Princeton, MIT, Harvard, UC Berkeley, the University of Central Asia, and the Asia Pacific University of Technology and Innovation, and many others — feature at least some degree of blockchain education and regularly publish academic papers on the emerging technology.

Additionally, some Ivy League universities — such as Harvard, Yale, Brown — have been using cryptocurrency exchanges to directly gain exposure to digital assets, following investments from Ivy League endowments via venture capital funds in 2018.

Putting heads together for real-world use cases

The use cases for blockchain technology in higher education are readily evident. As secure databases, blockchain solutions may improve record-keeping, increase procedural efficiency, create new avenues for payments, and fundamentally alter for-profit institutions’ business models. Blockchain studies also encourage some of the brightest minds in this relatively new field to apply for admission to universities interested in fostering their personal development.

Also Read: LongHash Ventures launches US$15M fund to support early-stage blockchain startups

However, the potent combination of blockchain technology and higher education doesn’t end with universities’ simply utilising blockchain solutions. Rather, it also extends to partnerships that aim to develop various industries.

For example, in November 2020, leading technology company Maxonrow partnered with the National Chiao Tung University to jointly establish the ‘Technology Management and Blockchain Research Center’ in order to develop blockchain applications, facilitate cross-domain integrated application systems, and boost industry-wide ecosystem development. The research centre currently also offers FinTech and blockchain courses.

More specifically, the research centre is focusing on improving efficiency in the medical biotechnology industry, providing solutions for agricultural and fishery sales record management, developing fintech applications and smart logistics, and promoting renewable energy management, among other real-world use cases. 

In another example from earlier last year, Tokyo-based NTT Research, Inc.’s Cryptography and Information Security Lab separately partnered with UCLA and Georgetown University to research the theoretical aspects of cryptography and the utilisation of a world-wide blockchain research testbed, respectively.

COVID-19 accelerated the need for blockchain adoption

Universities have always played a role in both the education and fostering of innovation of emerging ideas. As such, partnerships between blockchain companies and higher-education institutions are crucial to the further development of real-world use cases for cryptography and blockchain systems.

Unfortunately, the ongoing COVID-19 pandemic has, according to the University of Illinois Springfield’s Ray Schroeder, decelerated the blockchain-focus from many institutions of higher education— which found their IT departments over-burdened by the need to adjust to a learn-from-home model. 

This need to adapt has opened the door for more university partnerships with companies— such as the aforementioned collaboration between Maxonrow and the National Chiao Tung University — and it stands to reason that the trend will continue throughout 2021 and beyond.

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