Funding IT projects via VC

Unless you have collateral, I don't think banks would support any IT project in this country. Come to think of it, we are promoting IT as the next engine of growth yet it is still unheard of in this country if you talk about startup capital for promising projects and new companies.

In the US, venture capitalists (VCs) that include banks, private individuals or commonly called angel investors and private funders take time to hear the latest innovations and tech-based solutions. Many of these VCs even go to schools to see some projects developed by students. Google for example (a project developed by students at Stanford University), is just one of the most successful projects funded by VCs.

In just seven years, Google made a record-breaking performance at the NASDAQ during their first initial public offering last year. And to date, Google shares remain to be the world's most sought-after shares beating Microsoft and Apple. Anyway, the story of Google only goes to prove that if funders like banks and government financial institutions listen, a project can succeed.

In the Philippines I'm proud to say that one IT entrepreneur from Bohol, Winston Damarillo, has probably made his first billion pesos after he created the "Gluecode" (an enterprise server platform) which was bought by IBM for US$100 million. But then again, this Boholano got the funding of his project not from banks or some government support but from Intel Capital who believed in him and his project.

He just created a software company called Exist, which has its base in Manila and at the IT Park in Cebu. And now he has created a foundation purposely to support high tech start-ups called "Simula Labs." I think he perfectly understands how high tech professionals and Filipino-created projects badly need support in the country.

Anyway, I am also convinced that a good IT project for it to generate support needs to be translated into a convincing business plan. One of the many reasons why many IT projects become "abandoned ware" or "junk ware" because our software engineers do not put them into clear concepts.

These days, perhaps more than ever, IT people need to have a comprehensive knowledge of their markets. A detailed plan of "market execution" and what makes the project totally different from the rest of its kind. The project must be able to prove that there is a team that is capable of executing the plan.

Of course, you are not going to get investors right away there are still other issues that come later. But what is important is to be able to initially convey what you are building. In fact, from my experience we submit our business plan to many VCs in the US - some can be a complete let down but there were quite a few successes.

But then again, like any other new businesses you have to have some patience.

Right now, the market for venture capital is merely back to normal after seeing unprecedented levels of investment during the technology bubble. An IT entrepreneur looking for seed capital to launch a product would be wise to take advantage of this financing vehicle.

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