Many successful businesses start with just one person who has a vision, the technical skills or a deep passion to deliver a superior product or service to the market.
The same is observed here where a number of the entrepreneurs that we have met are both first-time and solo entrepreneurs who have set their minds on growing their business and know what it takes to achieve growth. However, on the flip side, not many have taken the time to think about how best to eventually exit their business in a sustainable and equitable manner.
Traditionally, an exit by the founder of a business or start-up may happen in the form of a well-strategized succession plan, share sale to industry partner(s) or winding the company down. An important question to ask is whether either one of these options yields the best or desired outcome for entrepreneurs who have contributed a significant part of their lives to build their business?
Over the years we have helped many of our partner-entrepreneurs grow their business to a scale which put them on the radar of larger global or regional peers for a potential private share sale or a partial exit via the capital market. Here are some of the common denominators to help you determine if it is a path worth exploring:
Is an initial public offering (IPO) within reach?
The Malaysian stock exchange has consistently been an option worth exploring for considerably large companies with proven profits. Among the listing criteria that companies will need to consider for an IPO on the Main Board include the “Profit Test” (ie. enterprises with a consistent audited annual net profit in the last three (3) to five (5) full financial years with a total net profit of at least RM20 million, as well as a net profit of at least RM6 million in the most recent financial year). Another option is the ACE Market or LEAP Market, where interested companies may need to engage a sponsor or an approved adviser to assess its suitability for an IPO.
Entrepreneurs who have built a strong foundation anchored by a long-term vision for their business and can demonstrate how an external cash infusion could help accelerate such process (ie. working capital injection to accelerate growth and meet the qualifying profit requirement, among other criteria) may find this as an attractive option.
Are you ready for corporate governance?
While there are businesses that are profitable (some immensely so) and continue to grow exponentially, more often than not they are very focused on generating profits and do not have time to pause and consider if their company is sufficiently conducive to welcome minority investors or a change in the management team.
Some of the tell-tale signs which may turn a potential investor away may include the lack of timely and accurate financial reporting, sizeable undeclared related parties’ transactions or one-man risk with no meaningful succession planning in place (ie. a well-structured management that demonstrates commitment and capability).
Environmental, Social and Governance (ESG)-proof?
This may sound like the latest buzzword, but in its simplest form, a lack of ESG best practices and awareness presents potential operational and reputational risk for the company and may raise alarm bells for potential investors.
In addition to developing a game plan to ensure that your company continues to generate value in the long run, you are likely to also want to seek out an investor with the same vision with a good ESG reputation as your shareholder. Presumably, you would want to partner with a seasoned investor that has been in the industry for years who value integrity and social responsibility as much as good performance.
While reputable investors abide by their ESG pledge, the same is expected from their partner-entrepreneurs. Some of the signs of ESG risk include a non-existent whistleblowing policy, alleged corrupt practices and compliance issues.
We applaud entrepreneurs who have succeeded in their own right and have interest to further grow their enterprises for an eventual sustainable exit. OSK Ventures International Bhd has been the capital provider of choice for many of our partner-entrepreneurs. Let’s keep the conversation going and speak to us to find out if your business is ready for accelerated growth.
OSK Ventures International Bhd is a Malaysia-based investor with more than 20 years of investment track record. We support our exceptional founders in their entrepreneurial journey with timely capital and put their business on a value-added platform.
OSK Venture has launched a new venture capital investment fund that invests in fast-growing companies and scalable businesses engaged in high-demand sectors. If you’re keen to be part of our success story as an investor, please reach out to us today.
Let’s keep the conversation going and contact us to find out if your business is ready for accelerated growth.
Have more questions? Get in touch with us:
Jimmy Tham
Investment
T : 03-2161 7233
E : contact@oskvi.com