 |
 |
|
|
|
|
| |
| Showing You the Money |
| |
| |
Grab 'em by the eyeballs — their hearts and minds — and money — will follow. Venture capitalists' eyeballs are in great demand — and demand exceeds supply.
|
VCs are not cut from the same cloth as strategic investors or angels, and you need to know what makes them look.
VCs receive countless business plans. Understandably, they don't read every plan from cover to cover. If you're lucky, they'll read your executive summary. If it's good, they'll read on.
|
|
Executive Essentials |
Investors skim executive summaries, scanning for the spark that will ignite their interest to continue. This is your big chance. Your business plan must begin with an eyeball-grabbing executive summary. First lesson: be brief. "A 10-page executive summary is an oxymoron," explains Mitchell Hollin, managing director of Adventa Partners in Spring House, Pennsylvania. The ideal executive summary is three pages — longer and you may well lose your reader. Assume that your potential investor starts out even less interested than your 15-year-old — and has an even shorter attention span. Your executive summary must tell a complete and compelling story. Your charge: to provide your reader with a succinct overview of the entire business plan. Do this by telling of real markets, real needs, real products, great people and great opportunities for investors. The bottom line will always be: what is the opportunity for the VC?
In the body of the business plan is where you convince your reader that your investment opportunity is a real solution to a real problem or market need and can make real money, lots of it, for its investors.
|
| Company Characteristics |
| "I want to know what major problems you will solve in the work place. I want to see that perhaps your product is something that is ten times faster or better than the competition." –Gary Kalbach, general partner of El Dorado Ventures, Silicon Valley
|
Companies are born of inspiration; great companies are the result of perspiration. Tell of your inspiration and those providing the perspiration. Discuss the captain at your helm and the winning crew you've assembled. Most VCs agree that the single most important indicator for a successful venture is the management team. Emphasize the skills and experience each team member contributes, how these skills compliment each other, the team's ability to persevere through the challenges ahead, and how they have the proven experience to quickly adapt to unexpected changes in the business environment. Gordon Baty, managing director of Zero Stage Capital in Cambridge, Massachusetts, comments: "If someone is on the technical side, I want to see not only that talent, but experience and credentials in business leadership. Maybe they were a project leader or manager at another company. I don't want someone who just wrote software."
|
| Power-packed Products |
Why do we need your product? What need does it fill? What, precisely, does your product have to offer? Failure to describe your product successfully indicates that you haven't clearly defined your business in your own mind — hardly an attractive investment proposal.
Too much techno speak, on the other hand, becomes downright boring for most; you run the risk of your readers "tuning out." If you can't explain what you are doing to a layman, keep working on it.
|
| Market Mores |
Here's where you tell it like it is: show your in-depth understanding of your market, including an overview of target markets, size and potential, competitors and trends. You must demonstrate the market's need for your product or service, proving that you can meet this need better than the rest.
An essential part of your "show and tell" lies in your business model. Here you show how you intend to make money and address what is foremost on the investors' minds: how will they turn a profit? Benchmarking your product or service against a proven model shows you've got a firm foundation on which to anchor your assumptions and projections.
It's "do or die" when it comes to strategy. Without it, even the best product will fail. What's your marketing and sales strategy? Here's where you convince investors that you can meet the sales and margin levels indicated in your projected financial statements. Issues covered include growth and market penetration strategies, distribution channels, and promotional plans.
|
| Dollars and Sense |
Financial projections: tell them again how you're going to make lots of money — for the company and for your investors. Explain how they stand to profit from your investment opportunity. While VCs are fully aware that these figures represent assumptions and projections, they are looking for evidence that the plan is securely rooted in the real world. Beyond sales and profit projections, cash flows and balance sheets for the next five years, established companies should include historical information.
Roger Novak of Novak Biddle Venture Partners in Reston, Virginia: "We expect that a company will have minimal revenues in year one of development. But we'll hone in on their spending and whether they match with the development effort. We'll want to see them spending according to plan. If you are at the forefront of an industry, we have to look at the potential market and whether the product could earn 10% to 20% of the market."
One more thing — be prepared to explain: your assumptions. VCs won't take your word for the forecasts you've presented. Demonstrate that you have considered every aspect, are familiar with each number and can defend them — you'll have to.
|
| Looks Count |
In today's no-nonsense, time-is-prime world, VCs want to review clean, sleek, easy to read and navigate documents that get right to the point. Bullets, tables, and charts are easy to scan for key information. Judicious use of color, graphics and text boxes, along with short paragraph structure, facilitate readability and pull the text together into one cohesive document. Short sentences work best. Package your plan with the same care you would package your product.
|
| Less Is More |
So, how long should your business plan be? There are no hard and fast rules since each investment opportunity is different, therefore, no two business plans are the same, but you should strive to keep the document as short as possible (20 pages, plus five more for the financials). If investors ask for more detailed information, it can be supplied separately. This also gives you better control over how much of your business you reveal and to whom.
Your business plan is a powerful tool in your quest to win VC eyeballs — make sure it works for you and not against you.
|
| The Trendletter team welcomes your comments. |
Kippy Flur
Consultant
The Trendlines Group
|
|
|
|
|
©2002–2008 Trendlines International Ltd. All rights reserved.
Phone: +972.4.958.3323 | postmaster@trendlines.com
Directions |
Privacy Policy |
Site Map
This site contains material copyrighted by third parties.
This site
is best viewed in Internet Explorer version 5 or higher.
|
| |
| |
|
|
|
|
