I’ve had the good fortune to be involved in several successful startups, in varying roles, including as a founder, as a senior manager, as an investor, and as an advisor to senior management. I’ve written or co-written or analyzed dozens of business plans for startup companies.
The number one thing you want isn’t a business plan. It’s an executive summary. Make your summary 2 pages max, and pack in as much bragging material possible. This is your resume. VCs get dozens of plans a week, and invest in maybe one per month. You’ve got to catch their eye with this in 5 minutes or less, because they won’t be reading it any longer than that. Important sections:
Intro: in 3-5 sentances describe what problem you solve, how you solve it, and why you are uniquely qualified to solve it.
Market: Describe the need for what you’re doing. Estimate the overall size of the market.
Product or Service: Describe what you’ll do to address that market.
Sales Channels: Describe how you’ll get to your customer. Will you hire sales people and sell direct? Or will you find reseller partners? What vertical markets do you expect to attack and why? How will you find your customers and partners?
Team: Describe the people on the team and why they are uniquely suited to solving this problem. I can’t over-emphasize that the people are the most important part of the equation. If you are perceived as having a great idea but a lame team, you won’t get funded. If you’re perceived as having a half-way decent idea and an excellent team, you will.
Financials: Projected revenues for years 1, 2 and 3. When you expect to break even.
Work to date: What have you accomplished so far? Do you have anything patentable? Do you have a prototype? Do you have any employees? Do you have any Advisors from the appropriate space? Etc.
What you want: Amount of funding being sought. What will be done with that funding. How long you expect the money to last.
The number two thing you want isn’t a business plan, it’s a presentation. It should contain 20 foils maximum, and is really an expansion of your Exec Summary, built into a presentation.
The Exec Summary and Presentation may be all you need to get funding at this stage, and frankly I would run with those until a VC tells you they need more detail, at which time you can write it.
Be sure to pass your Exec Summary around to people you trust for review, and likewise give your presentation to several trustables before you go to the capital community.
You want to get to an Angel or VC by way of an introduction. Going in cold is bad in general, and and doubly bad with this current climate. Don’t know any? Go meet some. There are plenty of networking events you can go to where Entrepreneurs and VCs can meet. I don’t know what your space is, but local colleges are usually a good source of events.
Make sure the VC you’re going to is a fit for you. Different VCs invest in different stages; be sure the one you’re at is interested in making early stage investments. Some focus exclusively on later stages. Be sure the one you’re at is interested in investing in your field. Most specialize in particular areas.
When you go in to a VC, have your homework on them done. Go to their web site and find out what investments they’ve made in your space. Find out what potential partners for you they’ve invested in. And if by chance they’ve invested in a direct competitor of yours, by all means don’t approach them; your plans will go right into the hands of your enemies.
If you’re lucky enough to have many VCs to choose from, approach the lamest ones first. You’re guaranteed to get beaten in this process, so accumulate your scars with the low-end ones, so by the time you get to the big boys you’re polished.
What they’re looking for (in this order):
- the team
- the market
- the idea
In general, everybody and his brother has a great idea. That isn’t what gets funded. What does is if you’ve got people there who have proven success in this market before, and a large enough demonstrable market that if the idea turns out to be bad that you can adjust course.
As I say, I’m pretty deep into this stuff. If you’d like more advice, or a review, feel free to email me. Especially if you’re in the high-tech world, and especially if you’re in Silicon Valley. If you’re in my world technology and geography-wise, and you’ve got a good thing, I can introduce you to folks as well.