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Business Plan Overview

A sensible [person] never embarks on an enterprise until he can see his way to the end of it.
- Aesop

Your business plan is a "living" document with two primary purposes - to provide a strategic plan for your company and to raise capital throughout its growth stages. As a strategic document, the business plan should evolve as your company develops and achieves critical milestones. As a capital raising document, the business plan should comprehensively and concisely communicate your investment opportunity to potential capital providers. The better job you do on your business plan, the more of your company, you'll keep.

The Business Plan Executive Summary

Professional venture capitalists receive hundreds of investment opportunities a year, but they don't have the time or resources to read every plan. To pick which investment opportunity they will eventually finance, they typically request and review just your business plan's "executive summary" to quickly determine if your "deal" meets their criteria and has sufficient potential for success.

If the executive summary creates a preliminary level of interest, the venture capitalist will request the complete business plan and begin the due diligence or analysis of your investment opportunity.

The Four "M"s: Magic, Management, Market and Money

Magic
The investor must visualize and be committed to your "Vision". You must convince him or her that your investment opportunity is not just "smoke and mirrors," but is a real solution to a real problem or opportunity.

• Products / Services: description, technical specifications, and proprietary position (patents, copyrights, etc.).
• Competitive Advantages: management team strengths, market opportunity, product/service uniqueness and sustainability, and your business model.
• Strategy: operational plans, strategic partners, and government regulations.

Management
Investors bet on the 'Jockey', Not the 'Horse'!
The management is the most important indicator of a potentially successful venture capital investment. You have to convince investors that your management team has everything it takes: Experience, skill, passion, paranoia, prepared, (able to) persevere, (always has a) plan B, and has a winning attitude! Investors do not want to run your business. You must make your investors comfortable that you and your team can build the business without the investors' intervention. (Except for offering good suggestions and introducing you to influential strategic alliances from time to time!)

· Executive Officers/Senior Managers: professional and academic experience.
· Board of Directors/Advisory Board: experienced, diverse, and active.
· Future Staffing: expansion and succession plans for key staff.

The Market
If you build it, will they come?
The appropriate research, comprehension, and selection of a target industry, market and customers are critical to the potential success of a venture-backed company. You must convince the venture capitalist that your target market is large, growing, and fragmented; that you understand and can attract the appropriate customers; and that you have a solid plan to capture and to maintain significant market share while facing intense competition.

• Industry Overview: description, structure, and size of targeted industry and markets.
• Customers: description, segmentation, and size of targeted and future customer groups.
• Competition: current and potential competitors, including their positioning and advantages.
• Marketing Strategy: advertising, promotion, public relations, and media programs.
• Sales Strategy: distribution channels and strategic partnering.
  

"Show Me The Money!"
At the end of the day, an investor makes their decision to invest based on the "deal". You must convince him or her that your financial strategy is based on sound and proven assumptions, your company's price is right, and there will be a significant ROI.

• Revenue Model: pricing and volume assumptions and revenue streams.
• Financial Statements: 3-5 years of key historical and projected statements of income, statements of cash flow, and balance sheets.
• Previous Financing: amount and timing of capital investments and the type of provider.
• Company Valuation: "pre-money" company valuation and comparable companies.
• Capital Requirements: amount of capital required for existing and future rounds.
• Uses of Funds: distribution of required capital.
• Exit Strategy: description and time frame of probable liquidity event (IPO, acquisition, etc.)

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