« What are typical compensation numbers? | What Should I Pay a Recruiter? »

Do Venture Investors Require Business Plans?

Do Venture Investors Require Business Plans?

Q: Do VCs and angel investors really require a complete business plan? I’ve read a great deal of conflicting advice about the value of a business plan with regard to funding.

A: (Jason). Well, it sort of matters how you define “complete.” You could probably ask 10 VCs and get 10 different answers, although I think over time the formal business plan is losing some of its importance, much like how formal PPMs (Private Placement Memorandums) have lost some importance the fundraising world for VCs.

Worry more about the substance, not the form. I hate reading business plans that are 40 pages long, with about 5 pages of actual info, with the pertinent 5 pages being repeated several times.

Make sure that you explain what your company does, why doing it “matters,” what the financial model is, who the executive team is and how do you shake out against the competition.  Whether this is in a formal word document / business plan, or is in powerpoint form, doesn’t really matter so long as the proper information is presented. 

June 5th, 2007 by     Categories: Fundraising    
  • http://sabet.typepad.com bijan sabet

    My favorite plan was given to me in WordPress format.
    It was great content and easy to navigate. And the entrepreneur had great links, updates, etc.
    This is how it was laid out.
    http://tinyurl.com/394ppg

  • http://www.nosnivelling.com Dave Schappell

    Jason — I’m 93% done with my business plan (v6 :-) ), but was wondering if you have any blanked out BPlan formats that you’d be willing to post/share?
    I’m less interested in the specific wording, and more interested in what folks find very useful — I feel like there are 4-6 pages of what I’d consider fluff, but when I try to omit it, I’ve gotten consistent feedback that people like to see it.
    Thanks for any / all help — again, love this blog — very useful!

  • Jason

    Only version 6? You have at least 6 to go, right? :)
    I don’t have any particular format that I’d tell you was “perfect.” I like shorter business plans. The 30 page (or more) plans seems like fluff to me, as well.
    Remember, you only have to interest the person enough to ask more questions / ask you about things not in your plan. The plan isn’t, by itself, going to get you funded.
    Make sure that you have a clear vision of the issue, the solution and the revenue that your company expects. Make sure your financials are reasonable and that you have a clue about competition. This might take 7 pages and it might take 15.
    One thing that I really don’t care about in a business plan is an exhaustive essay on how the technology works. If I am interested in your company, I’ll tackle that during due diligence.

  • http://www.dotnetnuke.com Joe Brinkman

    Having recently gone through this phase for our company, myself and my co-founders found that the value of the business plan for us was not what we showed to the investors, but rather the critical thinking that it forced us to do in order to put the plan together. It really made us clarify our vision for the company and get a better handle on what we needed to do to execute on that vision. This in turn made it easier to talk to potential investors since the vision was much more focused and clear. I also think that developing the business plan helps to get everyone on the same page and moving in one direction. So for us, regardless of whether it was needed for investors, it was definitely worth it to us as a business tool.

  • http://www.dotnetnuke.com Joe Brinkman

    Having recently gone through this phase for our company, myself and my co-founders found that the value of the business plan for us was not what we showed to the investors, but rather the critical thinking that it forced us to do in order to put the plan together. It really made us clarify our vision for the company and get a better handle on what we needed to do to execute on that vision. This in turn made it easier to talk to potential investors since the vision was much more focused and clear. I also think that developing the business plan helps to get everyone on the same page and moving in one direction. So for us, regardless of whether it was needed for investors, it was definitely worth it to us as a business tool.

  • http://www.planhq.com Natalie Ferguson

    I’d love it if anyone writing a business plan tried PlanHQ (www.planhq.com) – No more iterating text, but a much more clever, ongoing, dynamic way to plan your company.
    As you may be able to tell, I work for PlanHQ ;) But we’ve had some really good feedback and are always open for more, especially from people who’ve done a bit of planning