Q: I just read your column in the January Issue of Entrepreneur and I had a follow up question. I am at the very beginning point of putting together my business plan. I have just started writing it and am fleshing out exactly how I envision the company running and what customer base I would want to target. I certainly would be looking for financing but I also feel that would really be important to the success of this business would be a group of people involved who can help with the various intricacies of getting a new company up and running. The long and the short of my question is should I send my business plan to VC firms when I have completed it or is there a better avenue to take at this point?
A: (Brad) My immediate reaction is “No!” For starters, my impression is that you probably aren’t ready for VC money given your description of where you are in the process of creating your company. It sounds like you haven’t started the company yet, but rather are working on the idea and using the business plan process to formalize your thinking. This is good, but it’s a long way from being ready to approach VCs.
Given that you “feel that would really be important to the success of this business would be a group of people involved who can help with the various intricacies of getting a new company up and running.” I’d find these people first. These are unlikely to be VCs. Rather, these are going to be business partners, mentors, advisors, and angel investors that can help you get things off the ground. Once you’ve made some progress, then you’ll be ready to contemplate talking to VCs.
But – before you even do that, you need to decide how much money you actually need to get your business up and running. If you needs are modest (say – less than $1m) then it may be the case that VCs are the wrong funding choice for you and you should focus your energy on angel investors. Or, depending on the type of business you are trying to create, you might be able to bootstrap the business without raising any money.
So – bottom line – don’t think of VCs as the first step in the process.