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Should I Send My Business Plan to a VC?

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.

January 19th, 2009 by     Categories: Business Plan    
  • http://www.dontgosouth.com David Brody

    Brad, couldn't agree more. I'm a Partner at boutique early stage investment and advisory firm and we see numerous deals that just aren't “investor ready”. It's true, there are many “minor league” options an upstart entrepreneur can use to sharpen their idea and their business model. As we like to say, entrepreneurs shouldn't waste “any time or money on anything that doesn't provide value back”. And that means they should think twice before clicking the “submit plan” button at one of these many online pitch farms that have cropped up of late. Unless of course, they want their business plan to get lost in the deep ocean of half-baked plans. We just published some constructive prose on this very subject called Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital. I'm sure you have some thoughts on the subject:). You can read more at our website: ” target=”_blank”>http://www.dontgosouth.com.

  • http://skywardinnovations.blogspot.com/ Alex Shore

    You should also be concerned about giving away your idea too early. Don't trust that a VC will keep your idea confidential. You are vulnerable when you are starting out because all you have is the idea. Start by talking to people that you trust and network out from there.

  • Peter

    Absolutely agree that it would be a bad idea to send out BPs at this point. However, it *can* be useful to check out a few of the application forms that VCs and accelerator programs offer on line. Even before you have the BP ready, check a few of these out and you'll get an idea of a lot of the questions you'll be asked–and that you honestly should be thinking about anyway.