[Guest article by Adiya Nataraja, Investment Manager at Ventureast, an early stage investment fund.]
One of the occupational hazards of working for a VC firm is that you need to go through business plans of every kind. This is especially true of the space in which my fund operates. Early/seed stage deals. This (irrelevant business plans) could arise due to various reasons and we shall not get into that now. This post refers only to those who are making business plans for the purpose of fund-raising. Let me get straight to the point.
What is a business plan? I think most people refuse to ask this question when they start building out one. It is a set of well-accepted business jargon that people continue to use and reuse. Wash. Rinse. Repeat. A business plan, in my opinion, is a document created for a certain purpose detailing the core aspects of the business addressing the basic questions of what, how, why, who, when and a few other purpose-relevant questions.
I have created a basic set of questions that the VC wants answered but does not know how to word it in a way that the entrepreneur understands it.
Each question can be answered in a single slide. So a business plan can be utmost 11 slides. Anything more than that means that either the entrepreneur does not know how to word it, or worse does not know the answer.
Here are a few basic dont’s:
1. Don’t create ppt’s of 35+ slides. And don’t send such plans (> 2MB in size) by email. If not anything it is bad email etiquette.
2. Don’t put up the market slide up first. Without the context of what you are doing, it is virtually impossible for the VC to understand what is happening in the slide. So, it’s always better if the market slide follows the value proposition slide.
3. VC’s, generally, like to see disproportionate (usually jargonised as ‘exponential’) growth. That doesn’t mean you show something that’s unrealistic – look at it from a market point of view and see if there is that kind of a space for your product/ service to actually grow. If there is then don’t worry, the VC will also figure it out. If there isn’t and you are trying to fabricate stuff, then the VC will figure out even quicker than you can complete your argument!
4. VC’s love stories. If you once went to Google or Microsoft with your revolutionary idea and they rejected it. It’s okay if it was rejected, but remember to tell them the good points that they said about your product. The VC will definitely take note.
5. Please listen. Don’t keep talking continuously. The VC, however inhumane, is still a human being. He has to go back and deal with a family. In all probability, yours is not the only business plan he is going to see in a day. So, be compassionate. The chances of reciprocation are higher.
6. If you are in advanced negotiation stages with other VCs, make it a point to reveal it during some point during the discussion. It will help save time for both of you (VC and entrepreneur). Sometimes, this might be a chance to get two investors in at the same time (co-investment).
What’s your opinion?
- Demystifying a Business Plan – What makes one stand out from the rest?
- Anatomy of a Good Business Plan – Combination of Strategic, Operational and Tactical Plans!