||Hook Them Immediately: Since investors are deluged with business plans, they reject most within a few minutes of beginning to read. How do you stand out from the rest? Open with a couple of sentences that grab investor’s attention and entice them into reading more. These first few sentences must tell the reader what you do; why you are unique; what size market you serve; what share of market you expect to capture; and when you intend to accomplish that.
||Project Solid Management Expertise: The strength of your start-up's management team is absolutely critical to both your success and your ability to raise venture and angel financing. A start-up doesn't need to have a complete team to raise funding, but it should at least have key players on board with the experience and vision to make the company a success. VCs and angels invest in people, not just ideas on paper. They want to make sure that your team can deliver, so investors look for an effective management team that:
- has successfully started and run other companies;
- works cooperatively;
- provides a range of industry knowledge and functional skills;
- and has integrity, passion, flexibility and reliability.
Corporate and advisory board members can help enhance the expertise and experience of a start-up’s managers. Marquee names impress investors. Choosing well-respected professional resources such as accountants and lawyers will not only expand your network, but also increase your credibility.
||Develop Captivating and Believable Financials: Investors will want to know how you arrived at your projections. These assumptions should be clearly spelled out. If you have an existing business, you have a pretty good sense of how much things will cost, how much staff you'll need and the sales you're likely to make. But when you're just starting out, these projections are difficult to make. Instead, develop your financials from the bottom up:
- Examine different distribution channels and the opportunities and costs in each.
- Source manufacturers and suppliers.
- Project staffing needs with salaries and start dates.
Depending on whether they are VCs or angels, investors will expect numbers to be more or less aggressive; angels tend to have less demanding goals than VCs. Specificity in financials may also vary in light of the stage of the plan and level of risk of the company.
Know your numbers and be ready to explain how each item in your projections has been calculated, because any serious investor is likely to grill you in detail. You’ll also be expected to know your break-even point and burn rate. Be prepared to discuss when you are going to run out of money and what the investor’s exit strategy will be (buyout, IPO, merger/acquisition).
||Target a Significant Market With Opportunity: VCs in particular are looking for big opportunities. They want to know that your business will serve a large market (at least $1 billion) and possibly become a market leader. They also want to understand the market situation that needs to be addressed and how you plan to exploit it. Is the consumer frustrated by an industry plagued by poor quality control? Is it an untapped market niche? Are you consolidating a fragmented market? Have you developed a technological or medical breakthrough?
||Include a Well-Researched Market Analysis: Part of targeting a significant market opportunity is knowing everything about the market, not just its size and opportunity. Provide a full analysis of the market’s characteristics, growth potential and all relevant trends. Include a competitive analysis, which describes the strengths and weaknesses of the your competitors as well as your competitive advantage.
||Create Competitive Barriers: You must have a sustainable competitive advantage. Do you have patents, copyrights, a proprietary process or technology, exclusive licenses or agreements? Are you the first to market? How long can you protect that lead if a big company enters the market? Do you have the best people or the best strategic partners?
||Forge Strategic Alliances: Securing strategic alliances with key players such as industry distributors and vendors shows venture capitalists and angels that others trust and want to work with you. It establishes further proof of your concept’s merit - particularly important for a start up because it definitely increases an investor’s confidence. Having big-name strategic partners or an existing customer base impresses even more.
||Set Realistic and Achievable Milestones: Investors don’t give a large sum of money in one chunk. You’ll need to address how much will be needed, when each contribution must be made and what the goals are in that period. If you don’t achieve your goals you may not get the next contribution, so make your milestones realistic.
||Show Management’s Commitment: For start-ups, a personal investment on the part of the entrepreneur demonstrates his or her seriousness and willingness to take on part of the risk. There is no greater tangible evidence of your commitment to the project.
||Attend to the Details: VCs and angels don’t have a lot of time or patience. Your business plan should be:
- concise - about 30 pages
- consistent - numbers in particular need to be consistent throughout the text of the plan, the financials and the assumptions
- well documented - footnote where appropriate
- accurate - don’t make things up
- easy to read - use a font and type size that are readable, as most investors are over the age of 40
- well laid out
- written in an acceptable business plan style
- handsome - use of color on the cover and graphics can be beneficial