Q: What do investors look for in a business plan?
A: A clear understanding of the business. How do you plan to make money? How much money is required? Why is your company unique? Why can it overcome much larger and better financed competition? What does the competition look like, both startup and large company competition? Who are the people in your team? What are their complete backgrounds? What is the company going to focus on?
Q: How seriously do investors take the business plan?
A: Very seriously. The business plan includes your business model, your team, your competition, all of which can be the difference between success and failure in business.
Q: Which sections of the business plan are the most interesting for investors?
A: The people are the most important. The business model is often very critical. The competition discussion is always important. We understand that the best people can overcome almost anything. We also believe that a large market, and large margins can be somewhat forgiving.
* What business is the company in?
* What is the company’s mission?
* Is the idea powerful enough to be the solid foundation of a big business or could it simply end up as a feature of someone else’s product?
* Is the path to market plausible for a new entrant?
* How will the company be financed, not only initially but all the way to self-sufficiency?
* What are the key milestones that must be achieved on the company’s path to success?
* How will the company be valued if it is successful?
* What is the likely exit strategy for investors?
* How long will it take for the business to generate $100 million in annual sales?
* What market share will it have to obtain to achieve those levels of sales?
* What size organization will have to be built to achieve these sales levels?
* At what stage does the business become profitable?
* Who are the key competitors?
* How is the new company going to effectively compete with incumbents and new entrants?
* What evidence is there to suggest that there is a pressing need for the solution?
* What cost would customers attribute to this problem and what value to the proposed solution?
* How is this need being addressed currently and why is this not sufficient?
* Has this need been recognized by industry groups, standards bodies and incumbent vendors?
* How significant and costly is the change required to embrace the proposed solution?
* What value do customers place on a solution to the problem the company is addressing?
* What departments and officers have budgets specifically allocated to solving the problem?
* How will the customer’s job change if the problem is solved?
* How long is the sales cycle?
* What are the customer’s key criteria in making a purchase decision?
* If the need the company is addressing is so great, why is no one else offering a compelling solution?
* Are the product’s advantages compelling enough to outweigh the customer s preference for continuing to deal with its existing, established vendors?
* What is the source of the company’s differentiation?
* How can this source of differentiation be protected and enhanced over a long period of time?
* What are the key risks facing the business?
* Which of these risks could be fatal to the business?
* What partnerships could help the company mitigate and address these risks?
* What alternative paths are available to the company if a major risk materializes?
* How will the company conserve cash and get all of its employees to think like owners of the business?
* How will the headcount grow over the next 18-24 months?
* Which companies are likely to be the best sources of talent to recruit?
* What compensation packages does the company intend to offer employees at various levels of the organization?
* Are the incentives of key executives, founders and investors aligned?
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