Business Plans for Venture Capital
The one thing that can totally make or break any quest for venture capital funding is the business plan. Business plans for venture capital must be exceptional examples of the genre.
The business plan has become a basic part of the science of business management. Business students are taught the importance of a sound business plan for every type of enterprise from a street corner lemonade stand to an international corporation. It should not come as a surprise to anyone that business plans for venture capital play such an important role in the ability of an entrepreneur to secure this elusive form of financing.
Venture capital is called elusive here because of a rather alarming fact. A very small percentage of companies that seek it actually find it. This percentage is as low as 2-3% of all presentations. So, it stands to reason that the business plan of an entrepreneur seeking venture capital is going to have to be exceptional. It is going to have to contain elements that will make it stand out and demand attention. This is no time for a routine business plan template or some very vague business mission. This must be a presentation that makes some people, who are not easily impressed, sit up and take notice. What are some elements of this type of business plan?
First, it needs to be very research orientated. When one venture capitalist was asked what were the three most important items that he looks for in a business plan, he replied, “research, research, and more research.” The business plan must have totally examined the potential market place. Competition, customer demographics, analytic metrics, and market penetration need to be thoroughly researched. “We think” should never take the place of “We know” in the business plan.
Second, it needs to emphasis the strengths of the people involved even more so than the original idea. Venture capitalist are very people orientated as they exam a potential investment deal. Even a good idea will fail if it is managed by the wrong people, and yet and average idea will succeed under a top management team. It is the current management team that will become the partners of the venture capitalist in the common goal of reaching profitability and insuring a high rate of return. So, their strengths and how these human assets are positioned to insure success should be part of the business plan presentation.
The idea of a good business plan to attract venture capital is to take a good idea and present it in a way that makes the venture capitalist applaud while he is reaching for his check book. It must be well researched with a strong emphasis on the management team already in place. It needs to be the kind of presentation that makes a prospective investor shake his head and say “wow”.