Business plan · Fundraising

Do we still need to have a business plan, before we approach investors?

Nickolay Kolev Freelancer at Private

September 5th, 2016

I have a B2B marketing platform. The product is 'done' (as much as it makes sense for this stage) and I am now looking to find business development and sales people to get traction.

I am also being contacted by many people here on FD (which is great!!) and some showed real interest in the opportunity to join my startup.

I also finished an incubator program few months ago. 

All the advisors and people at the incubator program was telling us that there is no need to have a business plan anymore, investors recognized that business plans render yo be completely useless documents the moment your product hits the customers. Remember, I am still looking for seed money, I am far from attracting VCs.

I have no idea how to do a business plan. Yes, I have a sophisticated spreadsheet, which shows me month-by-month how much money I will need, including the sales projections, but other than that I feel all is covered by my 2-page executive summary and my pitch deck. I could refine my spreadsheet to make it presentable and readable by potential investors, but do I really need to put a comprehensive, or even a simple formal business plan? I would much prefer to go and get new customers instead of writing a document which, will be completely useless the moment I (eventually) get funded?

Do I still need to have a business plan to approach investors?

I would appreciate any real life examples and suggestions based on real experiences.
More than 65% of new companies fail because they lack funding. In this course, you’ll learn common fundraising mistakes, how to nail an elevator pitch, how to craft a killer pitch deck, where to source investments from, and all about term sheets and convertible notes.

Martin Omansky Independent Venture Capital & Private Equity Professional

September 5th, 2016

You need a firm written document that memorializes your plan for the business - to share with others, to organize your thoughts, and to compare current performance against past thinking. This is essential and all for your internal use. investors will demand certain forms, so to be ready, you need to supply whatever they want in whatever format they require. Be aware, however, that almost all investors will conduct their own due diligence, and you will be required, in any event, to provide them with all relevant material. Whatever you have heard about the documentation required by investors, the truth is that there is no consistent approach. Sent from my iPhone

Anonymous

September 5th, 2016

Yes, sir. Sorry to say but a complete in depth business plan is necessary, not because it is actually needed for anything to be done with it. It is needed to show investors that we as creators are competent enough to draft one to appease them. Not only did it make my blood boil, that after having a well worded 23 page plan in their hands for a week, did they ask me the most simple and bare boned basic questions that were spelled out in page 1, but if you didn't have that booklet that they weren't going to read, I wasn't to be taken seriously if i didnt have that as it was their bare minimum requirement for me speaking with them.

Mike Adhikari M&A Advisor, business valuation, and BV Software

September 7th, 2016

The business plan helps educate the entrepreneur, it helps them prepare for VC presentation, and it helps with some VCs. There at least be a deck; may be a deck and a BP. The details of BP can vary. Sometimes high level is  better than details. 
Meeting VCs is like going for an interview. You want to prepare for more than what you may be asked.

Having said above, if you get a chance to meet a VC, do not let it go just because you do not have a BP. If the idea is good, the VC would be willing to meet again. At the same time if you are broadcasting to raise capital from VC, then it is safer to have a BP ready.  


Anonymous

September 6th, 2016

Hi Nickolay

A business plan is necessary before approaching investors to show them your earnest .
But the most important for this step is the human factor. So that's why you need a good preparation for your business plan and more for you.

good luck !

Idriss Zeffane BIG DATA Powered BUSINESS CONSULTING gf-accord.biz


Thomas Kaled Business Development Consultant @ thomas.kaled@gmail.com

September 5th, 2016

You should have a Pitch Deck for brevity and consistency. 

Consider developing a FAQ's database for the same purpose.

Abbreviate your detailed spread sheet. so an investor can understand utilization of funds. 

Michael Hentschel CFO at Olaeris, Inc.

September 5th, 2016

I've raised about $150m with or for hundreds of ventures over the years, and the largely superfluous excercise of a 30-page business plan has always been necessary and unimportant. The things in a BP you can't really do well in a PPT is give detail CV's, detailed "strategy" discussions, greater depth to your mission, detailed competition profiles, and so forth. For me, the PPT is the more thoughtful gateway to all that more detailed info.

We once got $17m in firm commitments based solely on powerpoints and in-depth detail financial projections, and nevertheless had to turn that into a business plan to close, for no other apparent reason than to have good closing documentation. We never referred to the plan again and sold the company 4 years later for $265m based on results and on market and financial projections. So my MO is create the perfect powerpoint and financial plans and then fill in the details in the usual business-plan structure from that. But yes, you need to eventually do it. If you do it from the other direction, however, even the most beautiful beautiful business plan will remain unread and will bog you down in a host of meaningless detail that you can only overcome by thinking tops-down again clearly.

Mattia Settimelli

September 6th, 2016

I doubt whatsapp was having a biz plan at all. Much much better to focus on customers, first. Then a pitch deck these days (when even a website is obsolete) would suffice.
The being said, if you can do it, better. It's like the thesis in university: no professor will read it after page 1, but to formerly discuss it and graduate, you have to do it. It's just a "pro-forma" document, 90% of the times.
Godd luck!

Colin Behr VP, Business Development at Vungle

September 5th, 2016

I don't necessarily agree with Angelos in that you will only be taken seriously if you have a 20+ page business plan. This is really largely dependent on where you are, what experiences you have as well as your track record of success as an entrepreneur or in this given sector. 

In your case I would focus on the following:
1) Make sure that you have thought through the first year of the business in a structured manner. This can be mainly for your own consumption, but you should have a plan that you're comfortable with that you can reference and understand. This will allow you to be confident in answering questions as well as actually know the execution steps ahead. 

2) Have a deck that is easy to follow and understand as someone who may not have direct experience in your field. This should outline things like the opportunity, what the competition is doing, how big you think the business can get etc. 

3) Make sure that the bulk of what you present is backed up by evidence. Which customers do you have? How much have they paid you already? What commitments have you got from suppliers etc that would allow you to be so confident in your financial projections?


Nishant . Co-Founder LIFTOFF Ventures || Investor VYANA Scientific || Mentor & Strategic Ideator

September 6th, 2016

To understand this, we need to understand why is it needed in the first place.

When founders think they know what it takes to build the idea, usually they are in 55% to 65% knowledge range and growing with each passing day.

Internally having a business plan helps:
- Removes dependency on the founders brain
- One time activity reviewed Monthly initially and Quarterly later is advisable
- Helps understand milestones, resources required including cash and time window of each
- Link it to your project plan to monitor progress and burn simultaneously.

For investors a business plan suggests the following and more:
- Someone is given a thought of how the company will grow in the long term
- Revenue streams and major cost centers
- Valuation and the basis of that

The plans may never be reviewed in detail but a lot of serious investors like spending time to align with the business idea further. If you are bringing in the investors for more than their money this is a good indication.

Thus having a plan helps internally and for the investors. It will be great to have the plan in place at an idea stage. This could help decide project viability early on and save time, effort & dollars

Michael Hentschel CFO at Olaeris, Inc.

September 5th, 2016

regarding my comments, the $17m fundiing was a post-Angel institutional A Round based on a single initial sales contract, and even the $1m angel round was done less on the document than on the credibility of the founders, an excellent management team. Whether large or small, each funding is gathered on quality elements other than the depth of the business plan. However, not providing enough credible detail preparation is always a stumbling block.