How to present a business plan toinvestorsPrajakt Raut – co-founder The Hatch for startups
Why do angel investors invest in startups? Expectation of making a profit Interest in supporting aspiring entrepreneurs Therefore, your focus should be to convince investors that your startup is a good investment opportunity
How much return on investment do angelinvestors seek? 5 - 10x of their investment in a startup…. … because, out of 10 startups they invest in 5-6 will fail, 2-3 may barely return capital, and 1 or 2 may be successful Therefore, unless you can convince them that your startups will create value, angel investors will not be interested For angel investors, profitability is not THE KEY criteria, because they are not keen on a „dividend‟ play – they are playing for higher valuation
You till typically get about 20 - 30minutes for your presentationKeep half the time for presentation and half for Q&A“Show the dish. Don‟t detail the recipe.” – the objective ofthe first presentation should not be to share details but toexcite the investor to meet you again for detailsDon‟t state the obvious – focus on things that mostpeople are not likely to know e.g. when presenting abouta solar energy business, data on how renewable energyis important is not necessary
Focus on the business around the conceptor product or service- What are you going to do – concept- How are you going to make money – business case- The size of the opportunity – potential- How are you going to do it – implementation plan- How much money do you need – to attract the next set of investors
What should you include in your presentation? • Concept overview – and why it is relevant i.e. opportunity / need • Team • What is the size of the opportunity • Business model • Competitive landscape • Operations plan overview • Risk factors • Funding needs and use of funds • Exit potential
Investors look for competent and committed teams- Passion and deep interest in the domain- Deep understanding of the dynamics of the business around the concept – who will buy, why will they buy, challenges, etc.
Investors look for plans with practical milestonesBut large aspirations
Investors look for teams with focus in the initialphaseEven when entrepreneurs have identified multiple opportunitieswith the concept
Investors look for a strong implementation plan“According to Gartner, the market will be USD 20 bn in 2020” isnot a reason to investHow you will build the first 1000 customers is.
Investors seek teams that have a clearly identifiedimmediate goals and tasksWhat do you need to do to launch?What are you going to test?
Investors seek a plan that clearly outline how muchfunding is required, where it will be used and what itcan achieveYou should seek from angels only as much as you require to go tillyou can attract VCsIn rare cases will angel funding be sufficient to take the startup toprofitability
Finally, investors look for teams they can trustBe honest about risks & challenges, be open about limitations andweaknessesWhen you tell them where you need help, will they be able toprovide inputs
In SummaryInvestors invest in a business case around products/services thataddress large marketsInvestors invest in high-quality teams with large aspirations andwho have a clear understanding of what it will take to achieve thepotentialInvestors invest in clearly defined plans with practical milestonesMake the investor go back feeling “What a great concept. I thinkthe market is large and the team will deliver.”