Business Plan for VC Funding

Purpose of a Business Plan Provides clarity of thought and purpose Introduces Business Model Introduces the company and the team Attempts to persuade investors Highlights risks and challenges Serves as an entry point for further discussions

Provides clarity of thought and purpose

Introduces Business Model

Introduces the company and the team

Attempts to persuade investors

Highlights risks and challenges

Serves as an entry point for further discussions

Target Group - VC VC firms see many plans Usually smart and knowledgeable Referrals – very critical VC’s objective to assess quantum, type, and manageability of risks Hence, business plan is an important document though not the “be-all, end-all”

VC firms see many plans

Usually smart and knowledgeable

Referrals – very critical

VC’s objective to assess quantum, type, and manageability of risks

Hence, business plan is an important document though not the “be-all, end-all”

Key elements of a plan Explain business model in simple terms Fit the plan to the company Be credible and informative Do your homework; Know your market and competitors Highlight Risks and steps to overcome the risks Execution Risk as critical as market or technology risk

Explain business model in simple terms

Fit the plan to the company

Be credible and informative

Do your homework; Know your market and competitors

Highlight Risks and steps to overcome the risks

Execution Risk as critical as market or technology risk

Business Plan Contents Executive Summary Company Description Product/Service Market Analysis Marketing Plan Operations Plan Financial Plan Management Team Exit Strategy Risks

Executive Summary

Company Description

Product/Service

Market Analysis

Marketing Plan

Operations Plan

Financial Plan

Management Team

Exit Strategy

Risks

Executive Summary The most important section of the plan, often the only read section! Compact version of the big plan Stick to hard facts; no room for exaggerated optimism Limit to a concise summary; no more than a couple of pages Summary is the prelude to further meetings

The most important section of the plan, often the only read section!

Compact version of the big plan

Stick to hard facts; no room for exaggerated optimism

Limit to a concise summary; no more than a couple of pages

Summary is the prelude to further meetings

Executive Summary (2) Summary should answer questions: What sort of company is it? What’s the product/service and what’s special? Who are the managers? How much money do you need? In what stages? What will it be used for?

Summary should answer questions:

What sort of company is it?

What’s the product/service and what’s special?

Who are the managers?

How much money do you need? In what stages? What will it be used for?

The Company Description A brief history of the company How you started? What was the original idea? Share your mistakes and what you learnt; adds credibility Share financials; actual vs. planned; if applicable Should lead up to the discussion as to where you intend to go from here

A brief history of the company

How you started? What was the original idea?

Share your mistakes and what you learnt; adds credibility

Share financials; actual vs. planned; if applicable

Should lead up to the discussion as to where you intend to go from here

Product/Service What is your value proposition? How are you going to solve their problem better than your competitor? Than what they are doing now? Any patent protection possible? Technology details: defensible? Unique? Sustainable competitiveness? Time to market? Ability to execute? What prevents someone else from doing it more cheaply?

What is your value proposition?

How are you going to solve their problem better than your competitor? Than what they are doing now?

Any patent protection possible?

Technology details: defensible? Unique? Sustainable competitiveness?

Time to market? Ability to execute?

What prevents someone else from doing it more cheaply?

Market Analysis Who is your target market? Profile of the people? What is their behavior pattern? Any complementary products or services? How large is your market? Growth rates? What are the trends in the market? How do you see the market evolving?

Who is your target market?

Profile of the people? What is their behavior pattern?

Any complementary products or services?

How large is your market? Growth rates?

What are the trends in the market?

How do you see the market evolving?

Marketing Plan Detailed note on how you will convert large market into revenue Provide different marketing tactics – cheapest to most expensive Costs and strategy of acquiring customers Sales and Marketing strategies Respect your competitors Risks and Unknowns Strategies for reducing risks

Detailed note on how you will convert large market into revenue

Provide different marketing tactics – cheapest to most expensive

Costs and strategy of acquiring customers

Sales and Marketing strategies

Respect your competitors

Risks and Unknowns

Strategies for reducing risks

Operations Plan The nuts and bolts – how will you make it? How will it be available to your customers? What’s involved in running the company? Location, equipment needs Labor requirements Risks at different levels and how best to mitigate risks

The nuts and bolts – how will you make it? How will it be available to your customers?

What’s involved in running the company?

Location, equipment needs

Labor requirements

Risks at different levels and how best to mitigate risks

Management Team Provide CVs of the key members Relevance of past experience Start-up experience Market creation experience Team dynamics – very critical when more than one founder Clarity of roles GREAT TEAM + MEDIOCRE PLAN > MEDIOCRE TEAM + GREAT IDEA

Provide CVs of the key members

Relevance of past experience

Start-up experience

Market creation experience

Team dynamics – very critical when more than one founder

Clarity of roles

GREAT TEAM + MEDIOCRE PLAN >

MEDIOCRE TEAM + GREAT IDEA

Financial Plan Detailed numbers not the key Assumptions very critical Key drivers of revenue Realistic projections Exercise prudence Benchmark your model Revenue estimate: bottoms-up Expenses – past and/or industry average

Detailed numbers not the key

Assumptions very critical

Key drivers of revenue

Realistic projections

Exercise prudence

Benchmark your model

Revenue estimate: bottoms-up

Expenses – past and/or industry average

Funding Capital – internet time delivery Brand building Scaling the business Funding based on 18 – 24 months projections? Till customer traction? Choose funding partner with care – it’s a marriage!

Capital – internet time delivery

Brand building

Scaling the business

Funding based on 18 – 24 months projections? Till customer traction?

Choose funding partner with care – it’s a marriage!

Exit Strategy Exit strategy for the investor; not necessarily the entrepreneur Exit could be merger, acquisition, or IPO Each strategy should be plausible and defensible

Exit strategy for the investor; not necessarily the entrepreneur

Exit could be merger, acquisition, or IPO

Each strategy should be plausible and defensible

Venture Funds Today Early stage investing: Only in Technology Product companies with strong background of entrepreneurs Mid-Late stage investing: More the norm, also more common for service companies Many Indo-US companies getting funded; even by Indian VCs

Early stage investing: Only in Technology Product companies with strong background of entrepreneurs

Mid-Late stage investing: More the norm, also more common for service companies

Many Indo-US companies getting funded; even by Indian VCs