Business Plan

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

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”

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

Business Plan Contents
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

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?

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

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?

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?

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

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

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

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

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!

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

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

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Business Plan

by vinaya.hs

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