 |
|
|
|
Startup Business Plan - How an Investor will Evaluate Your Plan
|
|
You worked hard to create a business plan and now you’re ready to present. Remember that great ideas are common; much rarer are businesses with the people and products to enter and dominate a market. Knowing that only 1% to 2% of business plans are funded, I’d like to provide a checklist that you could employ in advance of your presentation.
Work down the list comparing your plan and presentation, to the questions found in each Bold section. Make sure you know your strengths and weaknesses going in, and try hard to eliminate obvious gaps.
As I’ve mentioned earlier, investors buy management teams, not ideas or even products. People build companies, and better teams build better companies.
Please find below, in no particular order, a few key success factors that you can work to improve the potential of your plan and its associated presentation:
Team — Can you demonstrate years of operations experience in a similar industry? Do you have real world startup experience that led to a successful exit? Are you hungry and willing to be coached?
Market – Is your market growing or stagnant? It is truly addressable with customers ready to buy? Are you creating a disruption in the space? What is your plan to get customers? Please explain your conversion ratios.
Technology – Is your technology protected? What is the “secret sauce?” Can your innovation be used to create a defensible position today and down the road?
Competition – Who is the competition? (Saying we have none is an automatic fail.) What are their strategies? Which have worked and why? Which have not and why? Why will you win?
Business Model – What is your business model? Is it unique or disruptive? What problem are you solving? Is there real pain to be addressed? Is your product a “must have,” vs. a “like to have?” Are others using a similar model to success? How long until you get to cash flow positive?
Risks – What are the risks to your plans execution? What are you doing to mitigate them? What are the your “CSF’s?” (critical success factors) What must happen in your assumptions for you to be successful? Which assumptions do you consider critical? Which assumptions make you most nervous?
Financial Projections – Do your projections show a highly defensible set of assumptions that truly lead to the achievement of your plan? What is your monthly burn projected to be? How do you plan to deploy cash? How frugal can you be?
Capital Structure – What type of business entity are you? Do you have a cap table? Does your capital structure reflect your own investment? (Skin in the game.) Have you planned for future allocations of stock? Do you have too many investors all with varying expectations? Are there structural burdens on the business that this financing is to relieve? (I hope not.)
Exit Strategy – Who is a likely acquirer of your business? What deals have been completed in your space? What were the key metrics and ratios of those acquisitions? Do you have an exit strategy?
Investment / Use of Funds – What is your offer? Does it include a valuation backed by key metrics and rations? Detail how you will use the funds. How long a runway will your funding provide? Detail expected future rounds and the uses of capital from each round.
Conclusion: No matter how hard you try, your plan is going to change. Everything from your projections to your team, to competitors and their offerings will change. Under all circumstances, you can expect to be making major changes to the moving realities of the competitive market. You must demonstrate that your team is up to the task.
I trust the above will aid you in getting ready to present your plan. Working through this exercise is much like being tackled day after day before the big game. You now know what to expect and hopefully are ready to respond with clear and thoughtful answers.
|
|
|
|
|
