Should I write a Business Plan and what should I send to potential investors?


I forwarded to a friend a blog by an industry colleague, entitled, http://infochachkie.com/heres-how-you-get-a-vc-to-pull-out-their-checkbook/.  Then my friend called to ask me, are business plans really dead?  Do I have to bother writing a business plan?  But the Infochakie blog states that a pitch to potential investors should include a Powerpoint presentation, an abbreviated financial forecast, and an executive summary.  Well, by definition, an executive summary represents the distillation of the fully drafted business plan that includes everything stated in the three items – the executive summary, presentation and financials!  Now, I do believe that the potential investor does not care to see a “business plan” at first. It is a well known rule that you only send only the three items described. Given that every VC and Angel investors are besieged with unsolicited plans numbering in the thousands, they just want to see if this particular company is worth their while. But should a business plan be drafted? I would state undoubtedly yes. And how to persuade them to call you when they review those three items?  That is the key to preparing those three documents.

First, as a VC investor stated, the potential investor expects these three items to be written grammatically correct: no spelling errors with clear and concise language.  The best reference book to assist in writing those documents is exemplified by the short Strunk & White’s Elements of Style.  This reference book has the key grammatical elements anyone can use to draft such documents.  Certainly, if you are trying to raise $1 million or more, you should have the consideration of the reader in mind.  And then think of what the VC guy would think, if the author is sloppy with the presentation with poor spelling and errors, the reader may conclude that this presentation is a reflection on how this person will do business.  Careful drafting of the documents is always warranted given that the potential reader is looking for a reason to deny any potential investment.

Second, I generally focus on the first two paragraphs as the synopsis of the executive summary.  If the Executive Summary’s length is 2 or 3 pages, expect to write the first 2 paragraphs to state what the rest of the document will be saying.  Each word and punctuation will be crucial and well chosen, and should contain the most critical wording of the entire document.  In Hollywood, it is said that if the first 10 pages of a film script are not well written, no potential producer will bother to read the rest of the film script.  Equal amount of focus and care should be applied to the first and second paragraphs as if they were the first ten pages of a film script.

Third, get to the point quickly with the first paragraph. What is the Company name? What does the Company do? How much money are you looking for?  Why this market and other key points to the business plan? Again the first paragraph is a synopsis of the executive summary.

Fourth, like a film script’s initial pages, you must persuade the reader to continue on to finish the executive summary.  Remember that this is a hortatory document: you are persuading someone to buy into this company.  Now, lawyers draft SEC S-1 documents, a filing that only states facts and does not exaggerate or drum up interest. That is not the purpose of a business plan or the executive summary.  The S-1 drafting style is meant for companies that have been existence for years and are generating revenue.  This is not the case for a start-up.  The executive summary must somehow indicate that the company is pursuing to be best in the marketplace, be the first leader in the industry with disruptive technology, or the fastest growing  manufacturer – any “puffery” that indicates that this company will be an outstanding player in its particular market.

I cannot tell someone not to write a business plan since that would represent a total disservice to the company.  In writing a complete business plan, you are forced to analyze in depth every element of the strategy.  Even if you cannot insert additional details into the executive summary, you are better prepared when you undergo due diligence and are required to make a verbal presentation to a VC team. I have saying, that in such scenarios, you have one time to bat, and any mistake or omission during the live pitch can prove fatal.  There is no better preparation than drafting a complete business plan that contains the source for your research, the alternative strategies, and other analysis left out of the executive summary.

Finally, if the company already has logos or the team worked for notable companies—insert those graphics.  And, if the technology cannot be worded precisely, use drawings to summarize the process. Pictures might be worth a thousand words, but can also easily draw the interest of investors.  You still have to consider than you are still restricted to two or three pages.  So use graphics sparingly.  Insert additional or expendable graphics in the body of the business plan.

In another blog, I will discuss the outline of what a business plan should include, from the management team to financials.

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About Juan Ramón Zarco, SVVGP 胡安•雷蒙•扎尔科

Juan Ramon Zarco, 胡安•雷蒙•扎尔科, Silicon Valley Ventures Growth Partners llp, Hygieia Healthcare Technologies Company, AllRest Technologies LLC, Crimson Growth Partners LLP, jrzarco2001@yahoo.com, is an experienced as CxO, General Counsel and Secretary to public and private companies with global operations. Established track record of producing practical, revenue-focused solutions. As Counselor and Secretary, demonstrating vision, integrity, and sound business judgment, to CxOs. Managed complex, strategic transactions, M&A, contracts support, PE Financing, IPO, SEC compliance, Corporate/HR governance, IP licensing, Budgeting, Staff, outside counsel management, International market access strategies, Domestic & foreign government relations and advocacy. Creative in designing and implementing market access strategies. Practices law beyond conventional model with low-overhead and project-based fees. Effective at managing departments, formulating marketing strategies, balancing budgets, and implementing cost-saving measures. Extensive in-house and private practice experience, advising clients on commercial, corporate, international business, and technology law and policy. http://www.docstoc.com/video/89135472/make-your-business-an-international-presence; http://www.youtube.com/watch?v=fx5gijf3yoc For Sprint, he managed iDen international development in Southeast Asia, Middle East, and Africa, and contractual issues with Verizon. In Private Equity, he worked with Pegasus in vetting international investment deals and interim President for portfolio companies, such as Data Foundation, a data storage company, handling marketing, strategy, fund raising, and accounting. Before Pegasus, Mr. Zarco, as CLO and V.P. of Corporate Development, played a principal role in the structuring, international expansions for 2 telecom companies, U.S. Cable Group and Viatel, Inc. in financing and M&A deals exceeding $200 million. Mr. Zarco earned a J.D. from NYU Law School, M.B.A. from Cornell, and B.A. from Williams College; is fluent in Spanish, Portuguese, French, and German, with working knowledge of Russian, Arabic and Japanese.
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