Venture Financing:

Step-by-step Guide

How Investors Read a Business Plan

By Venture Planning Associates. Used by permission

Most business plan books and software do a thorough job of teaching you to describe your business from an entrepreneur's perspective, focusing on your product or service. Unfortunately, if you wrote your startup business plan in order to obtain funding, it's vital to write it from an INVESTOR's point of view.

Venture Financing Funnel    

Venture Financing: Key Documents

 

 

A potential investor will initially spend only 5 minutes with your plan.

The following areas will be evaluated, each area taking about 1 minute!

 

1. Determine the characteristics of (1) the industry and (2) this particular company

  • What other publicly held similar companies are there?

  • Is there a larger company that is extremely successful?

  • Is the company in a 'glamour field'? (important to ensure a good public offering)

2. Determine the terms of the deal.

  • How much of the company is being sold for what price?

  • What is the form of debt or equity being requested?

  • How will the funds be used?

o To retire old debt (bad idea)?

o To undertake new activities that will, in turn, increase profitability?

3. Review the bottom line with special emphasis on years three through five.

  • Earnings or potential earnings are reviewed to determine company's valuation.

  • Sensitivity analysis, or what if analysis to see how the business model adjusts to changing prices, expenses and competition.

4. Determine the caliber of the people in the deal.

(The most important aspect of the business plan!)

  • What is the track record of the founders and managers?

  • How much balance and experience does the inner management team possess?

  • How long have the members worked together?

  • Who are the banker and accountant, and what are their credentials?

5. The marketing plan is reviewed with careful consideration to current and future threats.

  • Is the product or service in demand now or will it be in the near future?

  • What is the Unique Selling Proposition for the product?

  • What other company or companies are already in this space that could leap frog this business?

  • Can the customer be easily identified and marketed to successfully?

Selling Is Problem Solving    

Synergistic Selling: 3 Components    

Buzz Marketing

 

 

Investor's Questions To Be Answered by the Business Plan

Business Plan DOs and DON'Ts

While a well prepared business plan is never a guarantee that your business will be funded, it can increase the odds in your favor.

 

Looking for venture capital? Ask a venture capitalist to Review and Tune Up Your Business Plan!