6 ms·

What to do when an investor asks for your "Business Plan"

41 points by danshapiro 15y ago

Yipster 15y ago
uh... give it to them?
true_religion 15y ago
> One final note: investors who want business plans are probably not your target market, if you’re founding a high growth technology startup. We had lots of great followup conversations with the angels who wanted them, but ultimately none of them turned in to investors. They never gave a busienss plan to these angels, so the angels never invested despite "good follow ups". That seems reasonable. I'm just pointing this out lest people have this take away message the business plans are obsolete (they're not: if you're not a radical startup, please have a business plan).
- danshapiro 15y ago
  We had plenty of conversations with many of these folks; I'm pretty sure that they had their questions answered and understood the business. I don't think there was a lingering resentment at a probably-forgotten request that was never mentioned again. But in the course of those conversations, their reason for passing also became clear - generalizing across the group, they were used to more traditional investments like restaurants and real estate. Not coincidentally, investments for which a business plan is both a sensible and standard document. They passed because our profile (tech company swinging for the fences) wasn't the right fit for them.
jjm 15y ago
Maybe give them your lean canvas and 30 second pitch.
mixmax 15y ago
In Denmark, where I happen to live, I've had two companies funded largely from a businessplan. The venture and startup ecosystem isn't as developed here, and frankly I don't think you'd get anyhwere without a businessplan and a powerpoint deck. Businessplans are great for getting funding from people who don't really understand your business, are government employees, banks, or are looking for the safety of knowing you are an expert in your field. They're also great for making an appearance and looking "professional". For instance when I hand out businessplans they're always pesonalised (every page will be annotated with "private and confidential - this businessplan belongs to Joe Schmuck). People fall for this. It's basically a great sales document for people that don't know much about startups. If you live in an area where nobody knows what the heck you're talking about when you mention retention rates, A/B split tests, etc. these are the tricks you'll need to get funding. I've always included "we will produce (product) to enhance shareholder value" in all the businessplans I've written just to see if anyone would catch the Neal Stehpenson reference. Nobody has yet.
- dotcoma 15y ago
  More about the Neal Stephenson reference, please. Sounds like great fun :)
  - mixmax 15y ago
    It's from Cryptonomicon - a thousand pages about wargold, allied codes, enigma, cryptanalysis, startups, datahavens and money perfectly weaved together as only Neal Stephenson can. One of the main stories in the book is about Avi and Randy that are trying to get a datahaven startup off the ground, and Avi, the sly businessman, is constantly on about enhancing shareholder value. There's an excellent and humorous description of writing businessplans where it's all about "doing X to enhance shareholder value." This is also where the term "fuck you money" comes from. Fuck you money is the amount that will allow you to economically say fuck you to anyone for the rest of your life. Basically total financial freedom. Avi, again the businessman, keeps an updated excel spreadsheet that calculates exactly how much money fuck you money is at the moment, since it's obviously dependant on exchange rates, stockprices, real estate prices, etc. It's a great read.
    - dctoedt 15y ago
      > This [Cryptonomicon, 1999] is also where the term "fuck you money" comes from. It's also in the 1981 novel Noble House by James Clavell.
      - anotherjohn 15y ago
        And i have a mate who was roadie for Muddy Waters (to give some age context) who learned the phrase well before i was born! A canonical reference for the first use would be fascinating.
      - anotherjohn 15y ago
        FWIW, i have another pal who was posted diplomatic to HK in the late 70s and was instructed to read Noble House - it's thinly veiled translations of real characters, some still alive.
ojbyrne 15y ago
The basic components of a business plan are often in people's pitch deck: - description of the market - description of your product - competition - your plan for the next 12-18 months - burn rate and runway - team You can probably just flesh them out (which might not be much more than having a word document with paragraphs and sentences instead of a powerpoint document with bullet points) and satisfy a significant proportion of investors.
- wisty 15y ago
  For all the above: - an explanation of why this is relevant, written for someone who has never heard of network effects, minimal viable products, iterations, ab testing, google ads, virtual hosts, backups, recovery, testing, user testing, user tracking, user demographics, early adaptors, or anything else really.
d0m 15y ago
tl;dr: Just give them the same slides/documents that you'd give an investor who doesn't ask for the business plan. (And, a VC asking for a 30 pages business plan might not be what you're looking for.)
pbhjpbhj 15y ago
>But during Ontela’s seed round, when we pitched probably 100+ angels, it came up more than a few times. // I'm involved with a small business. When people come asking for a job we asking for a resume/letter of introduction. The vast majority of the time it never comes. This is simply our first filter. Presumably these companies have a business plan they just don't have a BusinessPlan.pdf. As an investor I'd be pretty keen to know you've looked at the figures and that you understand the basics of accounting before I gave you a wad of cash. It's moot as I don't have a wad of cash but there ya go ...
tszming 15y ago
If you really need one, the format recommended by Sequoia is very good. Writing a Business Plan: http://www.sequoiacap.com/ideas http://www.sequoiacap.com/ideas
rdl 15y ago
I think it's pretty easy to hand someone a "50 page business plan", if that's what he really wants, by turning a 5-10 page pitch deck and 3 page executive summary into a ~10-15 page document (with notes), combined with some additional product documentation, market research, etc. (which can just be included as appendices). As long as there's no real original content required, I don't see why it's that big a deal. You already have the pitch deck, executive summary, maybe some long-form resume or bios of key people, news articles, and white papers (if it's a hard tech company; otherwise include screenshots, press coverage, etc.). The only thing which is bogus is the 5y pro forma financials; these become more reasonable post series A I think.
ig1 15y ago
Do you need to have a 50 page document ? - no Do you need to have a document showing you understand your growth and revenue model and the underlying assumptions ? - yes.

41 points by danshapiro 15y ago

uh... give it to them?

> One final note: investors who want business plans are probably not your target market, if you’re founding a high growth technology startup. We had lots of great followup conversations with the angels who wanted them, but ultimately none of them turned in to investors. They never gave a busienss plan to these angels, so the angels never invested despite "good follow ups". That seems reasonable. I'm just pointing this out lest people have this take away message the business plans are obsolete (they're not: if you're not a radical startup, please have a business plan).

danshapiro 15y ago
We had plenty of conversations with many of these folks; I'm pretty sure that they had their questions answered and understood the business. I don't think there was a lingering resentment at a probably-forgotten request that was never mentioned again. But in the course of those conversations, their reason for passing also became clear - generalizing across the group, they were used to more traditional investments like restaurants and real estate. Not coincidentally, investments for which a business plan is both a sensible and standard document. They passed because our profile (tech company swinging for the fences) wasn't the right fit for them.

jjm 15y ago

Maybe give them your lean canvas and 30 second pitch.

mixmax 15y ago

In Denmark, where I happen to live, I've had two companies funded largely from a businessplan. The venture and startup ecosystem isn't as developed here, and frankly I don't think you'd get anyhwere without a businessplan and a powerpoint deck. Businessplans are great for getting funding from people who don't really understand your business, are government employees, banks, or are looking for the safety of knowing you are an expert in your field. They're also great for making an appearance and looking "professional". For instance when I hand out businessplans they're always pesonalised (every page will be annotated with "private and confidential - this businessplan belongs to Joe Schmuck). People fall for this. It's basically a great sales document for people that don't know much about startups. If you live in an area where nobody knows what the heck you're talking about when you mention retention rates, A/B split tests, etc. these are the tricks you'll need to get funding. I've always included "we will produce (product) to enhance shareholder value" in all the businessplans I've written just to see if anyone would catch the Neal Stehpenson reference. Nobody has yet.

dotcoma 15y ago
More about the Neal Stephenson reference, please. Sounds like great fun :)
- mixmax 15y ago
  It's from Cryptonomicon - a thousand pages about wargold, allied codes, enigma, cryptanalysis, startups, datahavens and money perfectly weaved together as only Neal Stephenson can. One of the main stories in the book is about Avi and Randy that are trying to get a datahaven startup off the ground, and Avi, the sly businessman, is constantly on about enhancing shareholder value. There's an excellent and humorous description of writing businessplans where it's all about "doing X to enhance shareholder value." This is also where the term "fuck you money" comes from. Fuck you money is the amount that will allow you to economically say fuck you to anyone for the rest of your life. Basically total financial freedom. Avi, again the businessman, keeps an updated excel spreadsheet that calculates exactly how much money fuck you money is at the moment, since it's obviously dependant on exchange rates, stockprices, real estate prices, etc. It's a great read.
  - dctoedt 15y ago
    > This [Cryptonomicon, 1999] is also where the term "fuck you money" comes from. It's also in the 1981 novel Noble House by James Clavell.
    - anotherjohn 15y ago
      And i have a mate who was roadie for Muddy Waters (to give some age context) who learned the phrase well before i was born! A canonical reference for the first use would be fascinating.
    - anotherjohn 15y ago
      FWIW, i have another pal who was posted diplomatic to HK in the late 70s and was instructed to read Noble House - it's thinly veiled translations of real characters, some still alive.

ojbyrne 15y ago

The basic components of a business plan are often in people's pitch deck: - description of the market - description of your product - competition - your plan for the next 12-18 months - burn rate and runway - team You can probably just flesh them out (which might not be much more than having a word document with paragraphs and sentences instead of a powerpoint document with bullet points) and satisfy a significant proportion of investors.

wisty 15y ago
For all the above: - an explanation of why this is relevant, written for someone who has never heard of network effects, minimal viable products, iterations, ab testing, google ads, virtual hosts, backups, recovery, testing, user testing, user tracking, user demographics, early adaptors, or anything else really.

d0m 15y ago

tl;dr: Just give them the same slides/documents that you'd give an investor who doesn't ask for the business plan. (And, a VC asking for a 30 pages business plan might not be what you're looking for.)

pbhjpbhj 15y ago

>But during Ontela’s seed round, when we pitched probably 100+ angels, it came up more than a few times. // I'm involved with a small business. When people come asking for a job we asking for a resume/letter of introduction. The vast majority of the time it never comes. This is simply our first filter. Presumably these companies have a business plan they just don't have a BusinessPlan.pdf. As an investor I'd be pretty keen to know you've looked at the figures and that you understand the basics of accounting before I gave you a wad of cash. It's moot as I don't have a wad of cash but there ya go ...

tszming 15y ago

If you really need one, the format recommended by Sequoia is very good. Writing a Business Plan: http://www.sequoiacap.com/ideas http://www.sequoiacap.com/ideas

rdl 15y ago

I think it's pretty easy to hand someone a "50 page business plan", if that's what he really wants, by turning a 5-10 page pitch deck and 3 page executive summary into a ~10-15 page document (with notes), combined with some additional product documentation, market research, etc. (which can just be included as appendices). As long as there's no real original content required, I don't see why it's that big a deal. You already have the pitch deck, executive summary, maybe some long-form resume or bios of key people, news articles, and white papers (if it's a hard tech company; otherwise include screenshots, press coverage, etc.). The only thing which is bogus is the 5y pro forma financials; these become more reasonable post series A I think.

ig1 15y ago

Do you need to have a 50 page document ? - no Do you need to have a document showing you understand your growth and revenue model and the underlying assumptions ? - yes.