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Do I need a business plan to raise money?

My business is in the on-demand economy and I'm developing a mobile app. I'm in the process of getting things going and I've raised money from family and friends. My next round will be in the $5 million range with professional angels and VC's, and I'm wondering if I need a traditional business plan, i.e. a 15+ page document with charts and graphs and everything spelled out in complete detail? I've put together an investor presentation, which outlines the market, the competition, the competitive positioning, and the product, and I have a prototype of the app itself. I also have the financials, which explain how I plan to use the investment and what my revenue expectations are. Do today's investors want to see a formal business plan document as well?

33 Replies

Sean Hurley
0
1
Sean Hurley Entrepreneur • Advisor
Strategic Marketing Leader with strong financial results for growing organizations
Yes. Or at a minimum a week written Executive Summary. These documents demonstrate how well you communicate. Sent from my iPhone
David J. Neff
1
1
David J. Neff Entrepreneur
Digital Strategy Manager at PwC
I would suggest trying a Lean Canvas instead to test your idea in front of investors. http://leanstack.com/ Thanks, David J. Neff @daveiam on Twitter
Dirk de Kok
2
0
Dirk de Kok Advisor
Founder and CTO Mobtest
No.
A business plan is something that dies the moment your product hits the market.

Highlight your milestones with goals, features and costs.
You can put out certain predictions and assuptions re traction/revenue, but expect them to be false.

Do you have a prototype or an MVP? Do you have any traction beyond your friends?
You have an on demand marketplace, the hard part about those is bootstrapping both sides. How will you do this? How will you gain traction in both sides?

Raising institutional money without traction is near impossible, I would go angel/seed first.
Anton Yakovlev
2
0
Anton Yakovlev Entrepreneur
Founder of four successful businesses on two continents who can help you do the same
I'd say it's almost impossible to get any valid data for your business plan on early stage, and even later. Therefore the formal 150-pages plan will never be real. Investors know that. So why should you create a plan that will never be executed? Or even worse - executed right as written, which sure will bring your business to death even faster.


Andrew Katz
0
0
Andrew Katz Entrepreneur
Investments/Strategy/Business Development
Sean a biz plan isnt necessary, but you will need an executive summary, financials, and projections at a minimum. My company provides theses services and capital
Roz Biles
1
0
Roz Biles Entrepreneur
Business Development - Strategic Planning
My experience is that you need to tell the story in words and in numbers. This may be an Investment Brief and a Dynamic Financial Model. Be prepared to create a full blown business plan. Having done this over 200 times 70% of the effort is on sales development. Roz Biles Business Development Newport Beach, CA Direct [removed to protect privacy]
Leo Lam, PhD
4
0
Leo Lam, PhD Advisor
Product development executive, serial entrepreneur and Angel Investor
As an angel investor at multiple groups, a full blown business plan is not necessary; but a clear executive summary is a must. If you already know your product/solution/market/financial very well, creating this should be very easy. I can't imagine getting funding without at least a multi-page document with details on how you would execute (i.e. idea is cheap, execution is important). If you know your business well, that shouldn't be difficult.

We know that businesses will pivot, but you must show that you know your market well.

You need to show the problem, the solution, your target segment, market, strategy, financial and traction. Traction, to many, is the most telling piece of how fundable your company is. Getting adoption and traction is the best way for your company to get seed investments.

You mentioned that your next round is in the $5+ million valuation range. In that case, you almost certainly must show traction and revenue. That seems high for a first round beyond friends and family, unless you can show very healthy adoption and revenue. $5 million valuation is certainly below most VCs, you would be looking at Angels.
Andrea Raimondi
1
0
Andrea Raimondi Entrepreneur
Computer Software Consultant and Contractor
Do you need a business plan? Yes, unless you own a Bank ;-)
Do you need a boring, tens and tens of pages one that is most likely to be wrong anyway, as others have already pointed out? No.

What you really need is a 3-4 pages long summary of what you do and then how to get to profitability and how long it'll take you.
You will also need to include "what-if" scenarios of things that can go horribly wrong.

VCs want to see your ability to put things in perspective and that the numbers are realistic.

Once you got that, you should be mostly good.

I've noticed you said that you raised money between family and friends.
There was a guy asking here a few days ago about dilution.
Have a look at that.

A
Chris Kitze
2
0
Chris Kitze Entrepreneur
CEO at Safe Cash Payment Technologies, Inc.
You don't need a traditional business plan, but you'll need a cogent 6-15 slide presentation and a spreadsheet model with 3 years of forecasts and real, verifiable data and customers the potential investor can look at to validate your model. I don't know anyone who bothers to read long format plans any more, they pretty much went out the window 15 years ago.
Marc Milgrom
1
0
Marc Milgrom Advisor
Business Manager at Bloomberg, LP
I highly recommend reading "Venture Deals"-- it's both informative and funny, which automatically distinguishes it from most business books, and it's from the perspective of both experienced VCs and entrepreneurs. The short answer, as most have said, is a brief pitch deck, but since you have a prototype and investor presentation, that pretty much covers it. Many investors care more about playing with the product and getting to know the founder than reading a book of numbers that have 0 probability of being right.
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