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Do we still need to have a business plan, before we approach investors?

I have a B2B marketing platform. The product is 'done' (as much as it makes sense for this stage) and I am now looking to find business development and sales people to get traction.

I am also being contacted by many people here on FD (which is great!!) and some showed real interest in the opportunity to join my startup.

I also finished an incubator program few months ago.

All the advisors and people at the incubator program was telling us that there is no need to have a business plan anymore, investors recognized that business plans render yo be completely useless documents the moment your product hits the customers. Remember, I am still looking for seed money, I am far from attracting VCs.

I have no idea how to do a business plan. Yes, I have a sophisticated spreadsheet, which shows me month-by-month how much money I will need, including the sales projections, but other than that I feel all is covered by my 2-page executive summary and my pitch deck. I could refine my spreadsheet to make it presentable and readable by potential investors, but do I really need to put a comprehensive, or even a simple formal business plan? I would much prefer to go and get new customers instead of writing a document which, will be completely useless the moment I (eventually) get funded?

Do I still need to have a business plan to approach investors?

I would appreciate any real life examples and suggestions based on real experiences.

27 Replies

Tom Faust
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Tom Faust Entrepreneur
CEO at Redwood Renewables
Hi Nickolay, Would you be interested in using EHTech's product as a trial to see how your B2B Marketing platform system works. Hugo Durou is a friend of mine and is trying to place his product in the North American market. Best regards, Tom Tom Faust REDWOOD RENEWABLES 6 Endeavor Drive Corte Madera, CA 94925 Tel (415) 924-8140 Fax (415) 924-4041 Mob (415) 572-2090 Tfaust@redwoodrenewables.com Web www.redwoodrenewables.com Your Roof, Your Energy, Your Savings, Shape the Future, Invest in "Built in" Solar
Thomas J. Kaled
1
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Thomas J. Kaled Advisor
Business Development Consultant @ thomas.kaled@gmail.com
You should have a Pitch Deck for brevity and consistency.

Consider developing a FAQ's database for the same purpose.

Abbreviate your detailed spread sheet. so an investor can understand utilization of funds.
Angelos Kapatos
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Angelos Kapatos Entrepreneur
--
Yes, sir. Sorry to say but a complete in depth business plan is necessary, not because it is actually needed for anything to be done with it. It is needed to show investors that we as creators are competent enough to draft one to appease them. Not only did it make my blood boil, that after having a well worded 23 page plan in their hands for a week, did they ask me the most simple and bare boned basic questions that were spelled out in page 1, but if you didn't have that booklet that they weren't going to read, I wasn't to be taken seriously if i didnt have that as it was their bare minimum requirement for me speaking with them.
Michael Hentschel
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Michael Hentschel Entrepreneur
CFO at Olaeris, Inc.
I've raised about $150m with or for hundreds of ventures over the years, and the largely superfluous excercise of a 30-page business plan has always been necessary and unimportant. The things in a BP you can't really do well in a PPT is give detail CV's, detailed "strategy" discussions, greater depth to your mission, detailed competition profiles, and so forth. For me, the PPT is the more thoughtful gateway to all that more detailed info.

We once got $17m in firm commitments based solely on powerpoints and in-depth detail financial projections, and nevertheless had to turn that into a business plan to close, for no other apparent reason than to have good closing documentation. We never referred to the plan again and sold the company 4 years later for $265m based on results and on market and financial projections. So my MO is create the perfect powerpoint and financial plans and then fill in the details in the usual business-plan structure from that. But yes, you need to eventually do it. If you do it from the other direction, however, even the most beautiful beautiful business plan will remain unread and will bog you down in a host of meaningless detail that you can only overcome by thinking tops-down again clearly.
Michael Hentschel
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Michael Hentschel Entrepreneur
CFO at Olaeris, Inc.
regarding my comments, the $17m fundiing was a post-Angel institutional A Round based on a single initial sales contract, and even the $1m angel round was done less on the document than on the credibility of the founders, an excellent management team. Whether large or small, each funding is gathered on quality elements other than the depth of the business plan. However, not providing enough credible detail preparation is always a stumbling block.
Colin Behr
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Colin Behr Advisor
VP, Business Development at Vungle
I don't necessarily agree with Angelos in that you will only be taken seriously if you have a 20+ page business plan. This is really largely dependent on where you are, what experiences you have as well as your track record of success as an entrepreneur or in this given sector.

In your case I would focus on the following:
1) Make sure that you have thought through the first year of the business in a structured manner. This can be mainly for your own consumption, but you should have a plan that you're comfortable with that you can reference and understand. This will allow you to be confident in answering questions as well as actually know the execution steps ahead.

2) Have a deck that is easy to follow and understand as someone who may not have direct experience in your field. This should outline things like the opportunity, what the competition is doing, how big you think the business can get etc.

3) Make sure that the bulk of what you present is backed up by evidence. Which customers do you have? How much have they paid you already? What commitments have you got from suppliers etc that would allow you to be so confident in your financial projections?


Angelos Kapatos
0
0
Angelos Kapatos Entrepreneur
--
No Mr. Colin, irregardless of your status in your company or what you have done before, nobody is cutting you a check without a business plan in their hands, even if they don't read it.
Martin Omansky
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Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
You need a firm written document that memorializes your plan for the business - to share with others, to organize your thoughts, and to compare current performance against past thinking. This is essential and all for your internal use. investors will demand certain forms, so to be ready, you need to supply whatever they want in whatever format they require. Be aware, however, that almost all investors will conduct their own due diligence, and you will be required, in any event, to provide them with all relevant material. Whatever you have heard about the documentation required by investors, the truth is that there is no consistent approach. Sent from my iPhone
Terry Mackin
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Terry Mackin Entrepreneur
Remarkable Partners, LLC
I recommend having some form of a business plan to convey a professional approach: - Even "angel" investors will have some expectations. How much do you need to raise and why (use of proceeds). - Executive summary of two pages of narrative to describe the business you are building and the problems you will solve for customers. What is unique about your business versus others doing the same thing. - Revenue assumptions will talk about how long it will take to make a sale (sales cycle) and then your assumptions about how many sales you believe is reasonable by quarter through 24 months - What rationale are you using for pricing the service or product? How much room do you have to negotiate between asking price and selling prices? Will you have to renew agreements within the first 24 months. - Use of proceeds (first 12-24 months of expenses) - Definition of the customer marketplace which includes sizing the market and who are the top competitors - Are there any service agreements that will require a lawyer? - Are you starting the company as an LLC. If your vision is to build a prototype and then sell it to another company to execute sales and service, the formula above can be modified to figure out how are you going to get value from start to scale. If you are not comfortable building a business plan, perhaps you need strategic partners. I don't know anything about the business you are proposing. Here is an example of launching digital platforms- https://cb.hbsp.harvard.edu/cbmp/product/R1504H-PDF-ENG Good luck, TM
Martin Omansky
0
1
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Terry: It's obvious that a 2-page summary will not be enough space to accommodate all the subjects you want to cover. Sent from my iPhone
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