Attracting Investors with a Business Plan

Attracting Investors with a Business Plan

Maximpact Services

Attracting Investors: What Investors Look for in a Business Plan

Entrepreneurs, businesses and projects rely on investment capital to hit the ground running. The groundwork and roadmap must be laid out within a solid investor-ready business plan. The activation of the best business plan starts out with catching the investor’s interest.

Therefore, a strategic business plan is essential in getting the funding you are looking for from VCs, accelerator, angel investors or other types of funders. First impressions are the most lasting.

Cutting to the chase

Venture capitalists, accelerators and angel investors are extremely busy and expect entrepreneur to do the required homework before approaching them. They only choose to take projects to the next level that have a solid business plan. (Read our blog on “ Are You Investment Ready” ).

A business plan shows investors how well you know your market, product, strategy and exit plan. Unless your investors are strictly family and friends, a third party’s main concern is how your product or service will achieve traction in the marketplace, profitability and what are the possible exit strategies.

Why is a business plan needed?

Many ask whether they need a business plan. The answer is “yes”.

A business plan is the answer to the question, “What do you aim to accomplish?” It is the blueprint and brainwork for the entrepreneur, management and the investor. It conveys vision and strategy to investors, laying out the path to success – where your business will have greater profitability and increased assets.

What is an investment ready business plan?

It is the aforementioned potential profitability, which is demonstrated through financial projections – usually within a 3 to 5 year period – that attract investors. A business plan answers unique concerns of an investor when it:

•    concisely details the business, customer profile, company management, market strategy, and financial projections

•    creatively presents business ideas tailored for the investor audience

•    clearly demonstrates acceptable risk, investor reward, and value creation

What do investors look for when reading a business plan?

It is important to understand what the investor will look for before outing forward your pitch:

•    The business plan will map out the products or services offered, how they will gain traction and the speed at which they will do so.

•    Secondly, investors will think of is the exit – how much, how long and how will the investors earn their return?

•    Thirdly, how much investment capital is required to grow a company to the  point where they can earn a return on their investment and also many more rounds of investment might be needed for the following milestones to be reached?

Having these answers ready, will ensure you are prepared.

In addition investors are looking at a variety of factors including a solid management team or advisors with a proven record of success. They must be convinced that the product offering has a clear competitive advantage with a shot at increasing and substaining  the value of the company, i.e., this could include different markets that can be tapped into with the same product or service for future growth.

Approaching investors – what do you need?

Approaching investors is best done through intermediaries who have ties and relationship to VCs, accelerators, angel investors and other types of funders. Generally, business plans are not sent as a first communication tool to investors but is kept for later when the investor is interested in hearing more about your business or business idea.

The 3 tools that are a necessity to pitch a solid business proposal are:

1. An elevator pitch. A brief description of what your value proposition is, that will clearly show the investor what the traction of your idea is and ignite that spark of interest to carry on reading.

2. A high-concept pitch. This would be a single sentence within the elevator pitch, which highlights the startup’s vision.

3. A ten-slide deck in the form of a Power Point presentation to tell your company’s compelling story. Click here to see what the ten-slide deck should contain.

The elevator pitch is an incentive for investors to look at the ten-slide deck. The deck provides the impetus to set up a meeting and/or ask for the business plan.

Your takeaway is…

Always remember what are foremost in the minds of investors:

•    Traction: Is your product going to be a great addition to the marketplace with or without their investment.

•    Investment: How much funding is required and the terms offer.

•    The Exit: Investors put money in private companies hoping  they might cash out through an IPO some time in the future. They will consider and look closely at your exit strategy to understand potential return, timeframe to exit and different options.

Do you need to write a business plan? update an old one? or is your business plan investor ready? 

Knowing how to craft a solid, investor ready business plan and how to approach investors lays the foundation for attracting investors. Equally important is knowing the investor’s perspective, which is, above all, return on their investment. It is best to let a business plan expert help you write, complete or update your business plan. This is an investment which will improve your chances of funding success.

When considering your business plan needs take a look at how www.Maximpact.com can help. We have hundreds of highly qualified experts and consultants able to satisfy the needs of any entrepreneur or business. Whether you require them to have specialized skills or expertise in specific sectors we have them all.

We cater to all budgets and help your business evolve and meet its full potential. Our business experts will steer you in the right direction and make sure you have what you need to become investor ready.

Book a free consultation with one of our mentors by contacting us at info@maximpact.com or visit www.Maximpact.com.

When Venture Capitalists Fly In, Success Follows

BusinessPlane

By Sunny Lewis

CAMBRIDGE, Massachusetts, February 18, 2016 (Maximpact.com News) – Startup firms connected to their venture capitalists by direct airplane flights are more likely to succeed than other startups, concludes a new study of nearly 23,000 startups and more than 3,000 venture capital firms.

Venture capitalists do help startup firms by closely monitoring their development in person, and the availability of direct airplane flights between the two parties improves that oversight, says co-author Xavier Giroud, an associate professor of finance at the Massachusetts Institute of Technology’s Sloan School of Management (MIT Sloan).

“The effect is that those companies become more innovative,” he said.

Giroud acknowledges that it has long been “an open question” whether venture capitalist involvement actually adds value to startup firms.

The study indicates that venture capitalist involvement is “an important determinant of innovation and success,” the authors conclude.

The study pinpoints cases where direct flights were introduced between areas in which venture capitalists and startups had already established their business relationships.

In total, the study examined 22,896 startup companies and 3,158 venture capital firms over a period of 30 years.

The researchers used data from three separate sources: the Thomson Reuters VentureXpert database on VC investments, the (NBER) National Bureau of Economic Research Patent Data Project, and U.S. Department of Transportation data on flights. The three data sets overlapped from 1977 through 2006.

The researchers also conducted a separate survey of 306 venture capital firms to see if the presence of direct flights increased the amount of contact venture capitalists had with the startups they had invested in.

About 86 percent of the respondents agreed that direct flights allow VCs to spend more time monitoring the firms in their portfolios.

The paper’s co-authors include Shai Bernstein, an assistant professor of finance at Stanford’s Graduate School of Business; and Richard Townsend, an assistant professor at Dartmouth’s Tuck School of Business.

In the model that Giroud, Bernstein and Townshend looked at, airports support performance by enabling ongoing VC engagement with more that can ease travel-time burdens for VCs who live more than a quick drive or train ride away from their startup firm.

The resulting engagement can, in turn, boost patent activity and long-term valuations.

Using a “difference-in-differences estimation framework,” the researchers found that the introduction of a new airline route leads to a 3.1 percent increase in the number of patents the portfolio company produces and a 5.8 percent increase in the number of citations per patent it receives.

Direct flights were shown to increase the probability of going public by one percent, and of having a successful exit via IPO or acquisition by 1.4 percent.

By tracking acquisitions and IPOs, along with the number and frequency of flights being offered at local airports, the study found that increased flight offerings might boost VC engagement within one to two years.

“I was very persuaded,” Matthew Rhodes-Kropf, an associate professor at Harvard Business School, told MIT News. “I think it’s a great paper. It’s very hard to get an [analytical] instrument that works like this.”

The findings also align with the opinion of Fred Wilson, a co-founder at partner at the VC firm Union Square Ventures. Wilson believes efficient travel options will even improve startups’ chances at getting funding in the first place.

“Investors value their time and focus it on markets that they can get in and out of easily,” Wilson wrote on his blog at AVC.com. “I think that has a big impact on where money flows.”

Among other things, the researchers found a wider dispersion of both startups and VCs than usually thought.

About 50 percent of startups and VCs in the study were located outside of Northern California, New England, and New York, the three areas most commonly associated with high-tech startups and investors.

“There are entrepreneurial firms all over the place,” Giroud observes.

Giroud suggests at least one way startups and communities can utilize the study’s findings – they can lobby for more connections between their nearest airport and the rest of the world.

“Suppose you want to promote entrepreneurship in a given area,” Giroud says. “One policy could be to promote the availability of [more] direct flights between the area and VC hubs.”

The paper detailing the study, “The Impact of Venture Capital Monitoring,” will be published in an upcoming issue of the “Journal of Finance.”


Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Featured Image: Face-to-face business meetings help both venture capitalists and startups accomplish their goals. (Photo by thetaxhaven) creative commons license via Flickr
Main Image: Business Flight – stock image 123rf