New Venture Lab: Equipping Christian Entrepreneurs

The Ideal Business Plan for Investors

One of the most frequent questions we get on New Venture Lab is how to raise capital for a startup in amounts that range from $5k to $1m. This stage of business development and investing is typically funded by personal savings (at the lower end of that range), friends and family (the next phase of capital in the $25k to $100k range), or angel investors ($25k to $1m or more) as discussed in more detail in our post Stages of Growth and Capitalization. Institutional capital such as venture capital usually doesn't get interested until the investment amount is a few million or more (see our post Institutional Equity Financing). But whether you are raising money from angel investors (see The Best Angel Investor) or institutional venture capital, you will need a solid presentation and financial model.

I've invested in around 20 startups, helped launch scores of others, and advised hundreds more, but I've never written a business plan. That is to say that I’ve never written the traditional narrative style plan with all of various sections that you get with typical business planning software (and I don’t think I invested in many like that). All of the plans I’ve written (and the startups I’m drawn to as an investor) are combinations of 
  1. a Power Point presentation that tell the story well (download an example one here), and
  2. a detailed financial model (which led to the model on this site) to make the case for the investment thesis.
You need a great elevator pitch and you need to have analyzed your market opportunity, but get your presentation boiled down to something you can present in 20 minutes. But despite that brevity, you need the detailed financial model to back up your plan. Keep the presentation short and sweet, but be able to explain all the details necessary to support the plan, which builds credibility based on your homework.

Here are a few tips to make sure your plan doesn’t miss the mark on what angel investors and venture capital investors typically want to see:
  • What investors do not want to see:
    • Too much narrative
    • Too much fluff
    • Too long
    • Insufficient market analysis
    • Insufficient detail on assumptions
    • Insufficient detail on risks and risk mitigation
    • Insufficient detail on the financial model
  • What investors do want to see:
    • A short Power Point presentation on the highlights of the opportunity
    • A detailed financial model with the ability to test assumptions and sensitivities and to immediately see the outcome (the Startup Financial Model was built for this purpose)
My recommendation on the Power Point presentation would be along these lines — and in this order — with 10 to 15 slides:
  • Elevator Pitch (one slide)
    • Vision
    • Mission
    • Strategy
  • Market (one to two slides)
    • Size
    • Growth
    • Unmet needs
  • Value Proposition (one to two slides)
    • Offering
    • Value creation
    • Go-to-market strategy
  • Competition (one to two slides)
    • Direct competitor profiles
    • Substitutes
    • Strengths and weaknesses
  • Business Model (one slide)
    • Key metrics
    • Scalability
    • Assumptions
  • Financial Model (one slide; copy and paste the Summary page from the Startup Financial Model)
    • Multi-year, detailed financial model summary
    • Income Statement
    • Balance Sheet
    • Cash Flow
  • Timeline (one slide)
    • Historical highlights
    • Future goals
  • Investment Thesis (one to two slides)
    • Risks
    • Returns
    • Rounds
    • Pre-money and post-money values
    • Potential exits
  • Risks and Risk Mitigation (one slide)
    • Identify all key risks by category
    • Outline risk mitigation plan
    • Discuss sensitivities
  • Team (one slide)
    • Roles
    • Relevancy of experience
    • Fit with each other
    • Strengths and weaknesses

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