On Strategy: A Contrarian Look at Business Plans
By Jack Mixner
Ridenour says a business plan isn't needed to raise money from Angels or Venture Capitalists. He says there is basically only one way to get close to a VC, namely, receiving a referral from a personal contact direct to the VC. Then you use your executive summary to get an appointment.
In your presentation, Ridenour suggests five slides (six really): Introduce your team, Market, Technology, Competitive Dynamics, Business Model and Traction, and Financial Forecast overview.
Strategic Implication
Only three per cent of deals are funded by VCs - maybe another two per cent by Angels.
The business plan is not to raise money. It is for running your company. The best kept secret of raising money from either Angels or VCs is that they won't fund any deal unless it is in revenue, and, more and more, profitable. Use your business plan as a road map to get profitable. Then use Ridenour's advice. Get a very good referral to a VC that is perfect for your deal.
You may not get funded anyway. Use the plan to continue to grow using cash flow for interim funding.
Start looking for some sort of strategic alliance, especially if you need $ 1 million or more to finish your chip design or medical device clinical trial. The business plan will help you there as well.
References
Ridenour, Matt. Raising Money: A Contrarian View of Business Plans. Tech Coast Venture Network. www.tcvn.org . 27 July 2006.