Blog Archives
To begin with, it is important to understand some basic facts about the world of entrepreneurial finance:
There are many more entrepreneurs than there are investors, with the result that only one company out of every 400 that seeks venture funding actually receives it. As such, the competition from an entrepreneur’s standpoint is very, very tough. In order to be
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The disappointing fact is that this is a highly unlikely scenario, for several reasons.
The most important is that venture capital firms simply do not fund business plans. They fund companies. There are several excellent explanations why this is the case, but the bottom line is that VCs are able to fund only one out of every 400 companies who approach them, and thus the
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Marketing strategy actually is quite important to most investors. The bottom line is that if no one shows up to buy or use your product, it doesn’t matter one whit how cool or great or innovative it is. And investors do not like top-down projections (“we’ll get a 10% market share…”). They very much want to see how you are going to get your first customer,
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Startups: Investors expect new marketing. The fundamentals still apply but tools and realities are different now. If you don’t understand the broader implications of social media, content marketing, curation, engagement, and relationships, then you desperately need a great reason why not. And don’t think you can just wave your hands at it. You have to really know it.
Here’s are
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Unfortunately, VCs do not typically review business plans. Instead, they look at a brief summary and then decide if they want to invite you in for a meeting.
Too many entrepreneurs still believe the urban myth that you can sketch your idea on a napkin, and investors will throw money at you. Every investor I know is frustrated with the poor quality of the business plans they get. This is sad, since “how to write a business plan” is a frequent topic found in every business journal, and
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Many entrepreneurs actually refuse to do financial projections beyond the first year, insisting that no one can predict the future. They need to realize that investors ask for projections, not merely as predictions, but more as commitments from the founder and his team. If you are not willing to commit, don’t expect anyone to back you.
In reality, you need
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Lack of confidence in your self, your product, and your startup is a surefire recipe for disaster. At the other extreme, too much confidence or arrogance can kill you just as fast. It’s always painful when a startup fails, but as a mentor to founders, I would hope that you can learn from these failings and not stumble on the
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Why is it that most of the business plans I see are really product plans? I define a product plan as a detailed description of your product or service, with a bit of business thrown in at the end. A business plan is a detailed description of your business, with a bit of product description thrown in near the front.
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I really like Martin Zwilling’s post here yesterday, 10 things that make a business plan fundable. That made me think about this list, the opposite, things that make a plan not fundable. Before I start, though, I second Martin’s motion on the use of business plans:
People ask me if they really need ANY business plan, unless they are
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