Venture Capital Investment Toolkit

Not too long ago a successful serial entrepreneur reached out to me to help with his fund raising efforts.   He has created a good concept, built a good team, and was starting to gain customer traction.  With all this success he felt that it might be a good time to go out and raise a venture capital round so that he could pour on the growth gas.  He was busy and wanted me to put together a 20 – 25 page business plan and an executive summary to support his fund raising effort.  And while I certainly would like the money that I typically charge someone to create such things, we had a very frank conversation.  I told him I did not think he needed a business plan to get funded but I would do a bit of research to make sure.

So I did.

On the down low I asked a half dozen or so VCs if an entrepreneur with a good concept, good team, and customer traction needed a long form business plan.  Not a single one said yes.  One admitted that they had never read a business plan in all their years as a VC.  When a VC asks for a business plan they are not asking for information.  It is a stall.  They telling you "no" without saying the word.

So what do they need?  I got some down low on that too.  I was told by my VC friends that you need four things; an one or two page executive summary, an overview presentation, a technical presentation, and a business model.

A one or two page executive summary is exactly that.  It summarizes your business in a page or two.  It includes such things as a company background, a description of the business, what problem you are solving, what is special about the way you are solving it, a bit about the management team, details about the market you are addressing, and summary financial information.  This is what you send to someone via email.  The overview presentation deck mirrors the executive summary but has a lot less words and you do not sent it via email.  Examples of both can be found on the ATDC web site.

The technical presentation is needed for when the technical due diligence starts.  Again, it is exactly what it is described to be.  A series of slides with increasing detail on the technical architecture of the solution you are creating.  The best way to get this together is to get your CTO type to whiteboard the solution and take detailed notes.  It is often just a few schematic type slides that can be talked through at great detail.

Finally you need a business model.  This is what feeds the summary financial information in the executive summary and overview presentation.  It is an excel spreadsheet.  With assumptions clearly outlined and put together in such a way that you can make changes to the assumptions to ascertain the end result.  This allows you to do two things.  One, change the assumptions as you learn more about your business.  Two, and more importantly, understand the drivers of business success so that you can focus on them.

Again venture capitalists, the guys that write the checks, don’t read business plans.  they want an one or two page executive
summary, an overview presentation, a technical presentation, and a
business model.  And if you don’t have the skill set to create this stuff, pay someone to do it.  But don’t pay someone to write a business plan that no one is going to read.

March 5, 2008  |  Comments  |  Tweet  |  Posted in Angels, Entrepreneurship, Venture Capital