Investor         Business Plans

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INVESTOR BUSINESS PLANS

Entrepreneurs, businesses and projects rely on investment capital to hit the ground running. The Investor Business Plan is the most essential document for any entrepreneur seeking to raise capital to start a new business or finance a project within an existing company.

 

Most potential funders wish to see a business plan as a first step in deciding whether or not to invest. But, different types of funders look at business plans from different perspectives.

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. 

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. 

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.

WHAT'S IN INVESTOR'S MIND?

We  know exactly what is in  investors' mind and what they look for in a business plan, including:

  • The potential of a return on their investment

  • The use the funds

  • Do you have a strategy in place?

  • Do you have a strong management team?

  • Are your projections are credible?

HOW INVESTORS ANALYSE BUSINESS PLANS?

VCFMs (The Venture Capital Fund Managers) and BAs (Business Angels) are investing for capital gain and, in contrast to the banker, they share in the success of the businesses that they invest in. Unlike the banker, their investment is also fully exposed in the event that the business fails. A further risk is that their investment will be illiquid if the business does not achieve significant growth. Accordingly, VCFMs and BAs might be expected to place greatest emphasis on the capability of the management team, the product/service and the market.

The most consistent finding from studies of VCFM decision-making is the importance that is placed on the ability of management. This includes management skill, quality of management, characteristics of the management team and
the management team’s track record.

 

Other criteria which VCFMs report that they take into account when assessing a new venture proposal are the character-
istics of the market/industry, environmental threats to the business, the level of competition and the degree of product differentiation.

However, other studies - while confirming the importance of the entrepreneurial team – suggest that other factors are also significant in the VCFM’s investment decision, notably product characteristics (proprietary features, competitive advantage, potential to achieve strong market position), market characteristics (significant growth, limited competition) and returns (potential for high returns, clear exit opportunity)

BAs might be expected to adopt an approach to investment decision-making that is similar, although not identical, to that of VCFMs. There are several aspects where differences might be expected to arise. First, VCFMs will be more concerned with market risk – risk that is due to unforeseen competitive conditions affecting the size, growth and accessibility to the market – whereas BAs will be more concerned with agency risk – risk that is caused by
the separate and possibly divergent interests of entrepreneurs (agents) and investors (principals).

Investment Criteria

Enterpreneur/Management Team

Description

The background, experience and track-record of the entrepreneur, their personal qualities (e.g. commitment,
enthusiasm) and the range of skills/functions of the
management team

Strategy

The overall concept and strategy of the business

Operations

How the business is organized to produce and deliver the

product (i.e. issues associated with the production

process)

Product/Service 

The nature of the product/service, in terms of its concept,
uniqueness, distinctiveness and innovativeness. It also
includes the quality, standards and performance, 
appearance, styling and aesthetic appeal, and ergonomics, 
function and flexibility of the product/service 

Market

The potential and growth of the market, demonstrated 
market need, level/nature of competition and barriers to 
entry

Financial Considerations

This includes three aspects: (i) the financial structure of the 
business (e.g. costs and pricing, revenue stream financial 
projections), (ii) the value of the equity/worth of business, 
and (iii) the likely rate of return and exit route possibilities

Investor Fit 

This includes two elements: (i) the relationship between the 
investor’s background, skills and knowledge of the industry,
market, technology, etc. and the investment opportunity, 
and (ii) the investor’s preferences (i.e. is this an industry, 
market, etc. that the investor wants to be in?)

Business Plan

A business plan is a crucial tool in maximizing the chances of raising money from investors. A well-written plan not only helps investors understand the business and founder's vision, but also shows them that the founder has taken the time to carefully assess and think through the issues that business will face

Schedule your free consultation and see how you can make a difference for your business and hit your goals.