Are business plans still relevant for an Internet startup?
Answers
Business plans are always relevant, if written to be relevant. Static 30 page business plans are not, 3 - 5 page executive summaries w/ 18 month forward looking forecasts are.
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Agreed. I find the new 'business model canvas' and 'lean canvas' tools much more effective than a 30 page business plan. They capture much more of what is important while being light enough to quickly iterate through business model changes with. Ash Myura had a great post on the topic, http://www.ashmaurya.com/2010/08/businessmodelcanvas/.
VCs are still interested in seeing the type of executive summary Wayne describes. A short product or company overview video has become an effective tool for gaining a VCs attention. Send a link to your video along with the exec summary if you're making first contact with a VC.
Wayne, I agree with comments, and I am a fan of the 'lean canvas' that Peter mentioned as well. Video has become the new elevator pitch!
"The means justifies the ends." You have a 50-50 shot that your predictions today will occur 12 months from now. But the process of looking at your strategy, your competitors, your
The Executive Summary on top of your plan should be short, sweet and concise. But the back-up should be extensive, especially for a start-up.
Do not make the mistake of assuming the amount of effort needed is related to the size of the Executive Summary.
Does your strategy change if you are approaching Angel Investors vs. Venture Capital firms?
Of course a business plan is still relevant. Technology though changes everything. It's said that investors invest in CEOs &
The business plan advertises that the CEO & management team can crisply and clearly articulate answers to the following ten (10) questions:
1. What the value proposition for the company is?
2. What is the addressable market?
3. What is the present competitive landscape?
4. Is the product or service a game changer?
5. Intellectual property protection in place or available.
6. What is the sources and uses of cash?
7. How much capital is required before reaching cash flow positive results?
8. Who are the investors to date and how much money has been invested to date (Cap Table)?
9. What is the Pre- & Post-Money Valuation & why is it reasonable?
10. What is the exit strategy?
If the answers to the above questions can be articulated concisely, investors will know that there is a well thought out plan. Whether it succeeds or not, ultimately is all about execution.
Incorporate
Following on the above (Jeffrey's comment); distill those 10 questions into a two minute summary. Record it. Practice it. If it takes longer than 2 minutes to verbally summarize the above, you (as an
What you will do, why and how; what it will take to do it, and why the investor wants to be involved.
Note; this drill may exclude 9 and 10...the VC is usually happy to determine 9, and 10 is usually too far out in the future to determine (but you do need to have educated opinions on both; you'll be asked, assuming the hook is set when you give your pitch).
Barry; I'm not sure of your question. Do you have a different message to Angels vs. VCs. Message: yes, usually. The $ and investment goals are different, as are usually the timeframe for the investment. Business Strategy: no, not usually...although how you discuss it may be different depending on the audience.
I have involved with the internet start up and I agreed totally with the "lean canvas"approach that Peter mentioned. Communicating and time are the crucial issues in fund raising and making new "things" happen.
The startup needs a business plan even more than the established enterprise. While an ongoing business has much in place that reflects the consequences of prior intention, past agreements, market feedback, for the startup these are less explicit, even nonexistent.
The business plan serves the important function of articulating agreements and critical information about the venture. That said, many business plans are less than they might/should be. And, no business plan may result in no business. The trick, to get it right, is far easier said than done. And doing so is central to success.
The writing of the plan (The plan to run the business) most helpful.
1. It causes you to think abut what your doing.
2. It itches the thoughts into the brain.
However there a a number of types of plans...One to run the business and another to seek some kind of financing.
The financing plan is the most detailed. The operating plan is a good guide.
Problem: Most people don't do any planning.
Agree with all of the above. Especially after sandwiching my 11 years in digital (before/during/after bubble burst) between strong fundamentals in non-digital... I can truly attest to the accuracy of the statement:
"What gets measured... gets done."
Great comments everyone. More concise business model communications really took shape several years ago, even before the meltdown, but after 9/11. Short and to the point is what most investors are seeking, with backup information available upon request. I agree that usually a 5-pg. executive summary is enough to communicate the initial message. Sometimes, you may want to convey more expertise than that space can allot, however.
I put together a short video if anyone is interested. It discusses most of the great points (and ones that are lacking in many pans unfortunately) that Jeff listed.
http://www.youtube.com/watch?v=tjMErjVJK-Y&feature=youtu.be