An active angel or seed stage investor would typically receive tens of enquiries, from entrepreneurs looking to fundraise, on a daily basis. A well-crafted business plan document is a key weapon that Founders have to differentiate their venture from the crowd.
An active angel or seed stage investor would typically receive tens of enquiries, from entrepreneurs looking to fundraise, on a daily basis. A well-crafted business plan document is a key weapon that Founders have to differentiate their venture from the crowd.
A good business plan ‘communicates existing value’, touching upon all key heads of information an investor would typically look for while evaluating. This makes it easier for them to digest the information and arrive at a go/ no-go decision faster. Great b-plans transcend to the next level, which is ‘creating additional value’. This would include spinning a story around the key problem the venture is trying to solve; presenting interesting market data and statistics to quantify the size (and growth) of the problem; communicating strategically chosen traction metrics that act as confidence builders; putting the best foot forward on ‘human resources’ – founding team, key employees, advisory board, mentors etc.; exhibiting differentiation and proprietary nature in a de-jargonized way; and finally, achieving all this in an aesthetic, engaging and crisp manner.
Let’s look at various aspects of constructing a winning b-plan:
1. Composition and Format
Your b-plan kit should comprise of:
• B-plan Deck – power point format
• Financial Model – assumptions, P&L, Balance Sheet, Cash Flow
Word documents are inherently difficult to digest so it’s best to avoid them. Power point provides a great medium to present information in a concise and visually appealing manner. Also, at the angel/ seed stage, your b-plan deck will double up as the management presentation – the document will be used both for circulation as an email attachment, and for presenting in-person to investors.
Even though your venture might be extremely early, investors will still expect at least a basic working financial model, with the 3 major financial statements built in and calculations flowing from the assumption sheet. This sheet is most critical as it would cover the key revenue (pricing, number of customers etc.), cost (margins, fixed and variable costs etc.) and operating drivers (working capital, capital expenditures etc.) of the business. Even if it’s simple, a financial model based on well thought-out assumptions communicates to investors the extent to which founders have thought through the business, its key drivers, growth plans and funding requirements.
2. B-plan Deck
The ideal length of a b-plan deck is 15-20 slides, which anyway is enough to present all major aspects of a business. Beyond this, reading fatigue tends to set in and attention spans start to drop.
A recommended beginning-to-end flow and structure of the b-plan deck is presented below:
• Business Snapshot/ Synopsis (1 Slide)
The first slide should ideally give a snapshot of the entire deck, similar to an engaging trailer that hits on all sweet spots, strengths and positive aspects of a movie. This slide can cover:
o Company introduction, when was it founded (1 bullet)
o Description of what the company does (1 bullet)
o Team summary, credentials, strengths (1-2 bullets)
o Problem being solved, market size, growth (1 bullet)
o Traction metrics – revenue; number of customers; operating metrics such as number of users, number of visitors; order book/ sales pipeline/ ongoing POCs/ pilots (1-2 bullets)
o Key marquee customers at POC/ pilot/ paying stage (1 bullet)
o Any awards/ recognitions (1 bullet)
o Capital already raised (if any) and planned fundraising amount (1 bullet)
• Team (2-3 Slides)
Yes, this should be the second slide. Quality of team is the single most important reason why deals get done so it has to be put up front. It’s recommended to even devote 1 slide to each founder, describing in detail their education, work experience, prior entrepreneurial background, awards and accomplishments etc. As part of this section, it’s also important to mention Advisory Board members and existing angel investors, if any. To summarize, the mantra for this section is – ‘the more detailed, the better’.
• Market Opportunity (1-2 Slides)
This section should address the market opportunity the venture is going after; in particular, its size, growth, key trends and any other proxies to communicate intensity of the problem being solved. A common mistake in this section is to be highly macro in identifying and sizing the market, and presenting it in a verbose fashion. The ‘addressable market’ should be presented, and not the overall market or peripheral market segments. Also, as far as possible, charts and graphs should be used to communicate market data. You can refer to trusted market research reports by reputed agencies and if required, present your own top-down/ bottom-up market sizing analysis.
• Description of Product/ Service/ Business Model (2-3 Slides)
This section should be utilized to present the venture’s offerings and existing/ potential business models around them. Here again, a common mistake is to use heavy terminologies/ technical jargons that most investors will find tough to understand and end up getting confused. Instead, images, flow charts, block diagrams and crisp bullets should be liberally used in this section. The acid test is – build this section as if you have to explain the business to your grandmother. Investors will always better appreciate things that are simple to grasp and assimilate.
• Competition/ Key Differentiators/ USPs (1-2 slides)
A good way to develop this section is to pictorially depict the competitive landscape and include 2-3 crisp bullets about the venture’s uniqueness/ entry barriers/ competitive advantage. Common ways of presenting competitive landscapes include 2x2 matrix with relevant parameters on x and y axis and various players positioned in the 4 quadrants; or a ‘feature table’ with key functionalities listed as column headers, key players listed as row headers, and ‘ticks’ and ‘crosses’ to indicate features being offered by each player. If you want to go simple, just create a table with overview, strengths and weaknesses of each competitor, followed by the venture’s own uniqueness/ competitive advantage vis-à-vis them. Last but not the least, any Intellectual Property (patents, copyrights, trade secrets etc.) that the venture might have filed/ been granted should definitely be included.
• Traction (1 slide)
If the venture has been revenue generating for a reasonable period of time, current revenue traction and growth trending (m-o-m, q-o-q, y-o-y, whichever is relevant) should be presented in this section. Ideally, graphs and charts (with specific values indicated within them) are preferable over intense data tables.
In case revenue is still very early/ non-existent, other proxies of traction should be presented. Some options could be:
o Enterprise focused businesses – relevant metrics could be number of pilots/ POCs/ demos, sales pipeline, order books etc. Also, it’s visually appealing to include logos of any large companies that are engaging with the venture as existing/ potential customers.
o Consumer focused businesses – relevant metrics could be number of unique visitors (or number of footfalls, in case of offline), average time being spent by them on the offering, repeat behavior etc.
o Technical traction metrics – could be progress on product roadmap and key milestones achieved, number of versions released, any IP filed etc.
o Strategic traction metrics – could be any key additions to the team, recent PR/ media visibility, awards won, any strategic partnerships/ alliances inked etc.
Irrespective of the stage, every venture would have specific relevant metrics that reflect market fit, adoption and growth, basically indicating that the company and its story is moving ahead in a positive direction. These metrics should be identified and presented to put the best foot forward for the venture.
• Financial Projections (1-2 slides)
The b-plan deck should include either a tabular or graphical snapshot of the company’s P&L projections, at least for next 3 years. In addition, based on the planned cash runway, the cash flow statement in terms of where will the cash be utilized and how the cash balance is moving should also be presented. Together with these, it’s also recommended to present critical operating and growth assumptions based on which the projections have been developed.
For the deck, only key line items (Revenue, Gross Margin, EBITDA, Capital Expenditure, Working Capital etc.) should be included; detailed statements can go as annexure to the b-plan.
• Fundraising Plan (1 slide)
This closing section of the deck should include any capital raised till now (equity or debt), the amount being raised and deployment plan for it. This plan should only present 3-4 broad heads – hiring, R&D, product development, working capital etc. (details will anyway be there in the financial model).
Presenting the shareholding pattern is also advisable, though not mandatory at this stage. An important closing point – don’t mention valuation expectations in the deck. It will be determined by various factors and explicitly anchoring on a specific number is best avoided.
To summarize, the key to creating a winning b-plan is to put yourself in the investor’s shoes, identify key aspects that will go into the decision making process, and then put your best foot forward on each of these aspects in a short, simple and structured way.
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