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How Many And Whom Should Be Targeted To Get Smart Money?

I would caution against sending the teaser business plan to too many people. Be very targeted and do enough homework to shortlist the VCs who are likely to be interested in your type of industry and project. For example, there is little point in sending a teaser to a company that rarely invests in capital-intensive companies, or those who only invest at the pre-IPO stage of the company. The better you do your homework, the more effective you will be in attracting the right partners to look at your company. You do not want to spend too much time talking to too many potential investors, and definitely not spend too much time trying to convince non-believers. Mr Inderjit Singh, The Art and Science of Entrepreneurship.

The hypothesis this week highlights the importance of magnetizing the business plan so as to ease the process of raising capital and the need to short-list those VCs that will receive your business plan.

It is a rare occurrence that an entrepreneur succeeds in raising money beyond the seed round. This is where the business plan comes into the picture, manifesting its importance by mapping the road to success. Once a business plan is in place and competent management expertise and captivating financial goals have been addressed, the entrepreneur’s job is done.

Investors are deluged with business plans, rejecting most of them within minutes. Among the sea of ideas, a business plan needs to truly stand out. It is, therefore, vital to capture the imagination of the investors right away and to hook them immediately.

At this point, it is the potency of the business plan that will come into effect. When pitching for funding, it is important to furnish that the plan is effectively communicating the information that investors are looking for. The executive summary is what venture capitalists and investors are actually interested in.

Executive summary can serve as an elixir as far as entrepreneurial success is concerned. This is because it can stir excitement and ignite an interest in the reader instantly. While the need to excite VCs from page one of the plan is mandatory, an attention-grabbing executive summary plays its role in convincing the investor in the right manner.

The executive summary should summarize the entire business plan and should capture the unique proposition in a clear and focused manner. Enticing the venture capitalists, the executive summary should be so attractive that the investors cannot wait to discuss the plan further with the entrepreneur.

The executive plan should be professionally prepared in a way that not only are the promising prospects spelled out but the essence of the business plan and the management team’s visions are also communed. The executive summary should give the VCs a fair idea that the entrepreneur knows the best route to accomplish the specified goals and that they have the competency to effortlessly skirt any turns and twists that will come in the way by navigating through them.

One glitch common to a lot of entrepreneurs is sending out the business plan to too many venture capitalists. While urgency may trigger entrepreneurs to taking such desperate measures, there is no point in sending business plan to those who have no use for them. An entrepreneur should do sufficient homework prior to reaching any VCs. One should focus on only the targeted ones and shortlist only those relevant to one’s project or industry.

It is of paramount importance to attract the right partners for your start-up business because the more appropriate the investors you get, the higher the chances of your success. Entrepreneurs need to apprehend that talking to too many investors will only account for wasted time and effort. Often, those who seem to be the most potential investors turn out to be the biggest non-believers. Either they fail to understand the scope of the project or do not have the appetite for the business. In either case, it is best to stay away from them.

In conclusion, it is important to establish that entrepreneurs should target smart money rather than hard money. It is not a good idea sending your idea to too many investors, especially if it is something ground-breaking or earth-shattering. Remember, VCs get to deal with myriad of companies or entrepreneurs each day. Revealing your idea to too many people is synonymous to making it public.

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