The area I am most often asked to give a talk about is what Investors look for in a Business Plan. I can only comment on what I look for as an angel with limited experience.
The first thing I look for is evidence of a good management team. This does not mean a team compromising of some stars (I find it is very hard to create a great team from one or two ‘stars’). I also think that businesses need to be wary of recruiting one or two really big names to sit on their board as Non-Exec’s.
I can understand the attraction of using a smokeless ashtray, but the skills a startup need are rarely found in someone who has experience of managing publicly listed companies. And if you do have NED’s with great CV’s – I would expect to see some considerable investment from them.
An investor I work with from time to time has a great approach. He does not care about past achievements, he asks the same question of every NED – how much have they invested?
With all points I make on this blog, it is about taking the sensible approach and not taking the point to the extreme.
I am also looking to understand what the business does in a very easy way. A great example of this was in a business I invested in recently (last one I invested in) created a short video to explain what they do (as it was something I knew nothing about!). The point was that I got it after watching the video – and it was fun. Another great recent example is when someone sent me the presentation they would make to a customer. That means I get more than what the business does – I also get
- Who they see as their customer? (And I understand the size of the market)
- What the problem is for their customer? (And I understand the value of the problem they solve)
- What the current solutions are and how they are inferior? ( And I understand their competitive landscape and barriers to entry)
- What the charge is? (And I understand profitability, etc.)
So it really is a great way to get an investor excited.
And… Just a personal thing, although I was pleased to see it was backed up by someone I consider an expert in the field at a recent talk in Halifax. Please save your time and money and write your own business plan.
Nothing will lose you more credibility regarding your knowledge of turbochargers with me (and other investors) if you don’t come across as the author of your own plan. By all means, use consultants to do research and validate some of your propositions – and to add expert industry commentary. But do not engage consultants to write a business plan.
If you can’t write – and I have worked with a lot of people who can’t, make sure someone on your management team can – and they come with you to any presentations you may make to potential investors.