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Business Plan Executive Summary For Venture Capital

Contrary to a lot of entrepreneurs' expectations most investors won't read a complete investment proposal, especially when the plan is more of an operational plan with too much detail. When raising capital your strategic business plan is not as critical as you might think nonetheless it remains important to your overall business success. If your proposal doesn't interest an investor then many will not read beyond the executive summary. Investors and vc's can be assessing between 10 to 30 businesses per month and have better things to be doing than just hoping the main body of the plan comes up with a more exciting proposition than the executive summary. Many other facets of the proposition may even help investors determine the history and credibility of the management team in addition to a variety of other conclusions and understand how much detail they require to understand from the proposal.

The message of the story - make the executive summary spot on.

An executive summary is a 2 to 5 page synopsis of the critical details in the business strategy plan.An executive summary is a two-to-five page summation of the significant points in your business strategy plan.The executive summary is a 2 to 5 page overview of the vital information in your business strategy plan.

Usually an investor will analyse the executive summary and determine whether or not the business and this investment really makes sense, whether management look like they know what they are doing, and has been completely thought through. Is this business genuinely going to take advantage of the stated opportunity? They will also want to conclude that the timing of the venture is right - not too late & not too early. Cosmetically, the plan in general should be clear, succinct where it ought to be and fleshed out where applicable.

Keep in mind the company idea does not have to become a paradigm shift, simple can be greatest and so where it is not do not make it any more complicated than it has to be.

To arrive at the above conclusions, a great executive summary would include the subsequent - and this really is as much a information for what a great proposition looks like as what ought to be included within the executive summary:

1)The issue must be stated clearly, how big the problem is and that this issue is fitting for a business answer - after all not all difficulties within the planet ought to attract a company solution.

2)The industry should be developing and be big sufficient for an expense chance to make feeling. Investing in the shrinking industry isn't an attractive proposition. Further, the investment will make more sense when the market share targeted is not a materials share of the overall market eg <5%, and still results in an attractive return for the investor.

3)The answer to the problem should be robust and guarded against the competition, through a reasonably competitive edge, or trademarked protection all of which imply the products or services will be outstanding, which is important. Further we must have a wide-ranging overview from the opposition and what they have accomplished and are likely to achieve.

4)Given uniqueness, the executive summary must state what the value proposition is to the end client, and determine that end consumer, and qualify the demographic targeted.

5)The management team should be introduced quickly (and in much more detail in the strategic plan, exhibit why their history is appropriate for that endeavor, and if they have not come from the industry, show their motivation to seek suitable guidance.

6)The summation must demonstrate good financials, with a return five to ten times inside of a five yr timeframe and note that recurring revenue decreases risk

7)The valuation should be sensible - consideration must be paid to business standards - do this carefully as this what an investor will do. If there is one flag against management and entrepreneurs that regularly causes frustration it is excessive valuations by entrepreneurs. It does nothing for management credibility.

8)An exit should be stipulated, preferably with a selection of specific strategic partners cited. So if you are seeking to become acquired...who are you ideal marks

If all these factors were integrated in the executive summary, presented clearly and concisely and made logical sense, an entrepreneur ought to expect strong results, subject of course to the proper numbers falling out and matching the investors expectations.

For more information on Business Plan Angel Investors
visit the Venture Capital Centre at www.VentureCapitalCentre.com.au

Venture Capital Options For Small Businesses

Venture Capital is a specific term that refers to funding obtained from a venture capitalist. These are professional serial investors and may be individuals or part of a firm. Often venture capitalists have a niche based on business type and or size and or stage of growth. They are likely to see a lot of proposals in front of them (sometimes hundreds a month), be interested in a few, and invest in even fewer. Around 1-3% of all deals put to a venture capitalist get funded. So, with the numbers that low, you need to be clearly impressive.

Growth is usually associated with access to, and conservation of cash while maximising profitable business. People often see venture capital as the magic bullet to fix everything, but it isn't. Owners need to have a huge desire to grow and a willingness to give up some ownership or control. For many, not wanting to lose control will make them a poor fit for venture capital. (If you work this out early on you might save a lot of headaches).

Remember, it's not just about the money. From the perspective of a business owner, there is money and smart money. Smart money means it comes with expertise, advice and often contacts and new sales opportunities. This helps the owner, and the investors grow the business.

Venture Capital is just one way to fund a business and in fact it is one of the least common, yet most often discussed. It may or may not be the right option for you (a discussion with a corporate advisor might help you decide what is the right path for you).

Here's a few other options to consider.

Your Own Money - many business are funded from the owner's own savings, or from money drawn from equity in property. This is often the simplest money to access. Often an investor would like to see some of the owner's fund in the company ("skin in the game") before they'd consider investing.

Private Equity - Private Equity and Venture Capital are almost the same, but with a slightly different flavour. Venture Capital tends to be the term used for an early stage company and Private Equity for a later stage funding for further growth. There are specialists in each area and you'll find different companies with their own criteria.

FF & F - Family, Friends and Fools. Those closer to the business and often not sophisticated investors. This type of money can come with more emotional baggage and interference (as opposed to help) from its providers, but may be the fastest way to access smaller amounts of capital. Often multiple investors will make up the overall amount needed.

Angel Investors - The main business angels vary from venture capitalists in their motives and level of involvement. Often angels are more involved in the business, providing ongoing mentorship and advice based on experience in a particular industry. For that reason, matching angels and owners is critical. There are substantial easily locatable networks of angels. Pitching to them is no less demanding than to a venture capitalist as they still review hundreds of proposals and accept only a handful. Often the demands around exit strategies are different for an angel and they are satisfied with a slightly longer term investment (say 5-7 years compared to 3-4 for a venture capitalist).

Bootstrapping - growing organically through reinvesting profits. No external capital injected.

Banks - banks will lend money, but are more concerned about your assets than your business. Expect to personally guarantee everything.

Leases - this may be a way to fund particular purchases that allow for expansion. They will normally be leases over assets, and secured by those assets. Often it is possible to lease specialist equipment that a bank would not lend on.

Merger / Acquisition Strategy - you may seek to acquire or be acquired. Generally even a merger has a stronger and a weaker partner. Combining the resources of two or more companies can be a path to growth - and when it is done with a company in the same business, can make a lot of sense - on paper at least. Many mergers suffer from differences in culture and unforeseen resentments that can kill the benefits.

Inventory Financing - specialist lenders will lend money against inventory you own. This may be more expensive than a bank, but might allow you to access funds you could not have otherwise.

Accounts Receivable Financing / Factoring - again a specialist area of lending that may allow you to tap into a source of funds you didn't know you had.

IPO - this is normally a strategy after some initial capital raising and having proven a business is viable through the development of a track record. In Australia there are various ways to "list". They are useful for raising larger amounts of money ($50m and up) as the costs can be quite high ($1m plus).

MBO (Management Buy Out) - This tends to be a later stage strategy, rather than a startup funding strategy. In essence debt is raised to buy out the owners and investors. It is often a strategy to gain back control from outside investors, or when investors seek to divest themselves from the business.

One of the most important things to remember across all these strategies is that they all require a significant amount of work in order to make them work - from the way the business is structured, to dealings with staff, suppliers and customers - need to be examined and groomed so that they make the company attractive as an investment proposition. This process of grooming and derisking can take anywhere from three months to a year. It is often costly both in actual expenses (consultants, legal advice, accounting advice) as well as changing the focus of the owners from "sticking to the knitting" and making money within the business to a focus on how the business presents itself.

The Venture Capital Centre works with businesses at all stages of their evolution through corporate and business advisory and can assist companies with raising venture capital.

Businesses that are seeking capital for growth in their organisation can be confident with access to our sophisticated investors, venture capitalists and private equity.

Article Source: EzineArticles.com - Venture Capital Articles

For more information on raising capital visit the Venture Capital Centre at www.VentureCapitalCentre.com.au

Additional Resources:
Venture Capital Alternatives For Companies
Venture Capital Strategies And Lessons From Guy Kawasaki
Financial Modeling Advice

Financial Model Tips For Raising Business Capital

Creating a financial model for raising venture capital is one of the core ingredients of a successful business plan for capital growth. A sound financial model and projection is inportant to demonstrate the future potential of a business to new investors.

these are some thoughts on the easiest way to build the right financial model for raising growth capital:

- Keep it real. Don't overstate sales projections. It is a common enough mistake to make because man's nature asserts we wish to put the best case forward. The solution os to have varied scenarios, assign some chances, and tell a backer honestly what needs to happen to reach the targets.

- State the expectations clearly in the projection, so the investor knows what it is primarily based on.

- Make it simple to adjust and show the results - what if sales are lower, what if churn is higher, what if our costs decrease, what if our main customer leaves? Investors are a ( justifiably ) ruthless bunch, so you have to be ready to lay out a best case and a worst case eventuality.

- Show the effect of expansion on cash flow. As sales increase, what is the increased need for further capital. This may show an investor not only how much they will have to put in, but when.

- If you do not know something, that is OK. Explain the opening in the knowledge and either how you'll get the knowledge, or its likely impact if you do not. If you claim to know everything, it will be clear you aren't being truthful.

- target readability - it's easy to get wrapped up in the complexity of your own spreadsheet and end up with a wall of numbers which is incomprehensible. KISS. Use clear labels, color code, space, and remove less material modifications ( put them elsewhere ). Separate inputs and variables from calculations - so that the user can see what they can adjust.

- Get in a professional. You may be surprised by what you can attain in Excel. For a little investment ( about a hundred to about a thousand dollars ) you can may build something which wins over a backer. Remember the quality of the temporary to the programmer can have a heavy impact to the success do not make the assumption they know anything about your industry. Explain everything.

- GIGO. Get good input figures.

For more information on venture capital tools and additional tools to help you raise venture capital for business.

Click Here to download your Free e-book on "How to create a business plan that investors will read" from the Venture Capital Centre.

Additional Resources:
Lessons From Guy Kawasaki On Raising Capital

Venture Capital

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