What do venture funds want to see in a startup business plan
I continue to publish some materials from my IdeaBlog.ru blog, dedicated to venture investments, venture investors and startups.
A small announcement: an article titled “ Investor Profile: Finam Venture Fund. Dmitry Rodionov, ” in which, based on an interview with the project manager (venture investments) of the Investment Center for High technologies of the Finam company Dmitry Rodionov, the investment preferences of the venture fund of the Finam company, its requirements for projects and project teams are revealed, it is said for what reasons most applicants for investments are eliminated, etc.
When a start-up thinks about attracting foreign investment, there is always the question of preparing a business plan - in his absence, it is possible to talk with investors, maybe it can, but it will not go further. Many people believe that a business plan for a startup, especially one that is at the pre-startup stage of development, is a fiction that it is not necessary to do it, and if you do, you can get by with formal words. However, such startups remain, as a rule, without investment. Unless, of course, they attacked some sucker investor: one of the successful Russian startups told me that among the business angels to whom he presented the project in cooperation with one of the Russian networks of business angels were mistresses oligarchs - “real blondes”, according to him, - which their sponsors gave money to buy business and do business, rather than take the brain out of their “daddies” from idleness; so to such “investors”, according to this start-up, it was more important that the start-up himself liked, not the project. However, all other investors will need your business plan, and they will study it very seriously. They need this document even not so much for the payback figures that you give there, but to understand how deeply you have studied the market in which you are going to act and whether your product / service will be in demand by your target audience, which should bring money to a startup. Therefore, the preparation of a business plan should be taken very, very seriously. This document is primarily a kind of questionnaire for you - have you studied the market enough, have you thought about everything in your project? Personally, I am always on my new projects - no matter whether I intend to attract investments or not - before starting their implementation, I draw up a business plan - and always with numbers. For myself and for a better understanding of what I want, what I have to do and whether I can do it myself or I have to attract someone. In 99% of cases, the amounts that initially seem to be sufficient for the implementation of the project, increase by 2-3 times - due to the reflection on those little things, which, as is known, the business develops.
')
Nevertheless, business plans for startups who want to see venture capital funds are slightly different from standard business plans that can be found on the Internet. First of all, the fact that venture funds need accents, placed slightly elsewhere. Therefore, the following structure of a business plan contains requirements that venture funds place on such documents. The above document, in particular, was compiled by the venture fund “Alliance ROSNO Asset Management” , but other venture funds will be satisfied if you submit them a business plan that exhaustively describes all the points mentioned below. For the next couple of weeks, I will devote a detailed breakdown of each item on the IdeaBlog.ru blog, which needs to be described in the business plan (and which you need to know for yourself!), Illustrating this with examples, including from personal experience.
The structure and content of the business plan submitted to venture funds
Executive Summary of the Project
* Size and market opportunities
Here it is necessary to describe the size, dynamics and possibilities of the existing market of the proposed product or service. Bring the main competitors, if any, as well as describe their capabilities, both financial and non-financial. It is necessary to describe the trends and problems existing in the market.
* Product
This section of the executive summary is intended to provide a brief description of the proposed product or service, its characteristics and the main differences from similar competitors' products or services. If this is a new product that is still under development, then it is necessary to briefly describe the stage at which the research or refinement of the product is located.
* Team
In the section it is necessary to give a brief description of the existing management team.
* Business model
It is necessary to describe in several sentences the business model of the product offered, namely: how the production and sale of the offered product or service to the final consumers is planned.
* Investments
In the section it is necessary to describe the size and purpose of the requested investment. Here you also need to specify what goals we would like to achieve after attracting investment in the project.
* Output
It is necessary to determine the time frame for the investor to exit the project, as well as to give suggestions on how the investor exits the project.
1. Market and industry
1.1 Market outlook
The current section describes the market for the proposed product or service. It is desirable to bring the dynamics of the existing market, as well as give forecasts on the prospects for growth, change and market development. If there is access to professional research regarding the market potential of the product or service being represented, reference should be made to this research. Here it is also necessary to describe important trends and events occurring or planned in the considered market.
1.2 Market size, segment and potential consumers
* 1.2.1 Potential consumers
Here it is necessary to give a complete and detailed description of the potential consumers of the proposed product or service. If this product or service is the final product for retail customers, it would be interesting to see the consumption and income structure (size, by country / region) of these consumers. If the potential consumers of the proposed product are commercial enterprises, it is recommended to give a description of these consumers: market share, their annual turnover (if available), the share of the proposed product in the consumption structure of these enterprises, as well as the business development trend of the described consumers.
* 1.2.2 Segment of the proposed product / service
Under the segment of the proposed product / service refers to a niche in the existing market, which occupies or will occupy the proposed product.
* 1.2.3 Size and market conditions
This section is intended to describe the size, condition and capacity of an existing market for a product or service.
1.3 Competition
Here it is necessary to describe the competitive component of the project existing on the market, to list and describe all manufacturers of a competing product or service.
1.3.1 Direct Competition
The direct competition section lists and describes all products or services that can directly compete with the product offered in the project. It is also necessary to compare the proposed product with existing or future competitors.
1.3.2 Alternative Competition
Here, unlike the direct competition section, it is necessary to describe possible alternative competing areas with the product or service offered for sale.
1.3.3 Competitive advantages
Competitive advantages are one of the components of success in a project, therefore it is necessary to provide a detailed description of all the competing advantages of the offered product or service.
Examples:
A unique technology or process protected from copying (patents, etc.). Accumulated by the business / managers / specialists a unique experience.
Costly, unique equipment.
Special properties of products / services.
Concluded exclusive contracts.
Wide distribution network.
1.3.4 Barriers
In this section, you should indicate the existing barriers that stand in the way of a new product and barriers, which in turn will assist in keeping the declared share in the market of a product or service. It is also necessary to describe the barriers that must be put in order to ensure the potential protection of this project from competitors.
2. Product and technology
2.1 Technology
In this section, it is necessary to describe in detail the existing technology, its advantages and key components.
2.2 Ongoing developments in terms of technology improvement.
In the section “Current developments in terms of improving technology” it is necessary to indicate those developments that are currently under active development.
2.3 Product
* 2.3.1 Distinctive features of the product
This section is intended for a detailed description of the product offered to end users. Here it is also necessary to indicate the main distinctive features of this product from competing products offered on the market.
* 2.3.2 Channels and product sales opportunities
Here it is necessary to describe the main sales channels of the proposed product or service.
Examples:
Method of distribution of goods.
Estimated distributors and intermediaries.
The results of the research of potential demand.
* 2.3.3 Features of direct application of the product
Here it is necessary to describe all the features of the direct application of the proposed product or service.
Examples:
Distinctive features.
Disadvantages.
Hidden potential.
* 2.3.4 Alternative product application options
Here it is necessary to describe all the features of an alternative (if any) application of the proposed product or service.
Examples:
Distinctive features.
Disadvantages.
Hidden potential.
3. Intellectual property and protection
3.1 Intellectual Property
It should describe the intellectual property that exists in the project and is subject to patent protection.
3.2 Existing intellectual property protection
In this section it is necessary to list all available patents, including PCT applications already filed.
3.3 Planned Steps for Further Protection
If in the project, according to the authors, there are unprotected places regarding intellectual property, then the planned steps to implement the proposed protection should be described.
Examples:
Patent search.
Filing of missing patent applications in Russia and other countries.
4. Team
4.1 Management team
Here it is necessary to describe the control command in detail:
Summary of key managers
Relevant experience, business achievements
Contacts with companies and Foundation staff and recommendations
Motivation of every top manager to work in business
4.2 Technology Development Team
In this section, it should be described, by analogy with the management team, the development team participating in this project.
4.3 Estimated management team gain
Availability (or plans) for hiring directors:
CEO
Production Director
Director of Strategy and Business Development
Financial director
Chief Accountant
5. Business model
Here it is necessary to describe the existing or proposed for the implementation and implementation of the business model.
5.1 Operational activities and strategy
* 5.1.1 Research & Development (R & D)
The R & D section should describe the scientific component of the project, describe the current developments, as well as the developments that are in the plans.
5.1.2 Production
Section "Production" is intended to describe:
Buildings, structures and land rights
Main equipment, its cost and wear
Necessity and amount of investment in alterations and repairs
* 5.1.3 Service
Under the service refers to the need and structure, if necessary, work with the client, has already become a consumer of the proposed product or service.
5.2 Product Promotion Strategy
5.2.1 Marketing Campaigns
Here you should describe the planned marketing campaigns, as well as key marketing points in terms of the impact on the loyalty of end users.
* 5.2.2 Estimated return on marketing companies
This section is intended to assess the effectiveness of the implementation of the above described marketing campaigns. Here it is necessary to describe and predict:
Dynamics of marketing investments / return per customer
Dynamics of the response of one client to a specific marketing component
Intended actions to track marketing campaigns
5.3 Sales Development Strategy
5.3.1 Main sales channels
In this section, you need to describe the strategy for promoting the proposed product or service through the main sales channels, working with distributors and suppliers.
5.3.2 Alternative sales channels
Here, by analogy with the previous section, the same should be described, but with respect to alternative sales channels.
* 5.3.3 Basic concept of sale
This section should describe the basic concept of promoting a product or service in a distribution network or individual consumers.
5.4 Timing and implementation plan
5.4.1 Estimated time to market
Here it is necessary to describe the expected timeline for bringing the enterprise to the maximum capitalization and give its proposals on the time frame for the investor to exit the project.
5.4.2 Main Reference Points
This section is necessary to describe the main iconic events in the life of the company.
6. Finance
6.1 Key assumptions
* 6.1.1 Sales Forecast
Here it is necessary to describe the main provisions on which the sales forecast is based, and also to give this forecast calculation.
6.1.2 Operational and capital costs
In this section, it is necessary to describe all the estimated operating and capital costs in a temporary breakdown and link to the sales plan.
6.2 Consolidated financial forecast
In this section it is necessary to present the consolidated financial plan of the company, starting from the moment of investment
7. Project risks
Project risk refers to the following:
Stages of development of the industry, current status and forecasts
Factors affecting the increase / decrease in sales in the industry and the price of products / services
Dependence on other industries, the threat of product substitution
The role of the state (regulation, licensing)
8. Investment and exit strategy
8.1 Requested investment
Here it is necessary to describe the volume and terms for which investments are requested.
8.2 Structure and schedule of investment consumption
This section is necessary to describe the structure of the requested investment, the rate of consumption, as well as a description of the return on each item of the investment structure.
8.3 Expected Exit Strategy
This section should describe the options for investor entry and exit from the project:
Structure of the proposed transaction and the participation of the Fund
Description of options for the Fund to exit the business (IPO, sale to a strategic investor, etc.)
Potential buyers and their motives
Availability of options for selling a share to the Fund or for the Fund to purchase an additional stake.
The permanent address of this article is on IdeaBlog.ru . Reprint requires active link to IdeaBlog.ru
A small announcement: an article titled “ Investor Profile: Finam Venture Fund. Dmitry Rodionov, ” in which, based on an interview with the project manager (venture investments) of the Investment Center for High technologies of the Finam company Dmitry Rodionov, the investment preferences of the venture fund of the Finam company, its requirements for projects and project teams are revealed, it is said for what reasons most applicants for investments are eliminated, etc.
When a start-up thinks about attracting foreign investment, there is always the question of preparing a business plan - in his absence, it is possible to talk with investors, maybe it can, but it will not go further. Many people believe that a business plan for a startup, especially one that is at the pre-startup stage of development, is a fiction that it is not necessary to do it, and if you do, you can get by with formal words. However, such startups remain, as a rule, without investment. Unless, of course, they attacked some sucker investor: one of the successful Russian startups told me that among the business angels to whom he presented the project in cooperation with one of the Russian networks of business angels were mistresses oligarchs - “real blondes”, according to him, - which their sponsors gave money to buy business and do business, rather than take the brain out of their “daddies” from idleness; so to such “investors”, according to this start-up, it was more important that the start-up himself liked, not the project. However, all other investors will need your business plan, and they will study it very seriously. They need this document even not so much for the payback figures that you give there, but to understand how deeply you have studied the market in which you are going to act and whether your product / service will be in demand by your target audience, which should bring money to a startup. Therefore, the preparation of a business plan should be taken very, very seriously. This document is primarily a kind of questionnaire for you - have you studied the market enough, have you thought about everything in your project? Personally, I am always on my new projects - no matter whether I intend to attract investments or not - before starting their implementation, I draw up a business plan - and always with numbers. For myself and for a better understanding of what I want, what I have to do and whether I can do it myself or I have to attract someone. In 99% of cases, the amounts that initially seem to be sufficient for the implementation of the project, increase by 2-3 times - due to the reflection on those little things, which, as is known, the business develops.
')
Nevertheless, business plans for startups who want to see venture capital funds are slightly different from standard business plans that can be found on the Internet. First of all, the fact that venture funds need accents, placed slightly elsewhere. Therefore, the following structure of a business plan contains requirements that venture funds place on such documents. The above document, in particular, was compiled by the venture fund “Alliance ROSNO Asset Management” , but other venture funds will be satisfied if you submit them a business plan that exhaustively describes all the points mentioned below. For the next couple of weeks, I will devote a detailed breakdown of each item on the IdeaBlog.ru blog, which needs to be described in the business plan (and which you need to know for yourself!), Illustrating this with examples, including from personal experience.
The structure and content of the business plan submitted to venture funds
Executive Summary of the Project
* Size and market opportunities
Here it is necessary to describe the size, dynamics and possibilities of the existing market of the proposed product or service. Bring the main competitors, if any, as well as describe their capabilities, both financial and non-financial. It is necessary to describe the trends and problems existing in the market.
* Product
This section of the executive summary is intended to provide a brief description of the proposed product or service, its characteristics and the main differences from similar competitors' products or services. If this is a new product that is still under development, then it is necessary to briefly describe the stage at which the research or refinement of the product is located.
* Team
In the section it is necessary to give a brief description of the existing management team.
* Business model
It is necessary to describe in several sentences the business model of the product offered, namely: how the production and sale of the offered product or service to the final consumers is planned.
* Investments
In the section it is necessary to describe the size and purpose of the requested investment. Here you also need to specify what goals we would like to achieve after attracting investment in the project.
* Output
It is necessary to determine the time frame for the investor to exit the project, as well as to give suggestions on how the investor exits the project.
1. Market and industry
1.1 Market outlook
The current section describes the market for the proposed product or service. It is desirable to bring the dynamics of the existing market, as well as give forecasts on the prospects for growth, change and market development. If there is access to professional research regarding the market potential of the product or service being represented, reference should be made to this research. Here it is also necessary to describe important trends and events occurring or planned in the considered market.
1.2 Market size, segment and potential consumers
* 1.2.1 Potential consumers
Here it is necessary to give a complete and detailed description of the potential consumers of the proposed product or service. If this product or service is the final product for retail customers, it would be interesting to see the consumption and income structure (size, by country / region) of these consumers. If the potential consumers of the proposed product are commercial enterprises, it is recommended to give a description of these consumers: market share, their annual turnover (if available), the share of the proposed product in the consumption structure of these enterprises, as well as the business development trend of the described consumers.
* 1.2.2 Segment of the proposed product / service
Under the segment of the proposed product / service refers to a niche in the existing market, which occupies or will occupy the proposed product.
* 1.2.3 Size and market conditions
This section is intended to describe the size, condition and capacity of an existing market for a product or service.
1.3 Competition
Here it is necessary to describe the competitive component of the project existing on the market, to list and describe all manufacturers of a competing product or service.
1.3.1 Direct Competition
The direct competition section lists and describes all products or services that can directly compete with the product offered in the project. It is also necessary to compare the proposed product with existing or future competitors.
1.3.2 Alternative Competition
Here, unlike the direct competition section, it is necessary to describe possible alternative competing areas with the product or service offered for sale.
1.3.3 Competitive advantages
Competitive advantages are one of the components of success in a project, therefore it is necessary to provide a detailed description of all the competing advantages of the offered product or service.
Examples:
A unique technology or process protected from copying (patents, etc.). Accumulated by the business / managers / specialists a unique experience.
Costly, unique equipment.
Special properties of products / services.
Concluded exclusive contracts.
Wide distribution network.
1.3.4 Barriers
In this section, you should indicate the existing barriers that stand in the way of a new product and barriers, which in turn will assist in keeping the declared share in the market of a product or service. It is also necessary to describe the barriers that must be put in order to ensure the potential protection of this project from competitors.
2. Product and technology
2.1 Technology
In this section, it is necessary to describe in detail the existing technology, its advantages and key components.
2.2 Ongoing developments in terms of technology improvement.
In the section “Current developments in terms of improving technology” it is necessary to indicate those developments that are currently under active development.
2.3 Product
* 2.3.1 Distinctive features of the product
This section is intended for a detailed description of the product offered to end users. Here it is also necessary to indicate the main distinctive features of this product from competing products offered on the market.
* 2.3.2 Channels and product sales opportunities
Here it is necessary to describe the main sales channels of the proposed product or service.
Examples:
Method of distribution of goods.
Estimated distributors and intermediaries.
The results of the research of potential demand.
* 2.3.3 Features of direct application of the product
Here it is necessary to describe all the features of the direct application of the proposed product or service.
Examples:
Distinctive features.
Disadvantages.
Hidden potential.
* 2.3.4 Alternative product application options
Here it is necessary to describe all the features of an alternative (if any) application of the proposed product or service.
Examples:
Distinctive features.
Disadvantages.
Hidden potential.
3. Intellectual property and protection
3.1 Intellectual Property
It should describe the intellectual property that exists in the project and is subject to patent protection.
3.2 Existing intellectual property protection
In this section it is necessary to list all available patents, including PCT applications already filed.
3.3 Planned Steps for Further Protection
If in the project, according to the authors, there are unprotected places regarding intellectual property, then the planned steps to implement the proposed protection should be described.
Examples:
Patent search.
Filing of missing patent applications in Russia and other countries.
4. Team
4.1 Management team
Here it is necessary to describe the control command in detail:
Summary of key managers
Relevant experience, business achievements
Contacts with companies and Foundation staff and recommendations
Motivation of every top manager to work in business
4.2 Technology Development Team
In this section, it should be described, by analogy with the management team, the development team participating in this project.
4.3 Estimated management team gain
Availability (or plans) for hiring directors:
CEO
Production Director
Director of Strategy and Business Development
Financial director
Chief Accountant
5. Business model
Here it is necessary to describe the existing or proposed for the implementation and implementation of the business model.
5.1 Operational activities and strategy
* 5.1.1 Research & Development (R & D)
The R & D section should describe the scientific component of the project, describe the current developments, as well as the developments that are in the plans.
5.1.2 Production
Section "Production" is intended to describe:
Buildings, structures and land rights
Main equipment, its cost and wear
Necessity and amount of investment in alterations and repairs
* 5.1.3 Service
Under the service refers to the need and structure, if necessary, work with the client, has already become a consumer of the proposed product or service.
5.2 Product Promotion Strategy
5.2.1 Marketing Campaigns
Here you should describe the planned marketing campaigns, as well as key marketing points in terms of the impact on the loyalty of end users.
* 5.2.2 Estimated return on marketing companies
This section is intended to assess the effectiveness of the implementation of the above described marketing campaigns. Here it is necessary to describe and predict:
Dynamics of marketing investments / return per customer
Dynamics of the response of one client to a specific marketing component
Intended actions to track marketing campaigns
5.3 Sales Development Strategy
5.3.1 Main sales channels
In this section, you need to describe the strategy for promoting the proposed product or service through the main sales channels, working with distributors and suppliers.
5.3.2 Alternative sales channels
Here, by analogy with the previous section, the same should be described, but with respect to alternative sales channels.
* 5.3.3 Basic concept of sale
This section should describe the basic concept of promoting a product or service in a distribution network or individual consumers.
5.4 Timing and implementation plan
5.4.1 Estimated time to market
Here it is necessary to describe the expected timeline for bringing the enterprise to the maximum capitalization and give its proposals on the time frame for the investor to exit the project.
5.4.2 Main Reference Points
This section is necessary to describe the main iconic events in the life of the company.
6. Finance
6.1 Key assumptions
* 6.1.1 Sales Forecast
Here it is necessary to describe the main provisions on which the sales forecast is based, and also to give this forecast calculation.
6.1.2 Operational and capital costs
In this section, it is necessary to describe all the estimated operating and capital costs in a temporary breakdown and link to the sales plan.
6.2 Consolidated financial forecast
In this section it is necessary to present the consolidated financial plan of the company, starting from the moment of investment
7. Project risks
Project risk refers to the following:
Stages of development of the industry, current status and forecasts
Factors affecting the increase / decrease in sales in the industry and the price of products / services
Dependence on other industries, the threat of product substitution
The role of the state (regulation, licensing)
8. Investment and exit strategy
8.1 Requested investment
Here it is necessary to describe the volume and terms for which investments are requested.
8.2 Structure and schedule of investment consumption
This section is necessary to describe the structure of the requested investment, the rate of consumption, as well as a description of the return on each item of the investment structure.
8.3 Expected Exit Strategy
This section should describe the options for investor entry and exit from the project:
Structure of the proposed transaction and the participation of the Fund
Description of options for the Fund to exit the business (IPO, sale to a strategic investor, etc.)
Potential buyers and their motives
Availability of options for selling a share to the Fund or for the Fund to purchase an additional stake.
The permanent address of this article is on IdeaBlog.ru . Reprint requires active link to IdeaBlog.ru
Source: https://habr.com/ru/post/16884/
All Articles