Investors are very busy, and do not have the time to read long business plans. They also favor entrepreneurs who demonstrate the ability to convey the most important elements of a complex idea with an economy of words.
An ideal executive summary is no more than 1-3 pages. An ideal business plan is 20-30 pages (and most investors prefer the lower end of this range).
Remember, the primary purpose of a fund-raising business plan is to motivate the investor to pick up the phone and invite you to an in-person meeting. It is not intended to describe every last detail.
Document the details elsewhere: in your operating plan, R&D plan, marketing plan, white papers, etc.
Too technical
Business plans—especially those authored by people with scientific backgrounds—are often packed with too many technical details and scientific jargon.
Initially, investors are interested in your technology only in terms of how it:
- solves a really big problem that people will pay for;
- is significantly better than competing solutions;
- can be protected through patents or other means; and
- can be implemented on a reason-able budget.
Keep the business plan simple. Document the technical details in separate white papers.
No risk analysis
Investors are in the business of balancing risks versus rewards. Some of the first things they want to know are what are the risks inherent in your business, and what has been done to mitigate these risks.
The key risks of entrepreneurial ventures include:
- Market risks: Will people actually buy what you have to sell? Will you need to create a major change in consumer behavior?
- Technology risks: Can you actually deliver what you say you can? On budget and on time?
- Operational risks: What can go wrong in the day-to-day operations of the company? What can go wrong with manufacturing and customer support?
- Management risks: Can you attract and retain the right team? Can your team actually pull this off? Are you prepared to step aside and let somebody else take over if necessary?
- Legal risks: Is your intellectual property truly protected? Are you infringing on another company's patents? If your solution does not work, can you limit your liability?
Even though you may feel that the risks are negligible, potential investors will feel otherwise unless you demonstrate that you have given a lot of thought to what can go wrong and have taken prudent steps to mitigate these risks.
