Investors base their investment decisions on some combination of the Team, the Idea, and the Market. As long as I can communicate effectively about these three areas, I am ready to start talking to investors. Talking to investors DOES NOT NEED A WRITTEN BUSINESS PLAN.
Investors will usually need a written business plan in order to complete an investment deal, but it doesn’t take a full business plan to start getting the attention of investors and building relationships. A one or two page executive summary will be enough to get initial interest, and a short presentation (a handful of slides) getting across key concepts will do it. In fact, provide more and you risk hiding your key messages in an indigestibly large document.
Those key messages should focus on the Team, the Idea, and the Market (yes I am repeating myself, yes I am still using bold). Ken Morse of MIT has suggested that the words “Technology” and “Platform” should be completely eradicated from investment pitches. I’m not going to go that far, but I think it’s really important that technology doesn’t dominate content. I’ve already blogged a about the importance of talking about markets and customers under the rather tongue-in-cheek title Investors, Magic and Mythical Creatures, which is one of the most read and tweeted posts on the site! You may also like to check out Guy Kawasaki’s notes on Pitching – his 10 slide titles work just as well as paragraph titles for an exec summary (skipping the projections section if you don’t yet have any).
If investors like the Team, the Idea, and the Market (yes, again) then they may even get involved in helping to prepare the business plan, or recommend people to help you with that task. That is a pretty big win, because investors are likely to find a plan they have been involved in writing quite attractive!
I’m not saying companies don’t need a business plan, but I am saying that not having a thirty page document polished to the last detail shouldn’t be a barrier to starting to talk to potential investors.