What to do when an investor asks you for your business plan

I’m digging in to Brad Feld and Jason Mendelson’s outstanding new book, “Venture Deals”. It’s full of both thoughtful analysis and commonsense wisdom about how to make a financing successful.

In one section, they discuss the “business plan”:

“We haven’t read a business plan in over 20 years. Sure, we still get plenty of them, but it is not something we care about as we invest in areas we know well, and as a result we much prefer demos and live interactions…. However, realize that some VCs care a lot about seeing a business plan, regardless of the current view by many people that a business plan is an obsolete document.

They go on to caution you:

Regardless, you will occasionally be asked for a business plan. Be prepared for this and know how you plan to respond, along with what you will provide, if and when this comes up.

Unfortunately, this is where the topic ends – they don’t tell you what to do when an investor requests that you conjure an obsolete 30-page document from the ether and send it to them that evening.

A straightforward executive summary

I’ve been in this situation, and it’s very disconcerting.  With my first company, Ontela, we pitched about 70 VCs for our Series B.  More than half of those were in person, and not a single one asked for a business plan.  We talked to dozens of VCs (I didn’t keep track of how many) during our Series A as well, and got zero business plan requests.  But during Ontela’s seed round, when we pitched probably 100+ angels, it came up more than a few times.

Whenever it did, we (“we” was usually my cofounder Brian Schultz and I; Charles Zapata, the third cofounder, was busy building product) were somewhere between guilty and scared.  Guilty that we had skipped something that was clearly important, and scared we’d look like idiots.  There was a lot of hemming and hawing before we figured out a foolproof solution.

Whenever an investor asks you for your business plan, send them the same damn packet you send to everyone else.  In our case, that was a 3-page “executive summary” and a dozen slides giving an overview of the business with some screenshots of the product (it was mobile, and 2006, so there wasn’t any easy way to send them a demo). Don’t apologize and don’t mention the business plan.

We did this at least a dozen times and had precisely zero complaints.

One final note: investors who want business plans are probably not your target market, if you’re founding a high growth technology startup.  We had lots of great followup conversations with the angels who wanted them, but ultimately none of them turned in to investors.

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