Most attempts to raise venture capital fail. This is one, in a series of articles, that explains to start-ups and entrepreneurs what steps need to be taken to successfully raise capital.
We receive thousands of calls per year from people who have a great idea and wish to raise capital. However, in most all cases, they will be unsuccessful, principally because of mistakes that almost guarantee their effort will fail. In other words, they are doomed to fail from the very start. When we are done; you will have sufficient information to develop a capital raising strategy that will have decent chance of success.
Many entrepreneurs believe that investors will fund their “great” idea because it is a “great” idea. Actually, investors will like an idea and think it has great potential but it’s the explanation in the business plan that describes how you plan to execute that idea which convinces the investor to write a check. That is the difference between successfully raising capital or not.
It is your job to explain both the pros and cons about investing in your project. In fact, you have a legal requirement under federal securities laws, so screw up here and you are screwed. The best way to start your plan is with a plan outline also called a, business plan template.
The template or outline should list many of the categories of information that must be included within your plan. Begin filling out the categories by hand. Answer the questions you are comfortable with answering. Don’t guess. Don’t lie. Later, in another article we will talk about investor documents, The, plan must eventually be included in your Private Placement Memorandum, aka, PPM, The PPM is a legal document and you will be held liable for everything that is in it. At this point don’t worry about the spelling or making sense. You can address that latter. List your answers in the, business plan outline in short form.
What’s important is getting all the possible information organized for the topic. In those categories that you are unable to provide information, seek help. A common example is putting together a financial. Do the best you can and then seek help or advice. Don’t get to sophisticated or the reader will not understand.
Don’t use acronyms or short hand explanations unless you explain what each means. An example is in this article when I used the term, PPM. The most difficult of all tasks in raising venture capital is the preparation of the plan. Take your time and when you really think you have successfully outlined all the information, begin writing business plan, You will also find it helpful to obtain a sample of a professionally written business plan. We provide both a 15 page, free business plan outline and a 35 page, free business plan sample, on our website. This will aid you in visualizing what level of quality your business plan must rise to a level that can successfully entice investors to invest in your idea.
Keep in mind, the quality of the business plan you write, is the prospective investor first insight into your competency. If you present the investor with a quality plan you have passed the first critical test in the process of soliciting their money?