preparing a b plan for equity investment

Preparing a Business Plan for Equity

Investment

Anjana Vivekwww.venturebean.com

[email protected]

1 www.venturebean.com

BACKGROUND

BUSINESS PLANS

2www.venturebean.com

INITIAL THINKING

Input quality

determines Output quality

How do you think through and plan for the business?

www.venturebean.com3

A) The thinking & planning stage

BUSINESS PLANS


ROLE PLAY: First….

Get into the shoes of an investor

What do you think an investor could be looking for?


EQUITY INVESTOR …

An equity investor is a co-owner of the company, unlike a lender

Factor this in your business plan


EQUITY INVESTOR …

Think of what an equity investor in general will look for

If you have a specific investor in mind, think through what they will look for

To illustrate:www.venturebean.com

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EQUITY INVESTOR …

An equity investor would invest in a company where the value is expected to go up significantly over time

Typically this could be 5 or 10 times increase or more in 4-5 years

What else do you think is key?www.venturebean.com

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EQUITY INVESTOR …

This must be realised value and not on paper; what this means is that….

The investor must be able to exit from this investment


VALUE INCREASE

How can value increase?

Think of examples of companies which have grown in value…what have they done; why has their value increased?


VALUE INCREASE

Companies need to have super normal growth

Markets should be huge

Capablity to capture huge markets


VALUE INCREASE

Customers perceive products as giving value for money

Competitive advantage

Sustainable advantage

Please think of more such factors


SPECIFIC INVESTOR

Think about the specific requirements of the investor you are targeting

What are they looking for in terms of industry, location preference, investment size, exit size etc


SPECIFIC INVESTOR

Check the websites/blogs of the investor and the companies they have invested in

Ask persons in your network who have interacted with them… after all, they will do the same about you


B) Preparation stage

BUSINESS PLANS


MAKE A STARTOnce you have thought through the points in the previous section, you can make a start

There are many templates available, online, in books and sometimes even with the investor

You can pick your own template or create your own


PLAN STRUCTURE: Illustrative The plan must have structure and include the following:- Business / idea- People behind idea/project- Market size expected- Marketing strategy- Competition- Financials- Other information which makes this complete


WRITING THE PLAN

Think through the format and packaging of the plan

Form and substance are important

NOTE: for more on this, please refer to the appendix


FORMAT AND SIZE

Word document can be between 20 to 25 pagesA presentation could have about 15-25 slidesA first cut document shown to an investor, could be the executive summary, which could be about 2-3 pages


PRESENTION TO THE INVESTOR

Once the investor shows interest, you can go beyond the executive summary and disclose details Make the document/presentation a self explanatory documentBe precise and clear, today we live in the twitter age and long winded documents are not appreciated


PRESENTION TO THE INVESTOR

If investors are interested, they will themselves ask for more information and hopefully go to the due diligence stageFocus on getting them interested in the first instance


WRITING THE PLAN

Creating spreadsheets is not difficult

Is the spreadsheet believable

Can the numbers indicated be achieved


WRITING THE PLAN

Does the spreadsheet account for alternate scenarios

Does the spreadsheet factor the risks, both internal and external to the business


WRITING THE PLAN

Tangibles are a fraction of the intangibles, particularly in a high growth company

Factors like brand/customer appreciation, quality of revenue, etc may not be visible.


WRITING THE PLAN

Are you leveraging on these intangibles?

How can you reflect these, for example IP… how is this captured in the plan, how do you demo IP?


WRITING THE PLAN

Example: A team can be strengthened by showing a business expert or tech expert who is known for his expertise in an area. This will immediately add to the credibility of the business and therefore increase the value of the business

www.venturebean.com

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WRITING THE PLAN

Some questions to ask yourself

Are the markets huge?Can you show how you will stand out from clutter and get customers?Can you demonstrate the quality of the team?

HOW?www.venturebean.com

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WRITING THE PLAN

More questions to ask yourself

Is the revenue going to come repeatedly?What is your long term vision?What are the gaps?Can you realistically fill these gaps?How will you achieve your vision?


FINALLY

BUSINESS PLANS


DEAL ISSUES

Every business has issues which are

- deal drivers and- deal breakers

Try to identify key deal issues from- your perspective and - the investors perspective


DEAL ISSUES

This can help you plan on how you can leverage on your strengths

This can help in negotiating a better deal


CHECKING THE PLAN

Does the plan stand up for scrutiny

The business plan will be the starting point in due diligence

Does it answer possible due diligence questions, directly or indirectly


DEAL CLOSURE

Prepare for due diligence by identifying pitfalls upfront and taking steps to mitigate/de-risk to the extent possible


DEAL CLOSURE

A well thought out and well written business plan can help get the investor interested in the business and can take the company to the due diligence stage

The next stage - getting money into the company - is another story altogether!


QUICK CHECK

Do you believe in what has been written in the business plan? Is it based more on real expectations, rather than on fancy dreams?

If you believe in what you are presenting, then the chances of success are higher


APPENDIX

BUSINESS PLANS


PREPARING THE

BUSINESS PLAN Presentation is important

Try to capture the reader’s interest

Think through the format of report and the logical flow of data, facts and your comments and statements


Pay attention to the details such as consistent style, formats, legibility, spell check etc

Disclose source for data, whether online or otherwise

PREPARING THE

BUSINESS PLAN


THANK YOU

Wishing you all success


preparing a b plan for equity investment

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