Surprise me - Investment business plan dilemmas

Royal Troon - 6th Green

I have spent quite a bit of time over the last few weeks writing a business plan. Its a bit of a retro experience for me. These days I spend much more time reviewing and advising rather than doing.
 
Apart from a long overdue return to real work, this has been a reminder of some key challenges. The business plan I am working on is for a funding pitch. Why else would you bother?
 
This is reality for most entrepreneurs. At some point you have to do one. 

Framing your sales pitch

In preparing for battle, I have always found that plans are useless but planning is indispensable.
Dwight D Eisenhower 

​Regulars will know this is one of my favourite quotes. The meaning is clear when you are fund raising. The purpose of both planning and plan is to support a sales pitch. Selling shares in your company to investors. (Please never “giving equity away”.)
 
Because its a pitch, your business plan is much more than a technical description of how you aim to grow your company. This is about presentation and storytelling. And its about a clear message. Not a range of scenarios for debate and discussion.
 
Most often the value from planning is helping evaluate options before making a decision. In an investment pitch, that value is thinking through the best story to tell your audience. 

How happy is the ending?

​Your first dilemma is aggression v realism in the numbers.
 
People and narrative sell the business but investors buy the numbers. As a struggling entrepreneur, fighting for your first few sales, can you really see $100 million revenue in 3 or even 5 years?
 
Yet that is what investors want to hear. The easy option is to offer exponential growth. Creating the forecast is remarkably easy. With no track record, your projections can be anything you like.
 
Then the dilemma hits you. Will anyone believe it? How do you convince investors that the dream is doable? 

How credible are the characters?

That brings you to the next dilemma. For the numbers to be believable, there are at least three other articles of faith. Team, market and product.
 
In each case, you need to sell investors a combination of proven reality and potential.
 

• Can a bunch of bright, creative and ambitious 20 somethings get this done?
• Are there enough people or businesses (which means people anyway) who will part with hard earned cash for the benefits of your product?
• Will that product reliably deliver those benefits?
• Faster, better or cheaper than any likely competitors?

And even if you succeed, how will you defend that market against big scary giants like Google, Facebook and everyone else?

What are the limits of the genre?

​At the risk of extending the literary metaphor, your business plan sits in a well understood genre of fiction. Investors have a set of expectations and plenty of experience looking at this stuff. And this is the true dilemma at the heart of everything.
 
Raising startup investment is a game with well established rules. They vary a bit between individual Angels, syndicates like those which operate here in Scotland, VCs and other market players. But the rules exist and they can be hard for entrepreneurs to learn.
 
Once you uncover the rule book, the temptation is to play it to the letter. And you will not be short of well meaning advisors who recommend just this approach.
 
Yet it won’t work.
 
The hardest rule to abide by is simple - surprise me. Every investor wants to see something unique. A passion or a solution or a hook of some kind that makes your business stand out.
 
Stray too far from the playing field (sorry drifted into a different metaphor) and people will think you are crazy. Stick within the white lines without deviation and the same audience sees you as boring. 

The Chairman's View

​There is the ultimate unanswerable question. How do you stand out from the crowd? Emphasise the unique genius of your business proposition while playing to the prejudices and preferences of your target investors.
 
No answers to this one.
 
But one big piece of advice. Make sure this is where you focus when developing your business plan.
 

• Don’t get caught up in detail and design.
• Don’t copy the last successful pitch.
• Don’t try to align with current trends and jargon (AI and Machine Learning at the time of writing for example).

 
Do the basics and use your thinking time to wrestle with the last dilemma.
 
Surprise me!