Documentation for Venture Capital Firms
Focus on the Financial
Many business plans fail to raise money because of the
orientation of the business plan, i.e., the plan focuses on the product
or service, not the financials. When we assisted with the review of over
150 business plans for a three day Venture Capital Conference for 23 venture
capital companies, only 25 of the 150 plans asked for specific funding.
Only 12 had specific uses of funds and exit strategies for investors!
While we cannot promise your business will be funded,
we can assure you that with our business
plan review program , your entire presentation package will be developed
so that your chances of being funded will be significantly increased.
It is important to remember that there is more money
looking for a good investment with moderate returns and medium risk, than
there are "good deals".
Stages of Documentation
There are several stages of documentation required by
most funding sources during the
venture capital process . They are usually tailored specifically
to both the funding source being approached, and the stage of your business.
The primary documents are outlined below:
1. Market Feasibility Study:
Basic research done principally by the entrepreneur
to identify a market niche for the product or service to be offered.
Identify the size, dynamics, competition, and other factors effecting
the proposed business operation prior to investing large sums of money,
or proceeding with a "missionary marketing" venture with little
or no chance for success.
2. Executive Summary:
An outline of the complete business plan, usually only
4-8 pages long. It includes and describes principal markets, personnel,
financial highlights, and the proposed
deal structure . The Executive Summary is developed from the completed
business plan, and summarizes the project.
3. Business Plan:
The business plan
contains the complete plan for your business, including extensive market
and industry analysis, sales and marketing strategy, operational plans
and timetables, management organization structure and key personnel,
risk analysis (including competitors and comparable industry numbers),
and complete historical and pro forma financial analysis (including income
and expenses, cash flow, balance sheet and ratio analysis) for three
to five years. The business plan financials should include low, medium
and optimum projections for various market conditions.
4. Business Valuation Study:
A document that includes several
business valuation studies showing business values before and after
investment. Business valuations allow you to determine how much stock
to sell for the money you are raising.
This is extremely important when you are trying to
raise money for a business that will be a candidate for a merger/acquisition,
or an Initial Public Offering (IPO) at a later date. It is also required
for funding by professional investors so that adequate returns on investment
5. Investment Plan:
Document outlining in further detail the timetable
of required equity and debt financing, as well as the payback, or liquidation,
of the investors' position under various scenarios. This is where the
"Deal" is structured to make your business attractive to investors
and lending institutions.
6. Due Diligence and Supporting Documents:
Include all additional information to support and supplement
the business and investment plans. Do your own Due Diligence on the
sources of funds and the funding sources prior to making a deal.
7. Presentation Package:
Your marketing package is used to present your program
to others. It may be a short series of color slides or overheads, or
a Power Point presentation, used when talking
with investors or banks. Your marketing package is developed along with
your business plan and can enhance chances of funding.
Your completed Business and Investment Plan is a blueprint
for the success of your business. It should be a living document that
is revised and updated periodically as conditions change, or when new
markets and products are developed, additional funding is obtained,
or economic conditions change .
your business plan reviewed by a professional Venture Capitalist.
We recommend that at least semiannual review of all of these documents
be performed by your management team.
goal is to provide you the best funding tools available and to get your
Venture Planning Associates,
of the hundreds of sites offering business plan products and services, your VenturePlan
site is among the best, if not the best. "
Mike Rischard CPA, President, Agilecor
we received first round funding ($5 million) the VC firm asked us to show
how our financial models were created. They wanted to use OUR TEMPLATE (which
we developed from the 7 Venture Capital Reports) to help them evaluate alternative
scenarios for their portfolio companies!" Michael
.Lay, CFO, e-Commerce Internet Company
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