Business Angels as private individuals are able to make decisions faster and be more flexible than Venture Capital organisations. They also have differing views on what they like to see in a business plan.
We have had feedback from hundreds of Angel Investors and believe me they have seen it all before.
Yes Business Angels can get a bit cynical, seeing the same boasts and claims over and over, yet they generally remain positive and will give you a fair chance of putting your case.
However all are busy people and get approached to look at many prospective investments, you have to be succinct and clear in your plan, making the right first impressions and capturing interest early.
When making contact with an Investor, very often they will simply want to see an Executive Summary of your plan, to help them decide if it warrants any further time. Probably 2 pages, but 3 pages is acceptable.
Although it may sound obvious, no typos, good grammar and clear writing. If you show that your Exec Summary is sloppy, then the Investor will believe that is how you will run the business.
1. What your business does
A clear paragraph so the reader can have some context for everything else that follows. You’d be surprised how many plans I’ve read where I still don’t know what the company actually does at the end. An Investor will not waste their time, or struggle to understand, the onus is on you to make it clear.
Say what the problem is that your business solves for your customers and briefly how you do that – not a long product or service description – an overview.
2. The Market
Describe the industry sector that you are addressing. Investors will want to know if it is an area that they know about and may invest into, or one that they have no interest in. Give the size of the addressable market that you are aiming for. Investors like to see if it will be large enough to make the effort worthwhile. Quote your sources, if you give a number say where it came from.
3. Competitive Advantage
Show you know the competition and how you will beat them. Never say you are “unique” or that there is no competition. Be factual, not hyping yourself.
Briefly give a summary of your products or services. Most people could write many pages on describing how wonderful their products are – you have to do it in just one or two paragraphs. Use bullets if needed. Clear, sharp, short.
5. Management Team
A very important section, but not the place for CVs. Key points only. Ideal situation is that the management team are all experts in their areas, have successfully done this all before and are a safe bet for the Investor to back. He wants to know that you can do what you say.
You should give a short paragraph explaining your figures and then a summary from the P & L account. It will depend on your business, but you may feel the first years figures should be by month to give the best information and then the next 2 years by only a yearly figure.
7. Investment Sought
Say how much you are seeking and what it will be used for. Give the Investor your thoughts on what their exit strategy will be. Most Angel Investors know that it will take time, up to 7 years perhaps to be truly successful. Some may be looking at a bit shorter than that.
You should show that you have thought it through, not many companies for instance are being floated on the stock market now days. A trade sale is often talked about, perhaps the Investor could sell their shares on, to new Investors who come in after the comapny has proved itself, or sell the shares back to the principals at the new greater fair market value.
Of course you should also have a full business plan with more detail to back up this Exec Summary. When the interested Business Angel asks for more information you have to get it to them quickly. These plans for individual investors need not be as long, or as detailed as when a Venture Capital organisation is investigating, but still they may be around 20 pages.