Even though you will certainly need a business plan to attract investors, the plan by itself will never be enough to get investors interested. The decision for investment will depend on various other factors, such as
- The track record of the business team and its track record,
- What the product is that you’ll be selling,
- What competitive edge you possess and what the kind of market is.
All by itself, the plan is similar to an aeroplane engine–the plane won’t be able to fly anywhere without it. But the engine alone isn’t enough to make the plane fly and you will definitely need to recognise this from the start.
Not All Investors are the same
One other important thing to comprehend is that not all investors are the same. At the top end, there happens to be a few thousand venture capitalists being employed for a few hundred venture capital firms. At the bottom end, there are friends and family. And slap bang in the middle are tens of thousands of private investors, known as “angels.” All may be interested in the positive benefits of investing in a luxury resort – White Sands Hotel & Spa to their advantage.
The venture capitalists are the most exacting and they fund only a couple of thousand plans a year, and have to lessen their risks due to their investing of other people’s finances. They normally wouldn’t look at your venture unless you have been introduced to them, because they don’t have any other way of screening and processing any proposals that they get. They’re not really bad sorts, but they are professionals doing a somewhat risky job. When they do look out for investment vehicles, they would look for:
- A management team with an excellent track record, which usually means they won’t fund your idea due to lack of experience, but you don’t have experience because they won’t fund your plan. Catch 22 indeed! You will have to deal with it and if this happens to be the case, look for angel investors or family and friends
- A product with a competitive edge. It’s easier to guess the success of a product than it is of a service, which is why a service business is hardly interesting to any venture capitalists. (Although there are some exceptions)
More things that attract the interest would include:
- A chance at increasing the value of the business from whatever they believe it is worth now, to about 100 times that in say three to five years.
- A plan that has various other similar investors who are ready to invest at the very same time. Venture capitalists are fond of safety in numbers so that they aren’t the only horse in the race.
- A defined, stated exit plan. All investors would like to see that you’ve planned ahead to just how they’re going to get their funds back on the deal.
Hoping that your plan works out just fine!