VC & Private Equity investment - BPlan

1. Preparing a Business Plan for Equity Investment Anjana Vivek www.venturebean.com [email_address] www.venturebean.com

2. BACKGROUND BUSINESS PLANS www. venture bean .com

3. INITIAL THINKING Input quality determines Output quality How do you think through and plan for the business? www. venture bean .com

4. A) The thinking & planning stage BUSINESS PLANS www. venture bean .com

5. ROLE PLAY: First…. Get into the shoes of an investor What do you think an investor could be looking for? www. venture bean .com

6. EQUITY INVESTOR … An equity investor is a co-owner of the company, unlike a lender Factor this in your business plan www. venture bean .com

7. 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. venture bean .com

8. 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. venture bean .com

9. 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 www. venture bean .com

10. 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? www. venture bean .com

11. VALUE INCREASE Companies need to have super normal growth Markets should be huge Capablity to capture huge markets www. venture bean .com

12. VALUE INCREASE Customers perceive products as giving value for money Competitive advantage Sustainable advantage Please think of more such factors www. venture bean .com

13. 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 www. venture bean .com

14. 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 www. venture bean .com

15. B) Preparation stage BUSINESS PLANS www. venture bean .com

16. MAKE A START Once 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 www. venture bean .com

17. 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 www. venture bean .com

18. 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 www. venture bean .com

19. FORMAT AND SIZE Word document can be between 20 to 25 pages A presentation could have about 15-25 slides A first cut document shown to an investor, could be the executive summary, which could be about 2-3 pages www. venture bean .com

20. 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 document Be precise and clear, today we live in the twitter age and long winded documents are not appreciated www. venture bean .com

21. PRESENTION TO THE INVESTOR If investors are interested, they will themselves ask for more information and hopefully go to the due diligence stage Focus on getting them interested in the first instance www. venture bean .com

22. WRITING THE PLAN Creating spreadsheets is not difficult Is the spreadsheet believable Can the numbers indicated be achieved www. venture bean .com

23. WRITING THE PLAN Does the spreadsheet account for alternate scenarios Does the spreadsheet factor the risks, both internal and external to the business www. venture bean .com

24. 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. www. venture bean .com

25. 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? www. venture bean .com

26. 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. venture bean .com

27. 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. venture bean .com

28. 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? www. venture bean .com

29. FINALLY BUSINESS PLANS www. venture bean .com

30. 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 www. venture bean .com

31. DEAL ISSUES This can help you plan on how you can leverage on your strengths This can help in negotiating a better deal www. venture bean .com

32. 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 www. venture bean .com

33. DEAL CLOSURE Prepare for due diligence by identifying pitfalls upfront and taking steps to mitigate/de-risk to the extent possible www. venture bean .com

34. 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! www. venture bean .com

35. 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 www. venture bean .com

36. APPENDIX BUSINESS PLANS www. venture bean .com

39. THANK YOU Wishing you all success www. venture bean .com