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From a presentation by venture capitalist Stephen Fleming of Atlanta, Georgia. Don't insist on a nondisclosure agreement
from investors up front. Venture
Capitalists typically read a hundred business plans for each company
that they fund. It would be impossible for them to process this kind of
deal flow if every one expected a nondisclosure agreement. You don't
have to reveal all of your technology in the first document you send the
VC. Describe enough to get them interested and consider a nondisclosure
agreement later if funding conversations progress. Don't focus on the technology and ignore the market, competition and customers. Remember your business plan is selling your company, not your product. A meeting with an investor is not the same as a sales call to your customer. An investor wants to know how you're going to build, sustain, and run a profitable company. A venture capitalists will generally assume you have good technology. They want to know why lots of people are going to pay you a profitable price and that you can deliver product to them. Don't practice top down sales forecasting. "Two percent of a billion dollar market will make us a $20 million company." WRONG! Markets typically shake out to a company with 50% market share, another with 30%, and a whole flock splitting the remaining 20%, none of which are making any money. You need to define a market where you're #1 or #2 in market share.
Don't use four significant digits everywhere. Projecting market growth, product roll out schedules and sales costs are, at best, educated guesses. Don't crunch the numbers forever. They're estimates. Everyone understands that. Don't position investors as necessary-but-unpleasant "mushrooms". You need to face it, accepting venture capital funding is like getting married. At the very least, you're going to be sitting across the table from each other once a month for 3-5 years. You need to accept your investors as part of your management team. Don't fill your business plan with typos, errors, chart junk, repetition, or inconsistencies. Your plan makes your first impression and often your only impression with an investor. Spelling counts as does accuracy, conciseness, and clarity. Don't expect to acquired by Microsoft. They're only one company. They can't buy everybody. Likewise not every company in a portfolio will do an IPO. For every company that does an IPO, five are acquired. Keep your options open and be realistic with your exit strategy. Keep in mind that companies need to generate 50% year after year return on assets to be attractive to venture capitalists.
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