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Why Business Plans are Not as Important as you Think
This a an article by Paul Grant, founder of The Funding Game and NextMentor in the Mentoring Programme.
I remember my first business plan too well. It was such an unforgettable document for two reasons. First, it took nine painful months to write. And second, I found out that no-one ever read it.
Despite that, I managed to raise both business angel and bank funding for my fledgling company. And my plan? I filed it away when I started the business – only to look at it again a few years later and discover that it in no way resembled how my company had actually developed and grown.
Later on in my career, when I was running a business angel network, it began to dawn on me that my experience wasn’t unique.
Although huge amounts of time and cash are spent churning out detailed business plans for potential investors, I found that very few were getting read.
Curious, I asked the business angels, VCs and bankers I came into contact with: “Do you actually read business plans?” As it turned out, most of the investors I spoke with said they made their decision to meet an entrepreneur on the basis of a well-written executive summary. They would then decide to invest in a company after a series of meetings with the founding team which tested how they interacted with one another and how they responded to probing and often very challenging questions.
So does that mean you don’t have to write a business plan when seeking investment for your business?
Sorry – I wish I could say yes. Investors still want to see some reassuring figures and words that demonstrate you have thought through your market, the need you are trying to meet and how people will find and pay for your services. But here is the good news: your plan does not need to be the soul-searching, nine-month, 100-page ordeal it was for me – and for many entrepreneurs seeking funds for their new ventures.
There is a plethora of business planning books, business plan consultants, software programmes and websites that will tell you how very important and crucial your business plan is when raising investment. Follow this path by all means, if it feels right for you, but the evidence shows that your search for capital might well turn into a long, frustrating and rather dull experience with a very limited chance of success – less than 1% in fact.
Sure, you need some kind of plan.
But before you begin, save yourself time, effort and possibly money by considering the following three points:
- Accept that your business plan is unlikely to get read. With this in mind, keep it focused and concise (no more than 20 pages).
- Do your research thoroughly but don’t spend more than a couple of weeks on your plan. After that, focus more on doing than planning.
- Remember that the most important part of your plan is the executive summary, which will get read by anyone who is interested enough to invest in your business. So spend most of your planning time creating one that gives the facts and shows your business in its best light.
There are thousands of entrepreneurs looking for capital, doing the rounds of investors with a beautifully bound, phone-directory-sized business plan in hand.
Meanwhile, entrepreneurs who spend just a few weeks creating a concise plan with an outstanding executive summary have spent their time more wisely. They are giving most investors what they want: fewer attempts at planning the unpredictable – and more evidence of the action they have already taken to build or sell something of value.
Paul Grant is founder of The Funding Game and is running a series of workshops on the topic of raising capital for start-up. The next workshop: How to find an Angel Investor will be held at the British Library on Tuesday, 31st August 2010 from 4.30pm-6.30pm. There is a special 25% discount for all The Next Women readers. Enter “nextwomen” when booking, or click on the link below:
| http://howtofindangelinvestor3108.eventbrite.com/?discount=nextwomen |
For the latest Funding Game events for UK entrepreneurs follow @thefundinggame on Twitter
Saska Graville from Red Magazine Advises Female Business Owners on a Successful PR Pitch
For the 10th Kitchen Dinner, The NextWomen received Saska Graville, deputy editor of Red Magazine as the special guest of The NextWomen Summer Kitchen Dinner. The 25 women who were gathered for this intimate and relaxed networking include many business founders and directors. Indeed, 76.5% of them own or lead a company.
As the attendees arrived and prosecco and canapés were served, each person had to introduce herself to the rest of the group and this showed that once again, The NextWomen Kitchen Dinner received a group of very inspiring business women.
Editors Career Path: via Sydney, Newspapers and Redundancy back to the UK
After the starter, the set of ambitious women had the honour to receive a keynote from Saska Graville, deputy editor of Red Magazine, launched in 1998 for “women growing out without growing old” and which is followed by 225 000 readers monthly. Red Magazine has currently a UK and a Dutch issue.
Saska gave an overview of her magazine oriented career before joining Red Magazine. At the end of her 20s, Saska moved to Sydney. She was hired at the New Woman magazine where she shortly had to be made redundant as the magazine had to be sold.
In her today’s opinion, she couldn’t agree more with what one of her managers told her:
“Everyone has to be made redundant at least once in their career”.
This led her to work for one of Australia’s best selling newspapers Sydney Morning Herald but with her magazine background, little was expected of her. However, she managed to give a touch of lifestyle to the newspaper that actually turned into a surprising success.
Red Magazine: Proud of “Grown-up” Work Experience and – finally- ONLINE
Before she turned 40, she decided to come back to the UK as media is quite a “young” industry and that is when she joined Red magazine. With a lot of competition from other woman’s lifestyle magazine, Red managed to grow rapidly by reflecting the reader’s thoughts and responding to the audience’s needs. Today, Red Magazine is expanding its brand through its Red Hot Women Awards, “Grown-up” Work Experience, Red Direct and – as one of the last print magazines- by going online.
Business Matching and Business Issues of Female Business Women Read more
Fashion Pioneer Natalie Massanet Takes you on a Tour of Net-a-Porter’s Offices
Last month, Natalie Massanet opened up Net-a-Porter’s 44,000 square foot headquarters in West London to the founder of online magazine Business of Fashion in its series of Fashion Pioneers and a video was made. Very inspiring.
Cosmo Blog Awards Finalists Announced – Last Chance to Vote!
Cosmopolitan has revealed the shortlist for its 2010 Blog Awards in association with Collection 2000. The Award is aimed at celebrating the “creme de la creme” of the blogging community, and we are very honoured that you have made us part of it.
Thank you to all of our readers who have voted for The NextWomen and allowed us to be among the 6 finalists in the News and Current Affairs category! You can view the list of finalists in all other categories on the Cosmopolitan Blog Awards finalists page, where you can also cast your final vote for your favourite Blogs.
To vote for The NextWomen, visit the News and Current Affairs finalists page and cast your vote with your email address.
To vote for all your other favourite blogs, visit each of the categories finalists pages and cast your votes.
Deadlines are not mentioned on the website.
Founder Interview – Building an Online Network of 3 Million Users
Tell us about yourself – your background and education. How did you get involved in the web space?
I’m an advertising person by training, a journalist almost by chance and an entrepreneur by temperament… For six years I was the editor of UOL’s homepage. UOL is the leading Internet portal in Brazil. In 2006, together with three partners and an investor, I founded Brancaleone, a communication and technology start-up.
When I started working at UOL I was an advertising professional and a novice in electronic media and felt like a black sheep on a team of online journalists. It was the year 2000 and the Internet was beginning to break out of the early adopters’ niche here in Brazil.
“I felt like my role was to act as an interpreter for people who were new to the Internet, a kind of guide to the virtual world for the average user who was just beginning to explore the Internet.”
It was a major challenge since UOL was the main reference point for Brazilian online content at that time.
How would you say the web has evolved in Brazil from when you were the editor in chief for UOL in 2000 to now? How do you see it evolving in the next 5 years?
“Many things have changed since then. Web portals are still relevant, but Internet users have taken an active role in the hierarchy of content.”
Orkut (google’s version of Facebook launched in 2004) was also an important turning point on the Internet here in Brazil. This social network arrived in Brazil when lower middle class people were beginning to buy computers and, even more importantly, when Lan-Houses (internet cafes without coffee) were sprouting up all over the country. Orkut brought a feeling of active involvement and visibility that allowed Internet users to see themselves for the first time in this new medium. Creating self-content had a significant differentiating aspect for this audience, it allowed them to recognise their own identity by profiling and expressing themselves next to their peers.
I see this way of interacting on the Internet becoming more sophisticated over the next five years. It can clearly be seen that younger Internet users (children, pre-adolescents) are much more critical of content and features, and also much more involved in collaborative projects. So I look at the future with optimism, as a tendency to move from passivity – a maturing process – taking even greater advantage of the possibilities to participate, interact, criticise and build collaboratively.
How did Migux come to life – how did you come up with the idea, and what has it become? How did it grow to over 3M users?
Female Founders Pitch at Mini-Seedcamp London
Every year we attend start-up events and start-up pitch competitions, from GeeknRolla to LeWeb, and yet we hardly ever see more than a couple of Women pitch. It was a very pleasant surprise to see 5 out of the 20 start-up pitches be led by women Founders at this year’s Mini Seedcamp in London, which took place on Tuesday the 27th of July.
Not only were there 5 women-led pitching startups among the finalists, but one of them was only 21. Jessica Ratcliffe impressed the audience of over 70 web experts, investors and successful entrepreneurs while pitching her business GaBoom, an online swap platform for gamers already live in beta and getting traction, alongside her business partner James King.
The Women-Led finalists were:
- EDITD - The Bloomberg for apparel retailers and brands that forecasts fashion trends – Founded by Julia Fowler and Geoff Watts – One of the 5 Seedcamp Winners
- GABOOM - An online marketplace to swap and sell video games – Founded by Jessica Ratcliffe and James King
- MATCHIK - The first Crowd Sourcing Platform for Home Design – Founded by Joana Picq, COO of The NextWomen
- SCRAMBLR - A SaaS application that enables creative teams to have their own online studio – Founded by Jane Young and Andrew Webb
- SWEEBLE - A web-based self-publishing tool designed to help schools and groups raise funds – Founded by Sue Greenwood and Greg Finney
All other finalists also had very impressive teams and compelling concepts; there was an interesting range of startups, from very early stage/pre-launch to more established and even profitable companies looking for advice and investment. Returning mentors thought this year’s finalists were especially good teams, and all teams were impressed with the quality of the advice given by the mentors at hand – Reshma Sohoni, Philipp Moehring & the Seedcamp team attracted a very interesting crowd to this event, which made it a success.
On top of the quality advice given by mentors, startups also had the opportunity to hear an interesting panel discussion with former VCs turned entrepreneurs about the challenges of fundraising, led by Saul Klein (Chairman of Seedcamp).
Here are some of the insights given by each panelist:
- Avid Larizadeh – now founder of Boticca
“Angels are often the best alternative to early stage startups as they can be more active and give valuable advice. It’s very important to choose the right investor, and not just any investor.”
- Greg Marsh – now Founder of OneFineStay
“I would start looking for early stage funding with friends and family, and look for the good VCs with seed funds.”
And when asked by the audience on what is ‘a little investment’:
“It depends where you are. You can find many people in the streets of Palo Alto who will think $1M is a ‘little bit of money’ – unfortunately they’re very hard to find in Europe. In the UK a “little seed investment” will often be of around £250K. “
- Max Niederhofer – now Founder of Qwerly
“Fundraising is like dating – don’t tell investors you are looking for money, try and pretend you don’t need it.”
“Don’t create unnecessary overhead in your company so early in time – avoid VCs even with seed funds.”
Mini Seedcamp London 2010 has proven to be a very worthwhile event, especially for startups, as it brought some of the most experienced and creative web experts together to provide constructive feedback and advice to early stage businesses trying to break through. We’ll be sending announcements when the next Seedcamp event opens for applications.
Founder Interview: Life After our Start-up was acquired by The Huffington Post
Elena Haliczer - Founder of Adaptive Semantics
Adaptive Semantics is an online customer management system which can be customized for different publishers. This company based on Linguistic Algorythm was founded in November 2008 by Elena Haliczer and Jeff Revesz. The NextWomen interviews Elena Haliczer on creating innovation and founding the business, and its recent acquisition by The Huffington Post.
“The Huffington Post made our decision very easy. Not only was it an attractive offer that felt right at the time, it was also a tremendous opportunity to work for a company with a real track record for innovation.”
How did you come up with the idea of your start-up? And what is its USP?
In the early days of our company, Jeff Revesz, my co-founder, and I felt strongly that the market really made a lot of our decisions for us. When we first started talking about forming a company, there was a lot of chatter and frustration about the lack of any really effective comment moderation system for blogs. At the same time, there was a lot of interest around discovering the influencers within online communities. Jeff had already begun working on JuLiA (Just a Linguistic Algorithm) in his spare time, and we were looking out for a good application for the technology. We quickly realized we could use JuLiA as the basis for an automated comment moderation and expert discovery system and market it to publishers.
We use linguistic algorithms and text data analysis — which become more sophisticated over time — to help moderate comments by recognizing offensive language and patterns of behavior used to evade comment moderation.
While publishers often rely on filters to moderate comments, they don’t effectively catch all the content necessary as users learn to work around keyword filters. Given the volume of comments that many publishers receive and the growing importance of comments to publishers’ communities, relying on human moderators can become unmanageable. The linguistics algorithms of our technology get around these issues by sorting through extensive databases — a fast-growing list of hundreds of thousands of single words and keyword combinations — to eliminate abusive comments. Through data mining and statistical analysis, JuLiA improves the user experience by using analytics to recommend community experts and identify and eliminate abusive posts.
We focused our product on publishers from the very beginning, and at the time, there simply wasn’t anything like it out there. Sentiment analysis itself had not really entered into the public conversation. This changed over the course of 2009 as companies like Crimson Hexagon and Jodange came to the forefront. We had some especially good timing, because we were already out there with clients who had gotten good results with JuLiA. Sentiment analysis suddenly became this class of products that publishers understood and wanted.
Companies that were potentially our competitors actually made our sales a lot easier.
How did you form your team?
Jeff and I met at New York Internet Week in June, 2008. He was working at AIG, and I was working at Games for Change, a nonprofit focused on social issue games. We were both fishing for a potential co-founder, though at the time neither of us were completely sure what the product would be. The match felt right because he had a strong background in math and I had an equally strong background in marketing, but more than that, we were both developers, and both hungry for the startup life. Concrete ideas and a minimum viable product were developed over the course of 2008, and in November we officially founded Adaptive Semantics.
How did you fund it, with how much money, and what is the business model? Read more
Cosmo Blog Awards – Vote For Your Favourite Blogs
Cosmopolitan Magazine launched the first Cosmo Blog Award ever this year, in search of the best and “must-click” blogs on the Blogosphere. You can vote for all your favourite blogs until August 4th, across various categories, from Sex & Relationships, to Beauty, Fashion, and Gadgets. If The NextWomen is on your favourite Blogs list, visit the Cosmo Blog Awards page and nominate The NextWomen under the News & Current Affairs category.
This might be your last chance to vote for us as your favourite Blog, as we are about to launch The NextWomen online Magazine website in September 2010, meaning we will replace the blog with a full news site.
Nominations end next week on August 4th – support your favourite blogs with your votes today!
Apply to the Accenture Innovation Awards (Entry Deadline – July 31st, 2010)
Every year since 2007, Accenture presents its Innovation Awards to reward innovative business and encourage innovation. Previous winners have been female internet heroes Claire Boonstra, and Marina Tognetti, who founded Layar and Myngle respectively.
Do you have an innovative concept in Media, Communication & High Tech in the Netherlands and want to be honoured for your successful innovation? You can apply until July 31st to enter the Award.
Awards will be given to those different categories:
- Best Mobile Concept
- Best Web concept
- Best Lifestyle concept
- Best Device connected
- Best Gaming concept
- Best Digital Home concept
- Best Green concept
All Female Heroes in Media, Communication and High Tech deserve to get a chance and be nominated for these awards.
For more information and a registration form please visit the Innovations Awards site, and don’t forget, with less than a week to go, it only takes 5 minutes to enter.
Founder Interview: How the Recession Forced us to Change our Business Model
Bettina Hein is Founder & CEO of Pixability, a startup based in Cambridge, Massachutes, close to MIT of which she is a graduate. It aims to help people make professional videos in a real simple way.
“Our biggest challenge was finding a market segment that had a) a strong need for our services and b) willing to pay for them. We started the company to serve families but quickly discovered that our customers loved the service but it was ‘nice to have’.
We launched our service in October 2008 and luckily the recession quickly showed us that we were on the wrong track. I also founded my last company in a recession and I’ve learned that a tough economic climate magnifies the weak points in your business model and forces you to iterate faster.”
When the company started it targeted the consumer market, but recently it has changed its business model to target the business-to-business market.
“Our goal is to create 1 million videos with over a billion views.”
Time for The NextWomen Founder Interview:
How did you come up with the idea of your start-up? Were you always an entrepreneur by nature?
I come from a family of entrepreneurs and self-employed professionals. Pixability is my second startup. I came up with the first iteration of the idea as I was graduating from the Massachusetts Institute of Technology. My previous startup SVOX, a speech software company based in Switzerland was a spin-off of the Swiss Federal Institute of Technology.
How did you form your team? Do you have a mentor or coach?
I formed my team by asking people in my trusted network to work for me or recommend capable people to me. I’ve never had a formal coach but I’ve been lucky to have very good mentors. I’ve also learned a lot from my co-founders and entrepreneurial peers.
How did you fund it, with how much money, and what is the business model? I understand you went form B2C to B2B, do you think you will go back to B2C at one point? Read more
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