Data from the Bureau of Labor and Statistics show that 2 out of 10 new businesses fail within one year of starting operations. The 2020 State of Global Startup Economy report paints a similar picture: 4 out of every 10 startups are in the red zone, 72% saw revenue fall at the onset of 2020, and only 12% were experiencing significant growth.
For founders, these numbers underline how important it is to secure resources such as funding at the right time.
One way to improve your odds is a comprehensive business plan. But what do venture capitalists, angel investors and other early-stage backers actually look for? To win seed investors, you need to understand what they want to see in a startup and build it into your plan.
Who needs a business plan?
Startup founders, entrepreneurs and anyone else launching a venture needs one. It is a basic tool for seeking funding, raising capital and running a company. After all, a business plan is the largest dataset about your business.
It is also a roadmap: it shows where you are now and how you intend to reach your goals, and it guides sound decisions for success and sustainability.
Anyone running a business should appreciate the value of having – and updating – a thorough plan when starting up, going public, attracting investors or growing. A solid plan can double your chances of surviving the daunting first year and building a profitable company.
What investors want to see in a business plan
Whatever the industry, product or service, investors want a well-thought-out plan that clearly shows the venture is feasible. Yours should include:
- A thorough description of your products and services, plus market research proving there is enough demand for them;
- A competitive analysis that illustrates your potential market share, sales projections and competitive advantage;
- Well-prepared business, marketing and financial plans that make your objectives, strategies and financial viability easy to grasp.
These are the basic elements of any plan. Depending on your niche, investors will look for further specifics, such as a tech startup business model.
“A good business plan always tells a story: it conveys what your ambitions are and how you plan to achieve them. The specifics obviously depend on the stage your project is at. In the early days it should focus on validating your hypotheses about Problem–Solution fit, Product–Market fit and Business Model fit. Later on, it will show your approach to scaling up and executing on growth. From the investors’ point of view, it is always interesting to see how the plan translates to numbers and whether those numbers have a chance of adding up in the real world. There is a saying that ‘more fiction is written in Excel than in Word’ – so be ambitious with your plans, but always have a reality check.”
Why science-based ventures are different
Investors in science and deep tech expect all of the above plus a clear path from lab to market: the maturity of the technology, the strength of your intellectual property, the regulatory route, and a realistic view of how long and how much funding development will take. Show how research milestones connect to commercial ones, and who on your team can deliver both.
Need help shaping a plan investors will take seriously? Book a consultation with our team.