Thursday, November 17, 2005

How To NOT Write A Business Plan

Entrepreneurs often ask me for a sample business plan they can use as a model for their fundraising efforts. They are surprised when I send them a powerpoint file.

It's always a good idea to put down on paper your plans for the business, so that your team can build consensus around objectives and metrics. Make it as thick and wordy as you like (though show some restraint--over-modeling the future only wastes your time). I'm sure that Brad Feld's upcoming series on business plans will become the authoritative online reference for this kind of internal operating document.

But my advice is to never send a document like that to a VC.

Keep in mind that you are not alone--entrepreneurship is thriving around the world. In fact, we assess about 100 times as many investment opportunities as we fund, so as everyone knows, it's hard to get a VC's attention. It's not exactly true that all VC's are stupid (not exactly), but we do not have the luxury of an attention span. Drop a thick document on a VC, and it will, wrapped in good intentions, go straight to The Pile.

The Pile is a dark, evil tower--impervious to attack--that looms over every VC's desk. My Pile, like many, is constructed out of business plans, white papers, analyst reports and scientific journals, waiting to be read with quiet thought and deliberation... Who Has Time For This? My only opportunity to curb the Pile's growth is airline travel, where I have some downtime to chip away at it (that is, until I can email and Skype using on-board WiFi). You'd think that with the recent surge of VC activity in Asia, we'd really have time to work down our Piles, but instead our Piles only grow taller, fortified by new material imported from China and India.

That's why nothing slows down a VC as much as a comprehensive business plan. Powerpoint presentations, in contrast, can be quickly emailed and skimmed, eliciting much faster indications of whether there is a fit. And if there is a fit, the VC will have an easier time educating the firm about the opportunity. So powerpoint plans greatly increase your chance of getting a term sheet, or at least the dignity of a quick No.

I was first exposed to this notion in 1995 by a super smart CEO, whose name I regretfully forget. His company (Eo Networks, I think) developed fiber termination units optimized for rural networks. He was walking me through his slides, and when I asked him for his business plan, he pointed to the laptop, looked me in the eye, and said, "this is my business plan." I thought, What? Oh. Okay.

So here are my specific tips on constructing a business plan...

Your presentation should not exceed 10 slides. The appendix can include as many slides as you want. The more the better. Nothing beats responding to some VC's question with a slide from the appendix. Sales productivity? Here are the historical numbers. The competitor's software? Here's a screenshot. Most operating details will remain safely ensconced in the appendix, eliminating unnecessary friction in the presentation.

You might structure the 10 slides as follows:

1. The cover slide should offer complete contact info, and a tagline if you've got it. One of the benefits of a powerpoint plan is that it forces you to perform the critical exercise of describing the business in very few words.

2. A mission statement is a good idea to present, unless it's rather obvious from the tagline (as in Education, Guidance, Diamonds and Fine Jewelry). Select a mission statement that is achievable, but not yet achieved. Bad mission statements:

"To create the world's largest software company." [too broad and unrealistic to practically guide decision-making]

"To develop the world's best technology for defending DNS servers from worm attacks." [er, you said you've already done that, right? Mission accomplished!]

A clear mission statement also includes a clear idea of what the startup will NOT do. Here are some nice ones...

"Healthia will operate America's most widely used comparison shopping portal for consumer driven healthcare, enabling businesses and their employees to choose health plans, ancillary health benefits, and medical services objectively and transparently."

"Prolexic will create and dominate a new network service category that defends web applications from distributed-denial-of-service attacks."

Sometimes the white space on the slide is filled with customer logos or testimonials.

3. Introduce the team. On one slide, highlight the backgrounds of the key members of the team, and any directors or advisors (not too many) who bring something special to the startup. Explain verbally whom you intend to add to the team in the next year. (If that includes a CEO, say so up front, without waiting to be asked.)

4. Without yet getting into your product or service, describe the nature of the problem you address. Emphasize the pain level and the inability of incumbents to satisfy the need.

5. Introduce your product, and the benefits (which should obviously address the market problem you just described).

6. Elaborate on the technology or methodology you have developed to enable your unique approach. If appropriate, mention patent status.

7. Show off early customer or distribution progress: numbers, logos, testimonials.

8. Sales strategy. Show the expected cost of customer acquisition.

9. Competitive landscape. Be sure to anticipate competitive responses (before the VC does), and never deny that you have competitors, no matter how unique you think you are. Really, it's okay to compete. Even against Microsoft (as Flock will prove).

This is also a good slide on which to show market size estimates.

10. Earnings Statement, historical and forecast. For each time period, add headcount and cash balance. It should be clear how you expect the company to perform top line and bottom line three years out, and how much capital will be required now and later. Prepare lots of backup slides to illustrate the assumptions behind these financials.

Okay, so you might need an 11th or even 12th slide to cover all the financials, to describe the follow-on businesses that may arise, or to provide a timeline if you have a complex product road map.

Ideally, find the opportunity to walk the VC through your powerpoint plan in person, or at least by phone. If not, at least find a mutual friend to persuade the VC to review the powerpoint on his or her own.

If it's helpful, comment on this post with a link to a powerpoint plan that you have crafted along these guidelines--I'd be happy to publicly critique one such powerpoint, and others might weigh in, too.

Update: Before presenting your pitch, be sure to read Boris' tips. Also, here is advice from Matt Cutler that marries my tips with those of Brad and Guy.


  1. Anonymous4:23 AM

    We'll take the Pepsi challenge on that one. To get our "quick pitch" view or download it from our site.

    I look forward to your feedback.

  2. Anonymous6:00 AM

    not concensus but consensus

    I'd be scared to send Brad Feld a PowerPoint presentation given his belief that the program has dumbed us all down, but the point about the attention span is well taken.

  3. Chris,

    As promised, here is some feedback on your SproutIt plan.

    First, the presentation is unusually clear and to-the-point. (I see you embraced the 10 slide format quite faithfully.) I would rate this presentation among the top 10% I've seen.

    I do have some questions, but I suspect that some may be addressable only in real time, or in a slide show that isn't published to the world.

    Slide 2: I love the goals statement. But I'm not sure what you mean by Client Success Rate.

    Slide 5: I think there is a mismatch between the presented product road map and the mission statement. What is the nature of the follow-on products? It's hard to believe you can accomplish the ambitious mission when I see only the first product. I am skeptical that there are follow up products sufficiently hefty to accomplish that mission.

    2. On slide 5 or 6 you might wish to have a graphic (VC's like to look at pictures!) that visually displays some of the complexity involved in automated message routing. Why is SproutIt better than a simple Outlook rule that forwards emails around based on keywords?

    Slide 7: Should be "10 or Fewer Employees" but more importantly you should give some indication of market size (I believe it's quite large).

    slide 8: I'm not sure what you mean by "Co-Marketing campaign with small business communities." Are those email campaigns or telesales? This feels like a telesales business.

    slide 9: why does the competition fail to meet the customers' need?

    Chris, thanks for playing!


  4. Anonymous7:50 AM


    Excellent advice. It's nice to hear how a VC truly thinks because most people advise the exact opposite to us inexperienced entrepreneurs.

    John Yau

  5. Anonymous10:24 AM


    Thanks for the advice. Let me make some updates and send them back to you. We also had some advice to add one more slide with more marketing plan info. it should clear up a bit of the confusion. And, if you ever need clarification, feel free to email me.


  6. Anonymous2:05 PM

    Instead of mailing your business plan in, would it be a better idea to mail a USB key with your powerpoint file loaded on it along with a folder of data backing up your proposal?

    nice tips by the way :)

  7. Anonymous5:45 PM

    As an employee of one of the companies in which you have invested, I just wanted to thank you for the post. I've never seen it put so simply how to catch a VC's eye.

  8. Anonymous,

    I'm afraid you'd be buying and losing a lot of USB keys if you try that. Email should work fine, especially if introduced by a mutual friend.

    Good luck,

  9. Anonymous8:09 PM

    I'm wearing my new sweater today!

  10. Anonymous8:55 PM


    How would you reccomend one going about pursuing an idea they have but do not have the technical know how to produce?


  11. Anonymous3:15 AM

    I made some changes to the pitch. Please let me know what you think.
    Updated Pitch
    If you still have questions, email me via the contact us link at the bottom of the web page.

  12. Anonymous5:40 AM

    Excelllent JOb! I like it. Thank you to share these experience.

  13. This comment has been removed by a blog administrator.

  14. Anonymous9:47 AM

    the words I said aloud as read this are, "this is just beautiful!" Thank you so much. I used to run a large record company, and so far too many overwrought (and plain boring) business plans. Now that i've moved to the educational world (teaching college business), I'm going to direct my students to this wonderful advice. (I hope that's alright to do so; let me know if not.)

    thank you so much!


  15. In response to Mike's question about having an idea but not having the technical team/know-how to pull it off.

    I work at a manager at a not-for-profit (as opposed to non-profit) research organization - Southwest Research Institute ( We do work for big places like NASA and the Veterans Administration, but we also partner with small firms in just the situation Mike describes. Sometimes this is to prepare a joint proposal for some type of Small Business Grant, and sometimes it's for Angel Investors who are trying to help get a business off the ground. Because we're a not-for-profit, any patents we develop are shared with the company (750 and counting). Any software we write we turn over (no licensing fees). And so on.

    Needless to say, I'd be happy to talk to Mike (or David, or anyone else who's interested) about any opportunities where we could partner to help out. While the Division I'm in specializes in Medical, Transportation and Educational/Simulation software, we have divisions here for every one of the Applied Sciences.

    You can get me at egrantham at swri dot org, or at the email address in my profile, if you want to talk more.

  16. Anonymous10:45 PM

    How does a VC value a company. We work up present value ($1.2 mn)of our comapny, based on certain sales revenue in 5 years ($6.5 mn), offering 40% returns, and took market cap as one time sales revenue then. Their logic is to take the same method for valuating the comapny today (Equals to sales now, $ 45k). I fail to undersatnd how companies at idea stage will be evaluated?

    Moreover, once the product is ready and has some acceptance in the market, what's the kind of ROI investor would look at?


  17. mohit,

    if we like an investment opportunity, we value it the way you valued it. if we don't like the opportunity, we value it using "their logic."

    Yes, 40% sounds right. We certainly settle for a lower ROI in later stage companies, but not just because products have market acceptance. Rather, we compromise our ROI demands only when we have seen a company climb the sales learning curve. (if you're not familiar with that, read my post titled "Best Startup Advice I Have")

  18. Anonymous2:51 PM

    We'd really love your critique of our business presentation - we're pitching to a bunch of investors in December for our seed round, and want to get it right first time!
    The presentation is at


  19. Anonymous1:08 PM


    Great advice and information.


  20. Very informative. Thank you. I have a very strong idea for a website that could fill quite ba need out there. Would you be willing to look at a few paragraph description of my idea?

    Thank you - Adam Gropman

    P.S. Happy New Year

  21. wow youre freakin fabulous! Im amazed how 'in-touch' and non-superficial you are/come across and help people. I know the powerpoint suggestion is dead on as I had a project presentation and summarised key objectives within the .ppt leaving details in the paper doc. Now I feel like a genius!!! ahaha. Thanks mr. vc I look forward to learning alot from you here.

  22. Anonymous11:56 PM

    Hi David,

    great post. I have some questions:

    1. Is it a good idea to use a plain web site instead of PowerPoint to present the executive summary, some screenshots, team and a FAQ which will answer some questions that might come up after reading the other sections such as do you have competitors, or why is the idea better than the other companies, etc? Because i think a web site is more accessible and offers more interactivity.

    2. What is the easiest way to valuate the company in startup (but not in market yet) phase?

    3. and any advice on how to structure the shares of the company?


  23. Anonymous5:52 PM

    I'm funding my own venture (so far) with a beatiful angel investor and the sweat of my brow, but I did have the opportunity once to make a power point presentation for a useful group of folks. It was fun! Yes! I fully support the idea that your plan and your point is the same! Or else write several business plans - one for the world, one for your Mom, one for your own secret dreams in the middle of the night. Nothing says you can't do it that way. Write it to suit its use. What's it's purpose? A roadmap for you? An information package for a VC?

    And don't forget to update your plan!! I was at a big Toronto entrepreneurship seminar not so long ago, and one of the panels asked the audience who had looked at their plan in the last 6 months. Only my hand went up. It was kinda embarassing... When and how often you update it will depend on the business itself, but remember to do it!

  24. David,
    I like your recommendations a lot. Short and to the point is critical.

    In our practice we take the issue you raise very seriously and arguably, in the spirit of brevity, a small step further. When we are beginning distribution of a new confidential info memo for a capital raise we prepare a one-page "investment snapshot" that addresses short attention spans (that we suffer with in these over-wired times), and has added--perhaps even greater--value of requiring the principals to articulate a concise description of the business proposition, with key investment considerations emphasized, i.e., What's the business problem? How large is the opportunity? What distinguishes NEWCO?, etc.

    If the concept requires so much qualification/explanation it can't be clearly stated on one page the value proposition may need some polishing.

    To help the cause, here's a sanitized exmaple of an investment snapshot I completed for a client that offers a web-based solution for hospital revenue management quality assurance.

    Investment Opportunity
    Technology-based Revenue Cycle Enhancement Solutions

    XYZ, Inc.





    NEWCO is a recognized expert in reimbursement issues for hospitals and health systems and has worked with over 500 provider entities over the last decade.

    Innovative, Proprietary Technology Solutions.

    Management repositioned the Company in 2005 as a supplier of technology solutions to systematically eliminate common patient registration errors and detect omissions in coding, charge capture and documentation.

    NEWCO developed and field tested its first web solutions in collaboration with clients that continue to assist in product refinements and provide references and testimonials on the impact of NEWCO’s services. NEWCO retains exclusive ownership of co-developed technology.

    Significant Market Opportunity.

    Hospitals lose at least $25 billion a year—with some estimates running as high $90 billion—in avoidable denials and underpayments.

    The Company estimates the immediately addressable market opportunity for its first web-based solutions for patient access and revenue integrity management exceeds $1 billion in revenues.

    Market Validation.

    The Company has demonstrated proof of concept with a leading health system that published results of a study documenting increased cash flow of $2.5m and reduced quality assurance staffing by 50%--a recurring savings of over $500,000.
    The Company is expected to close new business with named accounts that will generate over $700,000 in annualized revenues.

    Experienced Management Team.

    NEWCO has leveraged its position as a trusted consultant and expert in hospital revenue cycle management and quickly established awareness and interest from potential clients.

    Client relationships have enabled NEWCO to migrate a traditional consulting and contingent recovery consulting practice to a technology-based solution with recurring revenues that deliver sustained value to its clients.

    The Executive Management team’s background and professional relationships is driving the formation of several strategic partnerships that will help position NEWCO as the premier supplier of web-based quality assurance solutions for revenue integrity management.

    Recurring Revenue Model.

    The monthly recurring revenue model ensures excellent visibility to future revenues and, at scale volumes, will support an attractive and sustainable operating margin.

    Financing Need.

    NEWCO is seeking $5 million equity investment to support sales, marketing and product development and achieve cash-flow break even by September 2007, providing revenue cycle analytics and QA services to 56 hospitals.

    Please contact ... for a copy of the Confidential Information Memorandum.

  25. Anonymous1:09 PM

    Thank you for writing this. I am a strugling Indian entrepreneur and hope your advice will help me in years to come

  26. Anonymous8:27 AM

    Business plans will still be required for any small business that needs to visit potential investors.

    It needs contant updates as new competitors will come and threaten your market, you need to keep on top of all areas of your business and business plans help you do that.

  27. Anonymous10:52 PM

    To use the powerpoint to represent the business plan is a good thing. this is a excellent explalaiton of the powerpoint into the business plan. Such a great job.

    Thank you

    Damon Thomas

  28. Anonymous5:21 PM

    NOT Write A Business Plan... Finally found really useful information on the topic, thank you.

  29. Anonymous2:59 AM

    Did not have any idea but after using the powerpoint representation for explaining my business plan found really great.

    Thank you
    Damon Thomas

  30. Hi David,

    I stumbled upon this blog entry today and have found it incredibly useful. I'm packing some PowerPoint heat; are you still reviewing submissions? I will need to e-mail it to you.

    Robbie Mitchell
    cambridge, ma

  31. Hi,

    wow there are a lot of comments here...

    quick question: have you ever heard of someone using a private blog to brainstorm their business plan?
    And what do you think of that idea?

  32. Anonymous7:58 PM

    Hi David,

    I found your blog and this post today – incredibly helpful. Would you be willing to take a peek at a mission statement for me?

    Thanks so much,
    byronwrites at gmail dot com

  33. Hi David,
    thanks for the advise,
    I have published my presentation at

    hope that you have the time to review it

  34. Anonymous9:43 PM


    How do you write a business plan for a brand new business that's not yet operating? If there's no history, what do you base the forecast on, or is there a different type of business plan for a situation like this? I'm VERY new to this whole entrepreneur thing, so any assistance would be greatly appreciated.

    Thanks in advance.

  35. Anonymous

    Try to find a role model business as the basis of your forecasts--it should give you some idea of growth rates and margins for your business. Or simply leave out the forecast, acknowledging the speculative nature of such an exercise for a non-existent business.

  36. fantastic job of thinking A Business Plan. When we are beginning distribution of a new confidential info memo for a capital raise.


  37. Anonymous10:50 AM

    The power point just makes sense. No one ever submits a paper resume anymore why not get with the times on submitting a business plan. Thanks for the great advice.

  38. Hi David,

    We were already using a powerpoint deck, but your post helped me distill down to the 10 most important slides - thanks.

    What is your view on confidentiality ? for VC's we have beeb introduced to I dont worry so much, but if you are sending out more speculaively ...

    I see some of your readers have their presentations as downloadable from their site - very open, but is that advisable if you have something unique? Is an NDA appropriate to presend to a VC or will you never get any traction ?

  39. VC's generally don't (and shouldn't) sign NDAs. We meet with so many companies that no matter how honest and discreet we are we would be inevitably become legal targets any time one of our portfolio companies succeeded.

    Here's the balance I'd strike between secrecy and disclosure: don't post your presentation (it smacks of desperation anyway), and share it only with VC's who don't *already* have a competitive investment.

    When I hear a pitch, I won't share specifics about that company with my portfolio, but I also won't ignore things I learn about the market as my companies craft their products and messaging. So before anyone pitches Bessemer I always disclose what conflicts may exist in our portfolio so the entrepreneur can assess the risk.

  40. Effortless shot. It is a great way of Entrepreneurship. You have done a very good job with it, nice post. Keep it up!!!!!

  41. this scared me.. i was stunned by the reality.. thnaks for the post cowan

  42. Great post David, came across it from Raj Kapoor's guest article ( on Tech Crunch. Thanks for the insight.

  43. quite interesting blog and useful too

  44. In my opinion, having a start up business plan is extremely valuable. It will serves as a map showing where you are today and where you want to end up. It gives you confidence that you know where you're going.

  45. chuck in minneapolis5:26 PM

    what? you mean i've been typing for 2 years on this plan for nothing? but seriuosly one thing i've noticed since i've started writing my biz plan is vc's are all looking for bio-science high tech i can make your internet phone doctor data back up ipad gizmo work faster better jump higher then ever before thinga ma jig. doesn't any one invest in fun any more. do you know a vc that will consider a start up that has focus on fun and profit?

  46. Good advice. We have invested in firms with a simple approach.

  47. good..good..gooood...tumb up for u buddy

  48. I have a quick question that was briefly discussed. I have an idea that I used for my marketing class that got rave reviews and I was even approached my professor to patent the idea. It's somewhat of a tech savvy idea that has literally zero competition on the market... Trust me I spent many many hours in the school library searching. I have begun to work on my pitch/power point, but I don't have the information to supply financial forecasts. Any ideas would be greatly appreciated.

  49. Regarding Patents and Technology:
    There are plenty of examples of companies that don't have particularly innovative technologies, but have really addressed consumer needs and developed a great user experience. (Flickr, Airbnb...) I get the sense that VCs are looking for patented technologies as a defense mechanism and that it seems as if great UX isn't so highly appreciated. Am I interpreting this wrong? Is it all in the wording?

  50. John

    I think you said it well: patents are a good defense mechanism. But to win you need offense, and that's where great UI's come in. Hypergrowth depends on rapid user adoption.


  51. Finding this kind of article really a relief for its been a while that been searching this kind of information with my current thesis..Thank you!

  52. 7 years passed already. Is it still valid today?


  53. Ziv,

    Mostly, but I think slides 6 through 8 need to be updated now that sales and marketing are predominantly online. Pretty much any online business - be it consumer or enterprise - boils down to the same unit economics: customer acquisition cost and lifetime value. These slides show the unit economics and depth of the marketing channels (how many customers can you acquire?).

  54. Hello David,

    we are developing a social networking cum sharing website( in which we have have tried to assimilate and integrate maximum possible and meaningful services which people, especially youth, can expect out of a social networking website.

    The website is on the verge of completion and we require some capital to launch the website on a global platform.

    I would be grateful if you could recommend me some ways of approaching the venture capitalists and also some suggestions about how to fetch the required capital from the venture capitalists for the website.

    Prahlad modi

  55. Hey David
    I just finished my finished my business plan when I saw this post which I found totally reasonable. Now I am trying to create a power point. My business plan deals only with the idea of a business and just exists in my head and on the paper. I live in Germany and want to get VC's in the USA.
    I am on my own and need assistance of VC's.
    If we proceed on the assumption that my idea is that brilliant that it isn't afflicted with the lack of a team, how do I have to fill out the third sheet?
    I think it would be unfavorable to just leave it out.



  56. Leo,

    Your slide on team should show not only what you have but also what you need. An investor wants to know that you recognize your needs, and that you have a plan for recruiting high quality individuals.


  57. Neatly written and well explained post.Thanks for the share.

  58. Nice post. Really wonderful.

  59. Got your tips in constructing good business plan. Thanks a lot David!