Vishal Gulati, a VC in the healthcare sector, spoke to my MBA cohort today and gave a few tips on mistakes commonly found within business plans…
- Competition is a good thing. Statements such as “We have no competitors” signals that either you don’t know your market or you’re making something no one wants.
- On market size/opportunity. “We’re aiming for a 1% of a zillion $ market” is an “upside down” way of thinking. In established markets new entrants have a very small chance of breaking through and any potential gaps is likely to be filled by incumbents. Instead, share your strategy on how you will execute to capture & grow your user base.
- Information overload or failure to express yourself succinctly – focus on your elevator pitch and the exec summary. You should spend as much time polishing your exec summary as the rest of the business plan.
- The assumption of “all we need is the money..” and the rest everything is worked out. Wrong!) Many times challenges don’t surface until money shows up and you begin to execute. Be very realistic about execution and operational challenges that you may face and have a plan in place on how to tackle them.
- Holding back information. If a business or technology is so secretive it’s probably not worth investing in. VCs aren’t going to sign an NDA so share non-confidential information at the start.
- Relying too much on intermediaries and ‘advisors’.
- Absence of proper ‘use of proceeds’ – investors care about what the money is going to be used for. Provide exact utilization of capital helps VCs focus on individual functions of the company & identify potential risks.
- Not knowing your route to market.
Finally, know your business well. You don’t really understand it until you can explain it to your grandmother.