Getting your business plan through screening

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…

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. Relying too much on intermediaries and ‘advisors’.
7. 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.
8. 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.

“The Five Startups You Meet in the Deadpool”

Another favorite session at SXSW 2011.

Former entrepreneur, current investor and innovation community leader Charlie O’Donnell will discuss five different patterns of failure often seen in startups that don’t make it. It will cover how entrepreneurs can derisk their ideas, maintain momentum, and take advantage of opportunities early on in a company’s life cycle. Patterns of failure include: 1) Failure to zero in on a sector’s most pressing pain point. 2) Not leaving enough time or financing to iterate on an idea. 3) Failure to create short term milestones that create value. 4) Failure to capture industry attention and mindshare. – 5) Failure to build a realistic customer acquisition engine.

Here are some of the nuggets I captured from the session…

On Idea:
Simplify to one core idea
Focus on “inputs” & “outputs”… Rather than what’s in the middle

On Product:
Narrow down features. It’s not about being comprehensive. Avoid “death by 1000 features”
Do one thing and do it well. That’s the story that gets traction.
Cultivate your power users

On Marketing:
“If you build it, they will not come”
Marketing is not a budget but a strategy

On Financing:
Leave enough time for financing & take an investor’s perspective

On Growth:
Set milestones & present as if you’ve reached it.
Show progress regardless how small.
Create value.

and lastly…
Make use of advisors but you have to drive the relationship

Notes from #SXSWSmall: What We Can Learn from Small Town Entrepreneurs

In the world of online communities, we need to learn to behave like one. The excerpt from my favorite session at SXSW11 as follows:

The business world is looking more like a small town. Strong downward economic pressures combined with advances in technology have forced rewriting the rules of business. Advances in technology have allowed all of us to collaborate instantaneously over great distances and not be tied to a single geographic area. Suddenly, the business advantage has shifted from multinational corporations towards small and local companies. When every one of your customers can talk to everyone else, it’s like a small town. When the human voice is valued over corporate mission statements, it’s like a small town. Now is the right time to look at the small businesses that have best succeeded in small towns, and find the lessons that everyone in the business world can use today.

Here are the notes that I captured from Barry Moltz and Becky McCray…

Lesson 1: “frugality is the new black” Plan for Zero – prepare for ups & downs and take a long term perspective. Focus on long term and stick to the plan.

Lesson 2: “if you found yourself in a hole… Stop digging” Spend brainpower before dollars and understand business cycles. Overnight success takes an overage of 7-9 years.

Lesson 3: Multiple your lines of income by diversifying to reduce risk. Nurture new product offerings.

Lesson 4: Work anywhere, anywhen.

Lesson 5: Treat customers like community. Any customer can interact with any other customer, just like a small town, treat everyone well.

Lesson 6: “be proud of being small” Act like a small business… Flaunt it! Build a community… Move from the community to the crowd. Build personal connections!

Lesson 7: “be local” Stick to your local culture. That’s what makes you unique

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