I just finished reading an incredible article titled “Courting Venture Capital” written by J.D. Kern, CPA in the June, 2011 edition of the Journal of Accountancy, published by the American Institute of Certified Public Accountants.
I wholeheartedly agree with Kern with respect to how to attract angel, venture capital or private equity investment to a new, emerging or growth company. Being a CPA myself and having earned an MBA, I readily admit that quantifying the investment opportunity in numbers alone is NOT enough. When presenting the opportunity to potential investors, in the words of Kern: ‘The company’s background, niche, management, strategy and other less quantifiable matters, are colloquially known as the company’s “story”.’
In the referenced article, Kern identifies the seven key componants of the “Story”. All are vitally improtant to communicate to potential investors why their hard earned capital should be entrusted to you and are part of any good business plan they are, in the order given by Kern, as follows:
1. Overview- what the company does, when it was founded.
2. Management Team- Brief biographies of key team members.
3. Why You Exist- See below.
4. Competition and Barriers to Success- See below.
5. Achievements to Date
6. Road Map for the Future
In my experience, potential investors won’t remember specific numbers in your presentation or your business plan, although they should have the plan itself to refer back to. What “grabs” them and compels them to consider the investment is the “story”. In my opinion, the most important part of the story is the section Kern titled “Why You Exist”. Considerations for inclusion in this section should be:
1. Describe your market in terms of the number of customers. How segmented is it? If segmented, how do the different segments differ? Are you interested in more than one segment? How much of each segment can you capture?
2. Describe your competition and why you think they are NOT serving your targeted markets. How are they limited in serving the markets that you intend to exploit?
Investors of all stripes, angel, venture capital or private equity want to be able to identify the “upside” of investing with your company. Is your compony the next Google?, the next Facebook? Giving them glimpses into where you think the opportunities await will give them insight into the “upside” of investing with you.
If you have an interest in finding funding for your idea or if you have a new or emerging company in need of growth capital, I encourage you to access this article. It is well written and very informative. If you need assistance with hands on business plan creation or execution, I can help!