Being sector agnostic is not a term we take lightly here at SyndicateRoom; in fact, it provides one of the core principles of our platform. It allows our investors to create diverse portfolios by being able to lead in the industries they do know, and seek advice in those that they don’t. By extension, this also bodes well for our EIS fund, Fund Twenty8™, which is consequently exposed to a wide range of industries.
What this means is that the analyst team (myself included) views business plans and investor decks from a huge range of industries, from film to medtech to blockchain to marketing. Business plans are rarely consistent, and why should they be? Why should a plan for a marketing business be the same as the plan for creating pharmaceuticals?
The short answer is, they shouldn’t. But it’s unprofessional to leave a blog post at that, so I’m going to contradict myself.
Amongst early-stage companies there are certain consistencies that should be adhered to over many, if not all, industries. These are things that we look for when carrying out the reviews on the companies that are looking to fund through our platform.
The dream team
Clichés often exist because they’ve been proven true, and ‘people invest in people’ – one of the most frequent soundbites in early-stage investing – is no exception. Ignore the embarrassment of having to list your credentials on the business plan and do it, not only for you, but for your team as well. Your team is your rock (and sometimes the hard place as well).
You need to sell your people as well as your product because the road to success is long and you will need them to get there! Frodo without Sam would have been Gollum fodder (one for you Lord of the Rings fans). I recently spoke with an experienced VC who put his focus on the team over product as high as 80/20. If that doesn’t prove my point, I’m not sure what will.
Go one step further and add your advisors and non-execs. Key areas to mention include specialities, previous companies and exit experience. All of these people will give potential investors more confidence in your product and your business, making them more likely to follow interest with cash.
All about the Benjamins*
*(or insert suitable sterling reference)
You know what I said earlier about clichés? Well, brace yourselves for another. Make sure your eyes aren’t too big for your stomach, especially when it comes to financial performance.
Financials are crucial to any business plan and something that every investor expects to see. SyndicateRoom works with a lot of opportunities that are pre-revenue, which is fine, but we still expect to see a financial history up to the present and we expect to see projected figures for the future. Financial projections are at best, uncertain and at worst, deluded.
The key is to be realistic and to base your projections in achievable expectations. For a sophisticated investor, incredible claims require incredible evidence; if you are unable to back up your expectations with reasonable assumptions and a proper strategy, then your extraordinary claims are more likely to deter than attract.
Something else that should always be included: cash flows. Cash is king and to ignore it would leave you playing the court jester. Nine out of ten startups will fail, with one of the key reasons for this being they run out of cash. Investors know this and will be keen to view the business’s current cash position, expecting to see a controlled and sustainable burn rate. Finally, please make sure your financial terms are standard and that you’re using them correctly, otherwise investors (and analysts) will get confused. Cash burn and expenditure are not the same thing…
Market your market
To suggest that you don’t know the market you operate in is to commit funding suicide. It is vital that you include information about your market in your business plan, however, market statements should be relevant.
It’s not rare to see companies creating a niche product for certain markets and citing the size of the whole market in validation: ‘We create a drink, specifically a health drink made from coconut water and smashed avocado, that is high in protein and helps with IBS. The size of the food and drink market in the UK is…’
Break it down further, what’s your addressable market? What realistic impact/share can you expect to have? Just because you’re a drink doesn’t mean your competition is every other drink on the market. Make sure you have reputable sources to back up your claims, otherwise you may be undermining your case. This is also important for financial promotion compliance, which the FCA is very stringent on.
An understanding of who you are addressing, as well as your competition, is vital. It also helps validate your financial forecasting if investors can see you know in detail what the available opportunity is.
Read ‘em and [don’t] weep
We completely get it – you’re a blockchain company or a medtech company with some really high-end, impressive technology. You, rightly, want to shout about this technology – and so you should! However, blinding investors with jargon and coding is not the best way to make your case.
Technical readouts are always impressive, but rarely understood unless you’re addressing a specialist audience. Investors don’t want to feel stupid (and neither do I). Make sure your plan is readable for investors who don’t have that level of specialisation, but want to diversify their portfolios. You need to try and include examples of how your product may be used in day-to-day life or by a specialist – why is your product useful for the challenges they face? Sophisticated and specialist lead investors are always a fantastic way to validate your technology, giving others who don’t specialise confidence in the deal. And don’t be afraid to have several business plans/decks in the pipeline, with one being a lot more technical for those who have knowledge of the industry.
So, there we go, a few basics that should be considered in any business plan. But remember, all plans should be unique to your product and to your industry whilst retaining the key components that are likely to encourage investment. The best thing about my job is the diversity that entrepreneurs bring to my everyday work (we’ve also got a biscuit drawer and a coffee machine), so keep being creative, keep innovating and keep sending those investment decks.