A term sheet is a document that sets out the basic terms and conditions under which the VC will invest in your company. Work completed in the due diligence phase of the funding process is used to draft this document. The term sheet is generally non-binding and is used as a template, along with further…
In the realm of startups and burgeoning businesses, the term “angel investor” holds significant weight. These individuals play a pivotal role in fostering innovation, fueling entrepreneurial aspirations, and driving economic growth. But what exactly is an angel investor, and what distinguishes them from other forms of investors? Who Is an Angel Investor? Angel investors are…
Venture capital is money provided by an outside investor to finance a new, growing, or troubled business. The venture capitalist provides the funding knowing that there’s a significant risk associated with the company’s future profits and cash flow. Capital is invested in exchange for an equity stake in the business rather than given as a…
Starting a business requires a lot of resources, and one of the most significant challenges entrepreneurs face is securing funding to turn their ideas into reality. One of the most common sources of funding for startups is venture capital. Venture capitalists invest in early-stage companies that they believe have the potential for rapid growth and…
This section tells your potential investors exactly how you make your product or service available to customers and how you plan to get the word out about your product or service. Here, you should discuss your marketing channels and provide sales targets. It’s best to give a number of different marketing strategies, possibly beginning with…
The business plan is a detailed road map to your venture and how you plan to grow it into a successful business. It’s a crucial document for anyone seeking capital, and is typically developed with two audiences in mind: 1) angel investors – wealthy individuals who personally invest their money, expertise and experience in your…
Explain why you need the funds, sources of your funds, and what the funds will be used for. Give as much detail as you can for how the money will be used. Most common uses for funding include R&D, working capital, and purchase of equipment. Example: iWidget intends to raise $3.5 million in this third…
Venture capitalists look for businesses that have the potential to grow quickly to a significant size, yielding a significant return on the VC’s investment in a relatively short period of time. VCs are not just interested in start-ups. Your company’s current size is less important than its future aspirations and growth potential. A target company…
This section should include the names, backgrounds, and qualifications of key management and what their respective responsibilities are in your venture. Discuss why the management team is well qualified to make this business successful. If any of your management team, board, or advisors have had prior success as an entrepreneur, note this – it will…
This section of your business plan should briefly sum up your company’s history and how you got to where you are now. Explain how your management team and your business evolved, how much has been invested in the business to date and by whom, and what the ownership and legal structures are. You may also…
The exit strategy is the VC’s way of cashing out on its investment in a portfolio company. A VC often hopes to sell its equity (stock, warrants, options, convertibles, etc.) in a portfolio company in three to seven years, ideally through an initial public offering (IPO) of the company. The company becomes liquid through the…
There are some excellent alternatives to venture capital that you should also explore in your search for funding sources. One such alternative is an angel investor – a term for an investor that takes you under its wing and lifts you up to the next level of growth. Angel investors typically do not have deep…
This is one of the most important sections of your business plan because it lays out the viability of your venture. You should have at least a basic understanding of the numbers you’re presenting – sales forecasts, profit-and loss statements, balance sheets, and cash flow projections, etc. – before you speak with any prospective investor,…
The executive summary is by far the most important section of your business plan because it’s the first thing the busy VC or prospective investor will look for and read to get an idea of your investment opportunity. If your executive summary is compelling enough, the VC will read further, contact you for more information,…
Use this section to demonstrate to prospective investors that you’ve thoroughly researched the market you’re serving. Discuss projected growth of the industry, the profile of the typical customer, technological, regulatory, and operational issues, and what the competition is doing now and may be likely to do in the future. In sum, you want to show…
Put yourself in the place of potential investors when determining how to describe your product or service. An investor would want to know what you offer and why it’s better than what’s already available on the market. How is your product or service new and different? If the product or service is not yet on…
