Business Plans and Raising Capital

Business Plans and Raising Capital in 2009



Even if you are going to ‘friends & family’ a good business plan is critical if you want other people’s money invested in your company. If you are going to seek funds from a bank, angel investor or Venture Capital Group (VC), it better be a very good plan custom written for your company specifically.

First of all pay attention. Don’t get patronized. Any group that offers to write you a business plan for a fee and also claims that they will show the plan to a network of private investors, VCs they know or a list of top banks that they work with is telling less than the truth. Think about it. They don’t know you. They haven’t written the plan yet. How could they know you are fundable and worthy of risking their reputation on before the details of you company are laid out? Would you bet 10% your net worth on a horse and then ask which horse did you bet on later?

Second, if you are not just coming out of a comma; you know times are tough. VC investments in the first quarter of 2009 were 50% of the amount invested first quarter 2008. At $3.9 Billion that’s the lowest level since 1998 when the Dot-com bubble burst.

So there is still money flowing just not as much as in the past. That means your management team, product or service and your company’s competitive advantage in your market better produce a cash flow that will generate an attractive return on the investment you are asking for.

As far as a bank or Small Business Administration (SBA) loan goes; the atmosphere is just as thin. Besides the above list VC requirements you will also need FICO scores over 720, several years of the company’s and the management’s past tax returns.

This brings us back to the beginning. Early stage and growing companies can still get capital to build and develop. First, however, put together a custom business plan that answers the questions the banks and investors will be asking.

It will make you life much easier.
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