What funding you are requesting and what exactly you'll do with those funds is clearly a central issue. You'll need a clear statement of:

• How much funding have you received to-date, and from where
• Exactly how much funding are you requesting
• Exactly what is the purpose of the funding and what will you accomplish with it
• What is the next step beyond this funding round? (A next equity funding round? Funding from some other source? An acquisition? )

Although you will not want to include a detailed budget in your business plan, you'll certainly need to have done that work, so you have a clear idea of how much funding you'll need.

In determining the level of funding you'll request, it's good to remember that:

• Product development will likely take longer than you think
• There will be problems you didn't expect
• The sales cycle (especially early sales) will likely be (much) longer than you think
• The next financing round will take longer than you think.

So when it comes to sizing the round, estimate how much you really think you'll need, then make some pessimistic assumptions and come up with a larger estimate. The latter is likely to be closer to the right number.

Exit Strategy

Exit strategy simply means: how do investors get their money out of the investment? In other words, if they invest in your company, how (and when) do they get a pay-off?

Exit Strategy Options

There are two (money-making) exit strategies for investors:

• Acquisition
• Initial Public Offering (IPO) of stock

Looking at statistics, acquisition is by far the most likely exit for investors today.

The Not-so-Positive Exit

Of course, the other option is that investors could decide to shut your company down. That's a much less pleasant alternative, so the focus needs to be on creating value that will lead to an IPO or acquisition.

Potential Acquirers

You need to describe what companies are likely to acquire your company, and why. This should not be a vague, theoretical discussion. Name names, and describe why (once you've got market traction) these companies will want to buy your company.

And why would they want to buy you company at a price that would give the investors a good return?