You Need Sales Tools
Perhaps your background is not in sales, but this is a good time to start thinking like a sales person.
For a sales process (i.e., convincing an investor to invest in your company) you need sales tools. And you need sales tools that are appropriate to the target audience. By sales tools, we primarily mean:
- Business plan (required by some VCs – not required by most angels)
- Financial projections with detailed back-up and defensible assumptions
- Executive summary
- Elevator pitch
- Investor presentation
- Industry expert references
- Customer references
- Strategic partner references
Is a Business Plan a Sales Tool or a Planning Tool? Answer: it is both. Yes, it represents your best thinking in terms of planning for the success of your company. So it is a planning tool. But it is also a sales tool. (And so is the executive summary.) So you need to make sure that both documents look professional, are well written, and are appropriate to the target audience, which is VCs.
What does “Appropriate” Mean? You have to assume that the VC you will send your Executive Summary to is familiar with your target market (because you qualified the VC, right?) but you also need to assume that the VC is not all that technical, so do not go into deep technical detail on your product in the business plan. Instead, focus on the things a VC cares about, as per our typical business plan outline.
When you have an interested investor, you’ll generally send them your executive summary, not the entire business plan. (Unless they ask for the whole plan.)
Industry Expert References
Are there respected experts in your industry who you can educate on your strategy, and then use to help explain to investors that you are indeed addressing a real market need? If so, they can be of great help. Note that if you don’t have a product yet (so they can’t really comment on the product) it is still valuable to have industry gurus who can validate the “problem” that you’ve identified and, hopefully, validate your overall concept for a solution.
Lining up these experts before you start talking to investors is very, very helpful.
The comments about industry experts apply to customers (or prospective customers) also. Even if you don’t have a product yet, it is very, very powerful to have some major prospective customers validating the market need and saying, in effect, “if this startup company can do what they are saying they can do, we would be very interested”. That’s pretty good early validation.
So again, line up customer (or prospective customer) references before talking to investors.
The same story. If you’re working with strategic partners, line them up as references to validate the market and to talk about what a strong team you have!