In Search for Venture Capital, Best Plan May Be to Skip Business Plan
Do entrepreneurs need a detailed business plan to get the attention of venture capital firms?
No, according to a panel of top-flight venture capitalists, or VCs, who discussed what might be the question of the moment for start-up businesses at last week’s Los Angeles Venture Assn. conference.
In fact, many panelists said they do not want to see business plans because they haven’t time to read them. They said they prefer a two-to-five-page summary that covers the key elements of a proposal.
“Everyone is strapped for time,” said Tony A. Hung, general partner at Torrance-based DynaFund Ventures.
The summary should include the problem solved by the proposed business, a review of competition and an estimate of market size. William Quigley, principal of Pasadena-based Idealab Capital Partners, said VCs look for markets with sales of $10 billion or more.
“If you’re in the single digit range”--single billions, that is--”and there is rapid growth, that’s OK,” said Quigley. “If not, it is too small,” given the competition among Internet-related companies nowadays.
VCs want management resumes and references and look for expertise in the type of business being proposed. “And don’t lie,” said Frank R. Kline, managing partner of Kline Hawkes & Co. of Los Angeles. “We hire private detectives” to check out resumes.
Would-be entrepreneurs who follow these steps face another hurdle: finding a lawyer, accountant or experienced entrepreneur who can introduce them to a VC. Few venture capitalists devote much time to proposals they receive cold.
“I must get 3,000 business plans a year,” said Kline, who told several hundred conference attendees how he handles unsolicited proposals he receives via e-mail. “Delete, delete, delete.”
