Some startup founders succeed without writing a business plan.

Great timing. Great determination. Or maybe just a whole lot of luck. But chances are, those founders will fail.

A great startup business plan can help you beat those odds (especially if it’s written around six months to a year after starting your business). A great business plan is also what helps venture capital firms find the best companies to invest in.

So what do those investors want to see in a business plan?  

Different investors bring different perspectives, experiences, and goals to the table. As with most things, the key is to know your audience—and to tailor not just your pitch but also your business plan—to that audience.

How to get investors with your business plan

Here are some of the biggest things venture capitalists tend to look for in startup business plans.

1. Proof you believe customers are everything

According to Michael Lints of Golden Gate Ventures, “Putting the customer first means you’ll spend every single dollar making sure that your customers are happy… When I go through the financial model, I look at where does every single dollar go in terms of your customer?”

Successful startups only spend money when it makes a real difference to their customers. They know success is not defined by trendy office spaces or cool perks; success is defined by customers.

And by the revenue and profits that result from putting the customer first.

What that looks like in your plan

  • The Products and Services part of your business plan should clearly describe the value customers will receive.
  • The Financial Analysis section should show the specific purposes of your expenses—and the revenues and profits that will result.

2. Proof you have a big vision

Your scope of ambition—the scale of your idea—is crucial. Here’s what Sequoia Capital has to say about the Airbnb business plan:

“It was their ideas, the clarity of their thinking, and the scope of their ambition. We love partnering with founders hell-bent on bringing an idea to life that conventional wisdom deems impossible. And we love to partner early—when an idea is newly formed and has the maximal room to grow.”

Your vision must dramatically improve on the current solution that exists. Quality, cost, service, reliability… your vision must make a tremendous improvement.

Why “tremendous?” Small, incremental improvements are important (and can provide the foundation for a business), but VCs look for the potential for massive improvements that can result in massive revenues.

VCs know every investment won’t be a home run. But they go into every investment hoping that it will be.

What that looks like in your plan

  • The Overview and Objectives section of your business plan should lay out the scale of your improvements.
  • The Market Opportunities section should detail how much a tremendous improvement will matter to potential customers.

3. Proof you’ve nailed five key points

Henry Wong, a VC and a founder of CNet Technology Inc. (and a number of other startups), recommends entrepreneurs hit five key points:

  1. Team
  2. Market
  3. Technology
  4. Customers
  5. Special connections

Why? No one accomplishes big things 100% on their own. Assembling the right team is vital.

So is understanding the market, understanding the technology required (whether you will build or adopt), and understanding your customers.

And so is describing the people, companies, partners, mentors, etc. that can help smooth the way for your success. Who do you know and how can they help you?

Where startup success is concerned, it takes a village. The right village.

What that looks like in your plan

  • Weave the five points into the Management Team, Market Opportunities, and Product and Services sections of your business plan.

4. Proof you’ve polished your business idea until it shines

Compared to a one-page business plan, a 100-page business plan may be impressive. But that doesn’t mean it’s automatically better—or more likely to attract VC funding.

Prime example: Dropbox founder Drew Houston’s application to Y Combinator.

Notice that while he did have a minimum viable product, he didn’t have a team (yet). He didn’t have revenue. But he did have an initial proof of concept, and a sense of his exit strategy.

And most importantly, he had a clear vision, one that said exactly how Dropbox was different than what currently existed. Plus, it could be described in just two sentences:

“Dropbox synchronizes files across your/your team’s computers. It’s much better than uploading or email, because it’s automatic, integrated into Windows, and fits into the way you already work.”

While that may not sound groundbreaking today, in 2007, it was.

And it’s why Dropbox is now worth billions of dollars.

What that looks like in your plan

  • Your vision should be direct and clearly stated in the Executive Summary section—and remain clear throughout the entire business plan.

5. Proof that you have something to talk about

According to Guy Kawasaki, ten slides is all a business plan needs.

That, and a prototype. “If a picture is worth 1,000 words,” says Kawasaki, “a prototype is worth 10,000 slides.”

“It’s about demonstrating your idea,” Kawasaki describes. “If you don’t have the prototype, you won’t sell the idea. And if you get the prototype right… you may never even have to pitch.”

Keep in mind a prototype doesn’t have to be a minimum viable product, or actually even work. The key is to show what customers will see and to provide a sense of how they’ll use your product or service.

Don’t just say what you will do. Show what you will do.

What that looks like in your plan

  • Include mockups of applications, models of physical products, and proposed workflows throughout your business plan.

6. Proof you don’t just “believe” in your idea. You constantly test everything.

As DreamIt Ventures partner Maureen Rinkunas says, “Your early ideas are assumptions built on assumptions, so you have to test these assumptions. When you start out, it’s very high risk and investors want to look at how you’re decreasing that risk for them.”

Startup founders trust their instincts. Successful startup founders also trust their instincts—but they also trust data. They trust the process of validating a business idea. They trust the power of testing.

Investors like ideas, but they love knowing your startup will work as hard as possible to refine and adapt and improve an initial idea. And make it great.

Which no startup can do unless it embraces a culture of testing.

What that looks like in your plan

  • The Products and Services section should describe previous products and results from A/B testing. How you arrived at your current state should provide insight into the way you and your team think and operate.
  • Describe what you plan to do if some of your assumptions, predictions, or forecasts turn out to be incorrect. While you don’t have to say how you’ll pivot, you should be able to describe how you’ll adapt.

7. Proof you have a clear exit strategy

Even though many VCs are willing to take long-term positions, all expect to someday receive a return on their investment.

Which means that someday they expect to cash in.

As Dave Lavinsky of Growthink says, “Be sure to provide comparable examples of firms who have successfully exited… the investor wants to see this planning in order to better understand the management team’s motivation and commitment to building long-term value.”

What that looks like in your plan

  • Describe exit strategies in the Financial Analysis section. (And if you really want to be bold, foreshadow your exit strategy in the Executive Summary section.)

While you may hope to run your startup for the rest of your life, once you take on investors, you’ll need to embrace their goals and vision too. (After all, now you’re in it together.)

Recognize that fact.

And more importantly, if you hope to attract investors, take that into account when you start writing your first business plan.

Ready for the next steps? Tackle the other essentials of starting a business with Gusto’s comprehensive guide.

Jeff Haden Jeff Haden is a writer, speaker, small business management expert, and Inc.’s most popular columnist. He's the author of The Motivation Myth: How High Achievers Really Set Themselves Up to Win.
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