The Essential Fundraising Question: What is Your Plan?

When introducing your startup to potential investors, there is so much to cover. Remember that the most important question to answer is what is your plan? All else is context.

The investor listened to the pitch: a passionately delivered story of a significant market need, buttressed by compelling statistics, that would be uniquely addressed by the novel product. With a questioning look, the investor asked the entrepreneur to articulate his plan for his startup. The investor hoped to gain insights into the myriad of interlocking decisions that would ultimately, if successfully executed, become the big, fast-growing, successful business investors dream of discovering early.

The story of a business is about casting a vision, demonstrating progress, and laying out the future actions you will take. Your plan is the way to showcase that in a manner accessible to potential investors.

Why this opportunity?

Before articulating your plan, you first have to lay some contextual groundwork about why this opportunity is worth pursuing: 

• What is the nature of the opportunity?
• How large and compelling is the market?
• How strong is the unmet need?
• What evidence do you have validating the opportunity and your solution?

What is the plan?  

Then you spend the rest of your time laying out your compelling plan for exploiting the attractive opportunity you have identified. Timelines, financial models, and other diagrams are helpful tools for articulating your forward-looking startup growth plan.

Conceptually, to articulate the “plan” for your startup, you will want to answer plan-related questions such as the following (as applicable in your startup’s case and in whatever order makes the most sense):

• What are the strategic choices you intend to implement with the funds you are trying to raise?

• What is your unique market insight, secret sauce, product positioning, and defensible competitive advantage?
• How will you break down your vision into actions that construct the business over a series of executable phases and defined value-enhancing milestones?
• What are your most urgent priorities now, and what could be deferred to a future phase? 

• What is your execution plan in terms of required people, processes, and technologies, laid out in appropriate phases? What are the triggers for investing in additional staff and formalizing your operations?

• What derisking strategies can you execute at various stages of development?

• How much capital do you need to raise, and what value-creating milestone(s) will you accomplish with those resources?

• Does your plan showcase the balance of essential elements of success?

How will investors evaluate your plan?

Remember, investors have either raised money from others (limited partners) who believed they had the relevant expertise to evaluate potential investments and manage an investment portfolio, or they have the experience of successfully building one or more businesses or otherwise generated sufficient wealth to become an accredited investor. After checking out your startup story and using their expertise, investors ask themselves:

• Do they believe in the opportunity you are describing?
  
• Do your assumptions pass their initial plausibility screen based on their experiences? 
  
• Does it survive a few quickly placed phone calls to their friends adjacent to the startup’s space to validate the strength of the unmet need, the uniqueness of the offering, the market’s challenges, and the competitive landscape?
  
• Do they believe your proposed plan makes sense and has an excellent chance of success?
  
• In laying out your plan, have you demonstrated the requisite creativity, tenacity, market awareness, discovery, and business acumen to be credible as a venture leader?

What happens if you have to change your plan?

The short answer is that you will have to change your plan because planning is, of course, a dynamic process. It requires making decisions and bets on what will be effective and what is likely to happen.

Even as I advocate for the critical importance of developing and articulating a single clear and compelling plan to investors, you (and your investors) should wisely expect the plan to evolve as you execute it. Outlining what you are aiming for with goals and boundaries provides a roadmap. Still, along the way, you will inevitably learn and discover new insights, wrong assumptions, and any number of other nuances that you did not anticipate. As you “do,” you may find more that needs to be done. Priorities may shift. Some goals may have to be pushed later, and others pulled forward. The shape or cost of things may expand or shrink in ways you did not account for. Then some of your carefully developed plans may need to be organically adjusted or abandoned altogether.