“Effective Business Plans & Presentations” At Venture Association New Jersey Meeting

By Robert P. Baker
The regular monthly meeting of the Venture Association New Jersey (www.vanj.com) was held on Tuesday, February 28, at the Marriott Hanover, Whippany, NJ. The featured speaker was Joe Allegra, General Partner, Edison Ventures (www.edisonventure.com), a regional Venture Capital firm specializing in Financial Technology, Healthcare IT, Interactive Marketing and eCommerce. His topic was how to prepare business plans and presentations that will attract Venture Capitalists (VC’s).
            “The first thing VC’s look for is a sound business model,” Allegra told the audience. “The business should not only be scalable with high gross margins, but income should include recurring revenue and not just one-time sales. It should also be based on a technological advantage that is difficult for competitors to imitate and that customers and prospects will appreciate.”
            Other things that VC’s look for in a business plan include:
An attractive market able to grow at least 5% a year for 5 years,
Strong management with the maturity and experience to recruit senior managers,
Potential buyers that can provide a clear path to an exit strategy, and
Competitive advantages that will enable the business to become a market leader.
An effective business plan should begin with an attention grabbing 2-to-3-page Executive Summary that will whet the reader’s appetite. “The first paragraph should include a compelling proposition,” said Allegra. “The rest should follow a structured presentation outline.”
A structured VC presentation outline should include:
Market Positioning including size and ability to be captured,
Needs & Gaps that exist in the targeted market,
A Unique Proposition telling how your product or service will fill existing needs and gaps in the marketplace, including a very brief description of your unique technology.
Competition including what problems you can solve that competitors can’t, and
Distribution Strategy including sales and marketing strategies to attract buyers,
Use of Capital and how it will lead to future growth such as by funding R&D,
Company Structure including key personnel and their relevant experience, and
Financial Details including 8-12 quarters of P&L, balance sheet, cash flow, etc.
Allegra then discussed, in descending order, the top ten communication mistakes made by entrepreneurs in presenting business plans:
10. Not being well-introduced by a trusted colleague.
 9. Setting company valuation themselves instead of allowing VC to do so.
 8. Being defensive, not open to feedback, not realistic about team.
 7. Failing to demonstrate evidence of sales ability, traction in the marketplace.
 6. Inability to differentiate product or service from competition.
 5. Presenting unrealistic/incomplete financials; withholding negatives.
 4. Failure to understand the customer or the customer’s problem.
 3. Having poor presentation and incomplete materials.
 2. Failure to do homework on types of investment favored by VC.
 And the number one communication mistake made by entrepreneurs:
1.     Not having a good grasp of competing products and companies.
In summation, Allegra listed nine attributes of “Fundable Businesses” that entrepreneurs should point out during their presentation because VC’s view them favorably when deciding whether or not to invest. These attributes are:
1.     Capital efficient business models
2.     Scalability
–        High gross margin and/or net margin
3.     High customer retention
4.     Recurring revenue
5.     Large, fast growing or emerging markets
–        If emerging, providing empirical evidence of why it will continue
–        Start in a niche, but articulate roadmap to expansion
6.     Realistic projections
7.     Team includes non-founders
–        Executives who have been there
8.     Founder/CEO looking for a partner, not just a check
–        Recognizes others may have good ideas
–        Open to debate to find the best answer
9.     Focus, focus, focus
The PowerPoint presentation used by Allegra at the February 28 meeting can be found in the Archives section of the VANJ website at www.vanj.com.
Next Meeting Tuesday, March 20
            The next regularly scheduled VANJ meeting on Tuesday, March 20, will be a panel discussion on the topic of, “Seed-Stage Investment: How to Get That First Round of Outside Capital.” The discussion will be moderated by Frank Graziano, Managing Partner, Monmouth Venture Partners (www.fjgraziano.com). The panelists will be Brian Cohen, New York Angels (www.newyorkangels.comwww.fscap.netwww.angel.co/rak-tech-fundwww.meetup.com/njtech) and DFJ/Gotham Ventures (www.dfjgotham.com). Biographies of the Moderator and all four Panelists can be found on the VANJ website at www.vanj.com.
Advance reservations can be made by calling Clara Stricchiola at (973) 631-5680, faxing (973) 984-9634 or e-mailing [email protected] and mailing a check ($35 for members, $55 for non-members) to VANJ, 26 Main Street, Chatham, NJ 07928-2402. Registration at the door is $75 after 12:00 Noon on Monday, March 19.