You worked hard to create a business plan and now you’re ready to present.  Remember that great ideas are common; much rarer are businesses with the people and products to enter and dominate a market.  Knowing that only 1% to 2% of business plans are funded, I’d like to provide a checklist that you could employ in advance of your presentation.

Work down the list comparing your plan and presentation, to the questions found in each Bold section.  Make sure you know your strengths and weaknesses going in, and try hard to eliminate obvious gaps.

As I’ve mentioned earlier, investors buy management teams, not ideas or even products.  People build companies, and better teams build better companies.

Please find below, in no particular order, a few key success factors that you can work to improve the potential of your plan and its associated presentation:

Team — Can you demonstrate years of operations experience in a similar industry?  Do you have real world startup experience that led to a successful exit?  Are you hungry and willing to be coached?

Market – Is your market growing or stagnant?  It is truly addressable with customers ready to buy?  Are you creating a disruption in the space? What is your plan to get customers? Please explain your conversion ratios.

Technology – Is your technology protected?  What is the “secret sauce?”  Can your innovation be used to create a defensible position today and down the road?

Competition – Who is the competition? (Saying we have none is an automatic fail.)  What are their strategies?  Which have worked and why?  Which have not and why?  Why will you win?

Business Model – What is your business model?  Is it unique or disruptive?  What problem are you solving?  Is there real pain to be addressed?  Is your product a “must have,” vs. a “like to have?”  Are others using a similar model to success?  How long until you get to cash flow positive?

Risks – What are the risks to your plans execution?  What are you doing to mitigate them?  What are the your “CSF’s?” (critical success factors)  What must happen in your assumptions for you to be successful?  Which assumptions do you consider critical?  Which assumptions make you most nervous?

Financial Projections – Do your projections show a highly defensible set of assumptions that truly lead to the achievement of your plan?  What is your monthly burn projected to be?  How do you plan to deploy cash?  How frugal can you be?

Capital Structure – What type of business entity are you?  Do you have a cap table? Does your capital structure reflect your own investment? (Skin in the game.)  Have you planned for future allocations of stock?  Do you have too many investors all with varying expectations?  Are there structural burdens on the business that this financing is to relieve? (I hope not.)

Exit Strategy – Who is a likely acquirer of your business?  What deals have been completed in your space?  What were the key metrics and ratios of those acquisitions? Do you have an exit strategy?

Investment / Use of Funds – What is your offer?  Does it include a valuation backed by key metrics and rations?  Detail how you will use the funds.  How long a runway will your funding provide?  Detail expected future rounds and the uses of capital from each round.

Conclusion: No matter how hard you try, your plan is going to change.  Everything from your projections to your team, to competitors and their offerings will change.  Under all circumstances, you can expect to be making major changes to the moving realities of the competitive market.  You must demonstrate that your team is up to the task.

I trust the above will aid you in getting ready to present your plan.  Working through this exercise is much like being tackled day after day before the big game.  You now know what to expect and hopefully are ready to respond with clear and thoughtful answers.

Your comments are always welcome.  Let us know who you are.  Join a feed above and become part of our team.

Having founded and run a number of software startups, I have come to believe there are valid reasons why startups should make efforts to protect their IP. However, when you’re getting your new venture off the ground, the key is to make sure your protection efforts are in line with the stage and goals of your business so as to provide you with what you need, when you need it, and at the lowest possible cost.

One thing I learned during the early stages of my last business: IP protection does matter when it comes to raising angel or venture financing. For the most part I think it’s simply a checkbox for investors: “…are these guys thinking about this or have they completely neglected it?”. However, and as Eric wrote in an earlier post, most times you’ve only got one shot to pitch an investor; being fully prepared to answer the questions they think are important is key. For most, IP protection is one of those questions.

PROVISIONAL PATENTS

Prior to raising our first major round of financing at my most recent company, we made the decision – based on advice from a couple seasoned entrepreneurs and investors – to file a provisional patent on our product and its underlying technology. For those new to the patent process, a provisional patent is what you generally file before filing a non-provisional patent (i.e., a real patent). Provisionals are great in that, for a nominal filing fee (using an IP attorney total cost came out to $1-$2K if I recall correctly), you will get full protection of your idea for up to 12 months. The USPTO website sums up provisional patents as such:

Since June 8, 1995, the United States Patent and Trademark Office (USPTO) has offered inventors the option of filing a provisional application for patent which was designed to provide a lower-cost first patent filing in the United States. Applicants are entitled to claim the benefit of a provisional application in a corresponding non-provisional application filed not later than 12 months after the provisional application filing date. Under the provisions of 35 U.S.C. § 119(e) , the corresponding non-provisional application would benefit in three ways: (1) patentability would be evaluated as though filed on the earlier provisional application filing date, (2) the resulting publication or patent would be treated as a reference under 35 U.S.C. § 102(e) as of the earlier provisional application filing date, and (3) the twenty-year patent term would be measured from the later non-provisional application filing date.

FILING COSTS

As mentioned above, provisional patents are exceedingly reasonable. According to the USPTO’s current fee schedule, total cost to file a provisional patent application is $220. If you involve an IP attorney, you can expect the total cost to file a provisional patent to increase to somewhere between $1K-$3K. Compare that to a non-provisional patent, which can cost (depending on if you’re seeking domestic and/or international protection) anywhere between $40K-$100K to file and protect.

ATTORNEYS

We decided that we wanted to involve an IP attorney from the get go. We did this primarily because we knew we were going to file a number of non-provisional patents within that 12 month window and wanted to make sure our provisional filing laid a proper foundation (i.e., make sure we didn’t neglect anything that we’d want to claim later on). The process of selecting a good IP firm/attorney is a topic we’ll deal with in a future post, however having gone through the process, our general rules of thumbs (in this case for a software company) are:

1) Make sure the firm has a practice group that has specific knowledge/experience with your business’s technology and market.

2) Make sure your attorney is a partner, not an associate.

3) Make sure the firm has existing clients that are of similar size and stage to your company.

THE BENEFITS

While we had plans to file non-provisional (i.e., real patents) on our technology, the provisionals provided us with a quick, cost-effective way to get some protection in place prior to walking into a angel’s/VC’s office.

To make a long story short, the fact that we had filed provisional patents played a big part in our being able to successfully raise our first major round of financing from a couple of professional angel investors.

Will be happy to answer any questions you may have. Stay tuned for future posts on the topic of IP and other legal issues/considerations facing startups.