As I blogged here a while back, there’s broad agreement amongst the startup chatterati that traditional business plans are dead. MBA thinking is (allegedly) useless for entrepreneurs, bootstrapping (and low-end funded) companies are stuck at the front end of the [necessity—–strategy] spectrum, everyone is talking about Eric Ries’ “Lean Startups” (even if nobody yet knows how to fund them, grow them, or exit them) while Steve Blank’s customer development allegedly beats out old-school product development, etc etc. So far so loosely consensual.
Yet the problem with this is that nobody has stepped forward with an alternative – really, what should Business Plans V2.0 look like? As per normal, pointing out that something doesn’t work is a pathetically easy game to play: coming up with a viable alternative is much, much harder.
All the same, this isn’t just some temporary post-credit-crunch glitchette. At heart, a business plan should be designed as a precursor to substantive investment discussion between the parties – so even if you chortle knowingly at its hockey stick graphs and its optimistic market presumptions, it is an object designed to help channel the raw collaborative urge to form a relationship, to ‘get it on‘ (whatever ‘it’ is).
The problem with this is that, though always somewhat wobbly, the arrangement between angels, banks, and entrepreneurs has been pulled so taut of late that it has now has more holes than substance: the parties’ interests have diverged. What kind of business contract could ever equitably cover the post-sales angle of bank finance, the post-traction obsession of UK angels, and the late-prototype focus of UK entrepreneurs all at the same time? And what kind of business plan could possibly lay down a set of guidelines to bring such parties to any kind of agreement, when right now they don’t even seem to be in the same building as each other?
Putting startup theatre to one side, I’ll be honest: this is a difficult question to which I haven’t (yet) got a proper answer. Though I despair of the sub-MBA grandstanding most business plan templates are built on, these remain the de facto standard for the simple reason that they give you a pragmatically dull way of presenting loads of genuinely useful information. The reason I’m thinking about this right now is that I’ve been asked for an up-to-date business plan by some interested investors, but frankly I’m struggling to bring it all together in any kind of traditional format.
However, what I want to say is quite different from what all the templates seem to suppose – what kind of generic template has the cojones to say “if angels don’t invest in the next couple of months, I’ll negotiate a customer-funded deal within my industry instead, because that’s basically how damn close to market my startup is”? It’s all gone so far beyond the “here’s a nice little idea, will you fund it?” stage (you know, the one that government advisors think that all startups are at) that it’s just not funny any more.
So how can a pitch document ever communicate this urgency – how can it manage to get the core message across that “this is your last chance“? Though I’ve met so many great individual angels over the last 18 months, perpetually coming in second (as almost all of them habitually do) is perhaps the most effective procrastination tool yet devised – for with nobody to come in first while EIS is so heavily stacked against other ways of investing, ‘nobody leads‘ means ‘nobody invests‘, period. The single reason angels can even conceive of a 10x ‘home run’ on any startup investment is that they have to come in early – that’s the deal, that’s how it works. It’s not exactly an ISA, is it?
So, how best to present this? As always, I’ve got plenty of ideas: but even so, it’s a tough nut to crack. And yes, I’ve already had a trawl through various “business plan v2.0” sites (such as this one, PlanHQ, and even the rather laconic icon-based business plan summarizer from Rotterdam), but haven’t yet found anything that comes particularly close. Have I missed something really important? Leave a comment below, tell me what to look at!