How to Write a Business Plan for Angel Investors
Angel investors are wealthy individuals who invest money in other people's companies. Many times they get involved with ventures at the very earliest stage, and as such they are the most important source of capital for entrepreneurs starting companies. Angels invest their own money, in contrast to venture capital firms that raise money from institutional investors and invest it on their behalf. Angel investors often have earned their wealth in their own or their families' companies, so they have a keen understanding of the challenges of starting and growing a business.
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Instructions
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Show you need the angel's input. Angel investors provide more than capital. They are eager to provide strategic advice, giving the entrepreneur the benefit of their business experience--successes and failures. Make sure the business plan states that you welcome their participation and guidance. Never treat them as just a source of money.
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Construct an outline. Simplify the process by writing an outline for the plan in a question-and-answer format. Break up the writing task into smaller sections and you will find it is much easier to complete.
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Consult with your team. Let all the key members of your management team assist with the development of the business plan. Understand that the plan is not only used to attract angel investment, it is the blueprint you and your team will use to create and grow the business.
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Strive for clarity. Don't assume the angel investor is as knowledgeable about your technology, your industry, or your target markets as you are. Use simple terms to explain how your technology works. Don't try to dazzle the angel investor with technical jargon.
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Explain the benefit of your product or service. Show that what you will be offering is clearly superior to what your competitors are currently offering. Don't just talk about the problem your product or service solves for your customers, explain why solving the problem is such a high priority for them that they are willing to spend money to solve it.
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Go into depth about the management team. Recognize that having a great idea or a great technology does not guarantee you will get capital. For angel investors, the decision comes down to whether they believe the manage team can execute the steps and strategies outlined in the business plan. Provide as much information as you can about the experience and prior success of each member of your management team.
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Make the financial projections realistic. Angel investors discount the entrepreneur's projections anyway, but presenting numbers that are clearly unrealistic can damage your credibility to the point they tune out other aspects of your presentation. Document all the key assumptions you used to construct your financial models so the reader can understand your logic.
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Write the executive summary. After you finish the full business plan, create a two-to-three page summary of the document to use to introduce the company to potential investors. Take the time to make the summary as clear, concise and exciting as possible. The goal of the summary is to cause the investors to request the full plan. It is your first chance to impress them.
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Tips & Warnings
Have your attorney prepare a non-disclosure agreement (NDA) for angels to sign before receiving the business plan.
Be prepared for tough questions when you present your plan to angels. Angel investors' considerable business experience enables them to identify weaknesses in an entrepreneur's business strategy. They ask tough, blunt questions.
Avoid the two major errors entrepreneurs make in their plans: underestimating the time it will take to introduce the product and build a large customer base, and underestimating the cost of entering the market.
References
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