Sherpa Partners - Submitting Your Plan
Tools to Help Create Your Plan
 

Pitch Document Criteria

Submitting Your Plan

Investment Criteria
What NOT to Say

 

1. The Elevator Pitch

  • Who you are?
  • What market are you in?
  • What is the size of the opportunity?
  • Why will you win?

Can your entire business premise be distilled into an efficient statement(s) that will make the listener/reader “want more”? Can you make the “20 second pitch” compelling enough to make “the cut” with a screening committee? Can you use the word “first” or “only” in your pitch? Can every person in your organization deliver the pitch with passion?

2. Executive Summary

  • Overview
    • A paragraph or two extending the “20 second pitch”
  • The Market & Opportunity
    • Size of the opportunity & growth rate
    • Target Market
  • Target Market & Strategy
    • Explicit Problem
    • Your Solution
    • Proprietary or Strategic Advantage
    • Strategic Plan Overview
  • Management Team – Alliances - Partnerships
  • Exit Strategy
  • Financial Projections
  • Funding Requirements – Use of Funds

The purpose of the Summary is to give the reader a few crisp, key pages to better understand the opportunity and why YOU are going to win. The goal - to beat the “cut”, prevent objections, and “sell” the next step/opportunity - a 45 minute face-to-face pitch with your PPT presentation.

3. PowerPoint Presentation

  • 8 to 14 pages
  • Stand-alone template to accompany the Executive Summary

The PPT should be created as a visual template to augment a 15-minute, face-to-face overview presentation. It should NOT be a document for your audience to “read” – that’s what the Executive Summary and Business Plan are for! Keep it short – hit the highlights – practice the presentation with PASSION!

4. Business Plan

  • Executive Overview
  • The Company
  • Management Team
  • Market Overview
  • Target Market Opportunity
  • Product/Service – Proprietary, Sustainable Advantage
  • Competitive Analysis – Barriers to Entry · Operating Plan
  • “Go to Market” (Sales) Strategy
  • Detailed Revenue Projections w/ Key Assumptions
    • Monthly statements year 1 – quarterly year 2 & 3
  • Milestones
  • “Path to Profitability” Projections
  • Funding Requirements and Use of Funds
  • Capitalization Table
    • Shareholders - % ownership per class - total # shares fully
    diluted - anticipated offerings - option pool, etc.
  • Exit Strategy

Venture firms seldom read Business Plans during initial due-diligence. However, it is “assumed” that the information exists for review when and if your plan makes the first pass. Normally, you get one shot…make sure the information and assumptions have been clearly outlined in the Business Plan.

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When the venture firm receives your Executive Overview, a partner will assume sponsorship of your plan and begin the internal process as follows:

1. First Pass Overview:

a. An analyst will review your Overview and PPT to see if your company documents can communicate the premise. IMPORTANT - see Sherpa’s Pitch Documents Criteria before you submit your plan.
b. If the partner decides to “pass” after review with the analyst, you will receive a letter outlining perceptions on the merits of your plan, and “pass” justification.

2. Second Pass Overview (Full business plan review / management team meetings):

a. Plan Validation (customers, analysts, partners, etc.)
b. Competition (barriers, sustainable advantage, etc.)
c. Valuation (cap table, ownership analysis, market data, etc.)
d. Exit (implied or explicit)
e. Team
f. Summary

3. Technical Due-Diligence:

4. Valuation Analysis

5. Investment Recommendation to Partners:

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Investors focus on early-stage equity investments that have 5 common characteristics:

  1. Large emerging market
  2. Clearly differentiated product or service
  3. Market validation
  4. Outstanding leadership
  5. Commitment to growth and shareholder’s value

Generally, investments are made in the first institutional or “A” round. This round, normally ranging between $3 Million and $10 Million, is typically sought after conventional seed or angel rounds have been realized.

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WHAT THEY SAY... WHAT THEY REALLY MEAN...
We conservatively project… We read a book that said we had to be a $50 Million company in five years, and we reverse-engineered the numbers.
We took our best revenue estimate and divided by 2.
 We accidentally divided by .05.
We project a 10% margin. We did not modify any of the assumptions in the business plan template that we downloaded from the Internet.
The project is 98% complete. To complete the remaining 2% will take as long as it took to Create the initial 98% but will cost twice as much.
Our business model is proven. …if you take the evidence from the past week for the best of of our 50 locations and extrapolate if for all the others
We have a six-month lead. We tried not to find out how many other people also have a six-month lead.
We only need a 10% market share. So do the other 50 entrants getting funded.
Customers are clamoring for our product. We have not yet asked them to pay for it. Also, all of our customers are relatives.
We are the low-cost solution. We have not produced anything yet, but we are confident that we will be able to be.
We have no competition. Only IBM, Microsoft, Netscape, and Sun have announced Plans to enter the business.
Our management team has a great deal of experience... ...consuming the product or service.
A select group of investors is considering the plan. We mailed a copy to everyone in Pratt's Guide.
We seek a value-added investor. We are looking for a passive, dumb-as-rocks investor
If you invest on our terms, you earn a 68% IRR. If everything that could ever conceivably go right does go right, you might get your money back.

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