October 18, 2014

Going beyond the 10 slides. Make sure your startup has a plan and a budget.

When raising seed or venture capital, having a traditional 10 slide presentation (plus backup slides) works well to communicate what your doing to traditional VCs and seed-stage investors and will go along way in raising capital.

However, you should spend quite some time thinking about different scenarios for the next 12 to 24 months and creating traditional budgets for those scenarios and not only create the slides. Having a plan and budget is much more valuable than most first-time technology entrepreneurs probably think.

It might be all about product, product, product the first 12 months of a startup, but if you run out of money you're dead, dead, dead and then product won't help you.

You should build a budget and a plan that allow you to raise enough cash to cover your costs for 12 to 18 months. At the end of the period you should be at cash-flow breakeven or have reached a milestone that will allow you to raise more capital.

If you're building digital services for mobile or the web, guessing your revenue is very difficult and quite risky unless you have some sales already. So assuming zero revenues is reasonably conservative from a cash perspective. But you should be able to estimate your costs quite well once you think through your team, business model, market and product.

By doing that thinking, you should have a good sense of how many people you need and how much to pay them, how much you need to spend on marketing (you're unlikely to grow entirely for free), office space, insurance, attorneys fees, travel etc. Figure out when different costs materialise and add it all up.

You will be a lot smarter about your business and more likely to succeed in both raising capital and building a company if you put in the time to understand how your costs will develop.

As the saying goes: "Plans are worthless, but planning is everything."

1 comment:

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