I just finished reading and commenting on a business plan written by a professor at a prestigious University. I found some things in common with previous business plans written by professors and academics and I thought I would capture that here.
First, the easy comment — too many words. And often passive verbs. The important parts of a business plan do not need much exposition. Investors look for gems, concepts that could explode out of the limitations on the way an industry currently works, technology that cannot be easily duplicated, and well-timed introductions to the market.
The main point — don’t be a professor and educate the investor without making your pitch.
Academic business plans provide a lot of education. It is one of the reasons I enjoy reading them — I learn a lot. The professor provides the information they would normally provide to people in their world: an administrator, a student, a donor, or a visiting scholar (from outside their specialty). It is entirely possible to finish reading the plan and love the concept — but want to invest in a completely different company pursuing the same opportunity. To be convinced by the compelling education and put off by a lightweight description of the company (the investment vehicle). Investors cannot invest in a concept, they have to invest in companies. So don’t blow your chance to sell your company’s strengths in addition to the market idea.
Maybe this is the way to put it: Let someone else educate your investor on the market space, your job is to educate them on why your company will conquer the space. Not the other way around.
What are the key things that academics forget and would be evidence for a good investment?
- People. Who are you? Is this research that you have spent 10-20 years perfecting and no one has replicated the full technique but you? Are you the most cited person in the field? Have you been part of academic spinouts before?
- Technology. What have you built that exceeds all commercially available techniques on the market? Patents, of course. What is the speed/throughput/accuracy/benefit where your method outpaces commercial solutions (real #s from real tests)?
- Risk mitigation. Are you using a SBIR grant for development? Can you get another? Is your intellectual property negotiation complete?
- Have you sold anything yet? Most academic plans have not, but if you have….
- Plans. Do you know your next two big milestones and how long you think it will take? What are proof points that make the company more valuable?
- Established space, labs, personnel. Many plans have none of this yet, but if you have any, specify. This includes working prototypes in your academic lab.
- Many people put in partners and potential customers — an interesting read, but too easily duplicated. So many people will “take a meeting” and that ends up in a business plan as a “sure thing”. Use sparingly.
Generic-proof your writeup. Imagine one of your college sophomore students who writes well has just written something nearly identical to your plan — just a generic, “someone ought to do this” plan based on a lecture you just gave. What have you put into your plan that this imposter cannot? What space have you wasted writing material that this imposter has just duplicated? Examples of generic-resistant points–
- Your degrees and position.
- Your papers and citations.
- Prototypes – real results from prototypes.
- SBIR and NIH/NSF grants.
- Established commercial lab, company formed, employees on payroll (if you have any of these).
- Customers & revenue. Gold standard.
- Patents and legal agreements owning IP or license to IP.
- Previous commercial success, partners with previous success, including advisors.
None of these can be duplicated by an imposter and most cannot be duplicated by a colleague in your field at another university. Make your company unique; a good investor knows there are other options, so they have to believe you are the best or only one that can do your main thing.
Side note: Your introduction may still need to inform (within reason) and avoid jargon. But your technology or product description section can be filled with jargon. Good investors will be handing it to another PhD or an established businessperson in your space to solicit an evaluation. I have done many of those evaluations. Lack of any detail anywhere in the plan loses the opportunity to impress an expert in the field.