Honest question for early stage investors (angels/funds). Why would you ask an early stage company (just launched and certainly pre-product market fit) for a detailed business plan? I’m talking about financial projections, hiring plan, expenses plan, product milestones.
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This is is exactly why founders *HATE* this. There are other ways to do this that aren’t an utter waste of the founders’ time.
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Such as?
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Keith’s answer was my first thought also. I thought rather obvious. Same reason why one gets strange questions in interviews, ie, “what does a 747 jumbo jet weigh?” Not looking for right answer but ability to think through the question with some reasoning.
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Isn't this sort of analogous to standardized test -- they just prove whether you can perform well on standardized test. Can you give examples, with the exception of Bezos, who created such a plan pre-product market fit? Time is valuable, seems better spent iterating and selling.
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For us it helps us understand a founder's thought process - it's all assumptions after all. How do they estimate/how well they understand costs, CACs, hiring, revenue, margins, etc. Anecdotally, founders who can plan well also execute well, others meander without clarity.
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"business plan" is a bit much. nevertheless anyone raising a seed round should have a plan for spending it. anything less doesn't show diligence. to be honest, we were asked this question. and the first time we didn't have an answer. that was enough to get us thinking.
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and the process of formulating the answer was more useful to us than it was to investors. "A bad plan beats no plan every time."
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Planning for is helpful but there is no learning like doing it and seeing how far from the plan reality is
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I don’t think “detailed” pro formas are useful, but having a true understanding of the biz’s economics and general math around the business is crucial.
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I don't want a business plan but I do want to know who you want to hire, what you want to spend on & if there are any largish costs you need to get into business Spreadsheet that details the timing of these is important We regularly see significant over & under estimations
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Business plans r like software simulations. Framework to help you identify variables and think through scenarios. If done correctly. Key is understanding objective mapping (terminal objectives > enabling objectives > dependencies, conditions, actions, resources, timing, etc.
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