Business Plans: Jim Goetz, Sequoia Capital

Transcript

the topic today says business plans it's more about raising Venture money and arguably from a perspective that uh everybody you heard from in the prior session may not agree with it's a very Sequoia specific look at what we look for we're thinking about making an investment in a series a company my own background I was actually in this room I'm goi... Read More

Summary

In this video, the speaker discusses what venture capitalists look for in a business plan when considering investing in a company. He shares insights and advice from both an entrepreneur and investor perspective. The speaker emphasizes the importance of having a compelling and unique value proposition, identifying unfair advantages, understanding the market strategy, building credible barriers to entry, and having a strong founding team. He also discusses the significance of financials, unit economics, and the sales learning curve. The speaker encourages entrepreneurs to take ownership of the meeting and manage it effectively, as well as be selective in choosing venture partners.

Questions & Answers

Q: What are venture capitalists looking for in a business plan?

Venture capitalists are looking for a compelling and unique value proposition, as well as identifying unfair advantages. They want to understand the market strategy, credible barriers to entry, and the strength of the founding team. Financials and unit economics also play a significant role in evaluating the potential of a business.

Q: How can an entrepreneur convey a compelling and unique value proposition?

An entrepreneur should focus on clarity of purpose and be able to explain, in two or three declarative sentences, what makes their business unique and compelling. They should highlight how their product or service solves a specific pain point for a specific customer.

Q: What is the significance of unfair advantages in a business plan?

Unfair advantages are an essential part of the market strategy. Venture capitalists want to see how a company plans to create a barrier to entry and differentiate themselves from competitors. Unfair advantages can include technical barriers, market expertise, partnerships, or user-generated content.

Q: How important is the founding team in a business plan?

The founding team is crucial in gaining credibility with venture capitalists. Investors want to see a diverse team with different areas of expertise and a track record of success. It is often more important to have individuals with deep domain knowledge and a passion for solving the identified pain point than relying solely on executive titles.

Q: Do financials play a significant role in evaluating a business plan?

Yes, financials are essential and investors do pay attention to them. Venture capitalists assess the numbers to understand the entrepreneur's thinking about the economics of the business. Unit economics, such as cost of customer acquisition, churn, and lifetime value, are particularly important in certain industries.

Q: What is the sales learning curve, and why is it relevant to a business plan?

The sales learning curve is a concept developed by Mark Leslie that outlines the challenges and assumptions involved in building revenue for a business. It emphasizes the importance of iterating on the recipe for success, understanding market positioning, sales compensation, and training. The ability to achieve repeatability is critical to a company's growth.

Q: How should an entrepreneur manage a meeting with venture capitalists?

It is important for an entrepreneur to take ownership of the meeting and manage it effectively. They should prepare for common questions, highlight key points, and be proactive in addressing any concerns or uncertainties. It is also essential to listen to feedback and use it to hone the business plan for future presentations.

Q: What factors should an entrepreneur consider in choosing venture partners?

An entrepreneur should seek venture partners who have a genuine interest in their industry and business, show enthusiasm and engagement during the meeting, and have a track record of successful investments. It is important to have a good fit in terms of values, culture, and long-term goals for the company.

Q: Should an entrepreneur share their slide deck in the first meeting with venture capitalists?

It depends on the situation, but it may be more effective to provide a brief paragraph outlining the unique value proposition and unfair advantage instead of sharing the entire slide deck. This approach creates curiosity and allows the entrepreneur to manage the meeting and focus on key points. The entrepreneur should consider the specific venture firm and its preferences.

Q: How should an entrepreneur create scarcity value and target specific venture partners?

Entrepreneurs can create scarcity value by being selective in the venture firms they approach and building relationships with advisors and mentors in the industry. By doing their homework and identifying the key questions and concerns venture capitalists may have, entrepreneurs can target those firms that align with their goals and are genuinely interested in their business.