No business plans, please
I remember the days when investors asked for and reviewed the startup business plans as if they were reviewing requests for bank loans to open yet another chain restaurant. It didn’t feel right back then and surely feels wrong today. So what’s the problem of business plan in today’s world for a startup, especially an early-stage one?
Simple: today’s world changes too fast, way too fast.
If you spend a lot of time writing a business plan, you tend to suffer from the over-confidence bias. You fall in love with your well-crafted plan and start to believe that it’d no doubt lead to the eventual success of your startup.
But your users won’t care how beautiful your plan is. The macroeconomy won’t care, either. If your products/services fail to achieve a certain product-market fit, any plan set in advanced becomes useless immediately. Worse, since you have fallen in love with your business plans, you might continue on a descending path and burn the precious cash toward the wrong direction.
Or even if the direction turns out to be right, you’d be satisfied to have stayed on-schedule with the plan and not push for that extra mile everyday. You then end up being surpassed by your relentless competitors.
And always keep in mind that VCs invest first and foremost in entrepreneurs, not products/services, and surely not well-crafted business plans in a Microsoft Word file with all headers and bullets universally formatted.
Good entrepreneurs will constantly monitor the progress of the business growth to see if the product-market fit is validated. They will also adjust the direction of the company when they see worrisome signs. They don’t have well-drafted b-plans printed out on A4 papers. They have continuously evolving plans inside their brains.
A 10-slide pitch deck is more effective then any b-plans, whatever the format. Sketch out rough stages of your expected growth in one or two slides. True VCs understand the uncertainty of a startup’s life and would always be open to change of plans, as long as the communication is done in time and properly.
Seriously, no business plans, please.
Jerry Yang is a Taiwanese Venture Capitalist formerly based in the Silicon Valley. He now lives and works in Paris. Check out his latest project: the Hardware Club.