Venture capital (VC) is a type of private equity, a form of financing that is provided to small, early-stage, emerging firms that are deemed to have high growth potential, or which have shown high growth (in terms of number of employees, annual revenue, or both). Venture capital funds invest in these early-stage companies in exchange for equity–an ownership stake–in the companies they invest in.
The start-ups are usually based on an innovative technology or business model and they are usually from the high technology industries, such as Information technology (IT), social media or biotechnology. The typical venture capital investment occurs after an initial “seed funding” round. The first round of institutional venture capital to fund this is called a Series A round. In addition to angel investing, equity crowdfunding and other seed funding options, venture capital is attractive.
Business plans are decision-making tools. The content and format of the business plan is determined by the goals and audience. For example, a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. Banks are quite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan. Venture capitalists are primarily concerned about initial investment, feasibility, and exit valuation.
The format of a business plan depends on its presentation context. It is common for businesses, especially start-ups, to have three or four formats for the same business plan. An “elevator pitch” is a short summary of the plan’s executive summary. This is often used as a teaser to awaken the interest of potential investors, customers, or strategic partners. A pitch deck is a slide show and oral presentation that is meant to trigger discussion and interest potential investors.
Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business plan is often developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures.