One of the key documents for starting a business is a business plan. A business plan acts as the foundation of your new company and is often used for loan applications. If you’re looking for investment capital, it’s an important document for investors to review to learn more about your company.
2020 was a challenging year for startups and small businesses, as many struggled to stay in business amid the coronavirus pandemic. New and existing businesses alike may find the idea of drafting a business plan in this challenging time to be an impossible task.
Traditional business plans are often 30 to 40 pages long. What if you don’t have enough information about your startup to fill all those pages? These documents also tend to be written three to five years in advance. How is it possible to determine where your startup will be in five years from now when you don’t know what will happen tomorrow?
Writing a business plan does not mean that the business will be immediately successful. It’s OK not to know exactly what will happen next. The plan itself, as mentioned earlier, acts as a foundation for the business. In your business plan, you should be able to set goals and outline necessary steps and timelines to achieve each milestone. It should also be highly flexible — ideally, a hybrid between a traditional business plan and a lean startup plan.
Here’s a glimpse of what entrepreneurs should focus on covering in a flexible business plan:
Executive Summary/Value Proposition
This is a brief introduction to your business. In a traditional business plan, an executive summary uses a few pages to detail more information about what the business does. In a lean startup plan, the value proposition is a statement about the value the business brings to its market.
A flexible business plan may merge these two sections together, creating an introduction that sums up the following business details:
- Brief business description. What does your business do? Where did the idea for the company come from? Where are you located and what industry are you in? How does the business earn money?
- Value. What value can your business bring its respective market? What kinds of problems does the business solve? Why would consumers choose to purchase your offerings and services?
This section is a bit of a hybrid between a traditional business plan’s section on business description and concept and a lean startup plan’s notes on key partnerships and activities.
Essentially, you should sum up the following strategic information about your business:
- What do your offerings do and how do they work?
- If your business is still in development stages, where is it currently and when will it be projected to launch?
- What are some of the goals for the business?
- Are there are strategies/steps in place for reaching each goal? What do these projected timelines look like?
- Does your business have any partners or is utilizing resources that may allow it to have an advantage in reaching these goals?
A critical part of a business plan is its market analysis. This is where you are able to answer key questions about your target market and customer base. These are going to be the people who invest in your products and offerings.
Here are a few questions you’ll need to answer in a flexible business plan:
- Who is your target audience?
- What are the demographic profiles of your customers?
- What are their needs?
- How is your business able to attract, capture and retain this audience over time?
Understanding your customer base will be an ongoing component of a flexible business plan. As demographics change in and out of your target market, you must be able to study emerging markets and determine how your business will be able to serve these needs in order to build lasting relationships.
This section is often referred to under “organization and management” in a traditional business plan. It provides a basic snapshot of your startup and its leadership.
Here are a few quick items to cross off for inclusion:
- Leadership. Who is running the business and what are his or her current responsibilities? Share all relevant background information and previous experience in the field.
- Location. Which city and state does your company do business out of?
- Business entity. Which legal entity have you incorporated under, such as a corporation or LLC?
- Mission statement. If your business has a values statement, be sure to add it here as well.
Every business plan is required to have a section dedicated to its financial projections. Within this section, you’ll be able to cover more information about the company’s cash flow. You can take a deep dive into the startup’s projected profit and loss, expenses budget, sales forecast and break-even analysis.
Having financial documents is critical if you would like to have investors invest in your business, because they will need to view these documents first. This gives them a good idea of what the startup’s future profitability looks like and encourages lenders to provide the startup with capital.
While we are unable to give financial advice, we do recommend entrepreneurs work alongside an accountant to prepare any financial documents. An accountant will work with you to create forecasts that are realistic and thoughtful. It’s also important to be honest when working on this section. Even if your initial projected revenue is a bit lower than anticipated, this may change over time — especially the longer you continue to conduct business in 2021 and beyond.
Previously, we introduced the concept of flexible VC: structures that allow founders to access immediate risk capital while preserving exit and ownership optionality. We list here all the active flexible VCs we have identified, broken into these categories:
- Blended-return streams
Revenue-based flexible VCs
These investors are paid back primarily based on a percentage of revenues.
Chattanooga, TN-based Capacity Capital was launched in 2020 with a primary focus on the southeastern U.S. Jonathan Bragdon, its CEO, describes Capacity as “a team of founders-turned-funders making non-dilutive, founder-aligned investments of $ 50,000-$ 300,000 in post-startup, post-revenue businesses planning to 2x revenues in 12-24 months. Investments are typically in exchange for a capped, single-digit revenue share and a right to equity under certain circumstances.
If the company sells or raises enough capital, the investment converts into an agreed-upon percentage of equity. If the company grows without raising additional equity funding, founders redeem most of the equity right, based on a pre-agreed return amount. With a portfolio that includes food, tech and services, the fund is industry-agnostic and focused on the overlooked and underrepresented with high-margin business models.”
Jonathan sometimes refers to their investments as “micro-mezzanine” because “mezz is typically structured as a contractual periodic payment, with some equity-like upside, but subordinate to other debt … so most lenders look at it like equity. But, it is typically shorter term with fewer control mechanisms than equity (i.e., not VC). I wanted [a term for] something similar (between debt and equity) but on an extremely small scale.”
In addition to a fund, the overall Capacity organization provides direct mentorship, consulting and connects founders to a broad network of talent, diverse forms of capital and existing resources focused on the post-startup stage of growth. The founders, LPs and venture partners have a long history in local startup ecosystems in the Southeast including LaunchTN, The Company Lab, CO.STARTERS and several other regional funds and resources.
Greater Colorado Venture Fund
Greater Colorado Venture Fund (GCVF) is a $ 17 million seed fund that invests in high-growth startups in rural Colorado using equity and flexible VC structuring.
A typical GCVF flexible VC investment is $ 100,000-$ 250,000 for up to 10% ownership, of which 9% is redeemable, with a sub-10% revenue share and 12-month-plus holiday period. GCVF specializes in providing critical support to founders based in small communities, while connecting them to an unfair network well-beyond their small-town headquarters.
GCVF is pioneering the future of venture capital and high-growth startups for all small communities. With Colorado as an ideal pilot community, the GCVF team (which includes Jamie Finney, a co-author of this article) has helped grow multiple staple initiatives in the rural Colorado startup ecosystem, including West Slope Startup Week, Telluride Venture Accelerator, Startup Colorado, Energize Colorado Gap Fund and the Greater Colorado Pitch Series.
Recognizing the need for creative investment structures in their Colorado market, they co-founded the Alternative Capital Summit, creating the first community of flexible VCs and alternative startup investors.
They share their learnings on flexible VC and pioneering rural startup ecosystems on the GCVF blog.
Estonian prop-tech startup, Rendin, a long-term home renting service that replaces security deposits and guarantees rental income, has raised €1.2M in a seed round of funding. The round was led by Tera Ventures, a VC firm investing in early-stage global digital startups.
In addition, the round also saw participation from Iron Wolf Capital, Truesight Ventures, Atomico Angel Program and Startup Wise Guys, with a number of angel investors.
Use of the raised funds
The raised capital will help the startup in expanding its core team in Estonia and launch the platform in Poland. Besides, Rendin will also be expanding its operations to Poland, a market with 2.5 million rental homes.
Everything about Rendin
Launched in March this year by Alain Aun, Maiko Saluorg, and Alar Mäerand, Rendin is building a home rental agreement platform that makes the whole process of home renting fair, fast, and flexible. In addition, it also claims to provide a safe and modern rental process for both owners and renters, including a fully digital agreement on its app and no security deposit requirement.
The platform also claims that it provides insurance for renters’ agreement breaches and offers landlords up to 100 times more safety compared to regular deposits.
Explaining about the startup, Alain Aun, CEO and co-founder of Rendin, says, “We want to get rid of outdated practices in long-term renting that may have been useful twenty years ago but not today.”
For example, Aun continues, “the security deposit is a big extra expense for renters while not doing a lot to mitigate the risks for property owners. Recovering rent payments can be an extremely burdensome process for the owner and in case of any damages to property, security deposits rarely cover for them. Rendin allows for up to 100x more protection for owners but also guards renters from owners that may want to keep their deposit maliciously.”
Rendin’s mission is to provide people with an end-to-end home renting solution that significantly reduces unnecessary showings, paperwork, hassle, and risks in the home renting process.
Growth and developments
Aun says, “Even though Rendin first launched just before the Covid-19 pandemic hit, we’ve been able to reach our growth targets. The crisis had a major impact on short-let properties due to the decline in tourism but didn’t change the dynamics of long-term letting that much. In fact, we had to deal with solving cases directly related to the pandemic, e.g. renters losing their income or leaving their properties behind in a rush to leave for their home country, which helped in proving our usefulness to all parties involved in a long-term letting agreement and demonstrating our value for investors.”
With the funding, the startup is looking for expansion in Poland and is already in the process of working out a joint business model with a local insurance company and the largest real estate portal of Poland; a skilled Polish market lead already joined the team.
Currently, the startup has eight members on its team, with tech backgrounds from companies like TransferWise and Kühne+Nagel, and is also looking to double the team. The company is actively looking for product engineers and a growth hacker.