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Why A Great Business Plan Does Not Guarantee You Funding

January 31, 2022

No matter how great your business plan is, how many revenue streams you have, how appealing a business model you created, how big a market you are addressing, and even how efficiently you plan to use capital, it is NOT enough to secure funding for your startup stand-alone. In this blog and the corresponding video, we unveil the other two components that are key to ensure your startup’s fundability.

Key ingredient # 1: Minimum Viable Product

Very few entrepreneurs have the track record to prove that they can take a great idea and transform it into a great product that customers will want to buy. Obviously, if you can’t turn an idea into a product, you are not going to get very far, regardless of how sophisticated or disruptive your monetization strategy is. 

That is precisely why investors want to first see proof that you are able to take a leap from a thought in your head to a concrete product in the real world. An MVP, or a minimum viable product, is exactly that proof because it gives investors a glimpse into what a final product would look like. Also and very importantly, because an MPV has all the core features, it can be used to gauge market demand and to validate product-market fit.

Key ingredient # 2: Team

One of the biggest risks that any early-stage enterprise faces is the execution risk. Most startups go through drastic changes in the first few years of existence and some end up with a completely different business model. 

For example, SLACK did not begin as an employee collaboration platform. Instead it started as Glitch, a now defunct online game. The team used what became SLACK as an internal communication tool and, after Glitch failed, shrewdly decided to roll it out as the main product. It’s now a billion dollar company. 

Their story is not unique, and this means that the management team must be able to not only recognize a need for change, but to also swiftly create a new business plan and execute on a new idea successfully, all under the time and capital constraints.

Conclusion

All three ingredients, business plan, team, and product, are required to make your startup fundable and none of them is sufficient stand-alone to raise capital for your company. 

A great business plan is worthless without a great product and a great team to bring that product to market. A great product is worthless without a thorough monetization strategy and a great team to execute on it. Finally, a great team needs a great business plan and a great product to really demonstrate what it’s capable of.

  • About Author

Victoria Yampolsky, CFA, is the President and Founder of The Startup Station, a comprehensive resource for modeling and valuing early-stage startups. She evaluates the financial feasibility of business models and specializes in the financial modeling and valuation of pre-revenue companies. She also created a finance curriculum for early-stage founders and launched The Startup Station’s educational program in 2015. Since then, more than 1,000 founders have attended her online and in-person finance classes and learned the basics of financial modeling, valuation, and startup financing.

Previously, Victoria worked for the Deutsche Bank Research Department and performed IT consulting for CapGemini’s Financial Services Division. Victoria holds a Bachelor’s Degree, Cum Laude, in Computer Science, with a minor in Mathematics, from Cornell University and an MBA, with honors, from Columbia Business School. Victoria is also on the Advisory Board of the Computing and Information Science (CIS) Department of Cornell University.

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