I am currently trying to create from scratch a new business. Is a high cost start business and I dont have the necessary funds, only the information of how to do it, that means from the customers and commercial stuff until to the whole structure of the components of an product.
So, to get to the point, what are the different perspectives of a potential investor to decide on a plan of great precision of let's say ~M EUR when all the infrastructure of the business that have over twenty branches is explained .. by one single person?
I am interested in both the positive and the negative side, if possible from some real experiences to get conclusions about some facts that for sure I do not know and be prepared for any kind of doubt which may arise, leaving no margin of error and with the clear intent of winning the total confidence of the investitor from the first meeting.
One common characteristic among prospective investors is that they will want to see a well-developed business plan.
One thing a successful business plan will do is break down the start-up into easily understood stages, complete with a cash-flow analysis.
Business plans have been widely discussed in this forum, and you can learn a lot by searching that term.
I will try my best to tell you how I sold my Start Up from the last six months work to 2 potential Investors. An investor who is willing to pay you any amount of money will look for (Digits/Numbers/$$). Ten days before I do my last sort of presentation for the Investors, I asked an investor what is it an investor would look for, and few other questions, later on I came up with some good resources for my project.
Something else that is so important is building an MVP!
A Minimal Valuable Product, use pen and paper or high UI tools and just show the investors that the product of your Business, or what you will have in future will look like this.
Going back to numbers and digits /$$ :
"winning the total confidence of the investor from the first meeting "
First off this won't happen. It's not about trust. It's about your capability to execute your vision. You first have to sell yourself not the concept. Everyone has a concept for something. You have to prove your the right guy with the right team to be able to pull it off. Next, where are you at with the concept/product? The next thing they want to know is do you have any traction? Is anyone playing with it yet? If not then the concept really hasn't been vetted by anyone right.
If your product is going to take a 1M Euro to get off the ground then you need to think smaller. Do you have a MVP or minimum viable product yet?
So, here's what important to a potential investor:
Business plans, yeah don't bother. I don't know of any startup that's really taken the time to sit down and write a 50 page plan. It will change over time anyways.
It is worth reading Venture Deals by Brad Feld as it covers a lot of useful investing/VC stuff.
Be wary of spending too much time on your business plan, as they are not as useful as some people think and always turn out to be works of fiction.
In general, investors invest in people, although having a useful project with a clear route to market and a meaningful exit is all good too. Ideally, you'd have traction too, if not lots of paying customers yet, at least a number of prospects lined up who can't wait to start using your new product.
When I grew up I was told, "build a better mouse trap, and the world will beat a path to your door". I grew up with this assuming this was the case, and of course it's not that simple.
It's very rare that an investor will give you money unless you can demonstrate beyond their doubt that you can make money with the idea and that the idea will make enough money to give the investor a healthy return on their investment. They aren't in it to just give you money.
Different investors have different experiences and different levels of doubt, so you will have to overcome all that doubt of any potential investor before they will give you money. These days, investors really need to see some kind of revenue generation, that means you have solve issues around market penetration and actually prove that you can make money with whatever it is you are selling. That's more than just customers, revenue must exceed all expenses by a wide margin so that you can not only sustain your business but grow it too.
I remember in the dotCom boom, companies where making money based purely on investors, that had no sustainable income. We're all still paying for that; and investors are a lot smarter now. A good song sounds nice, where is the proof?
Business Plans will help you organize your thoughts around how to do it, but you'll still need to execute. An investor won't give you a dime with just a business plan; unless you have a reputation to back your ideas. You have to make the plan, then execute the plan and prove your planning skills and adaptation skills will still make money.
My advice would be to ask questions, "how can I do this if there were no grants or investors? Could I demonstrate the need for my product or service in a small way that would make a customers want to buy?"
Of course the fundamental problem you have to ask yourself is, "what pain am I solving that people are willing to pay you their hard earned money to solve?" If you cannot answer that one, you won't go very far.