What to include in our funding requirements?


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We're a small group of IT students and recently we came up with an idea that we're going to pitch with business plan in an event hoping to get feedback and funding from investors. (Ok, I read that people on this site keep saying that no one asks for business plans these days, but in the part of the world where I'm, I've to go through this process and I think I'm fine with it.)

My first question is that while asking for funding, should I try to include all possible investments in our funding requirements (which we're writing as part of executive summary) or the aim should be to be a little frugal? So, should I count office space for the team and associated expenditures which we might need soon but not really need urgently, or not? Are there some guidelines to come up with funding requirements. How does investors look at the way we specify our funding requirements? If we're being frugal, does that leave a negative impression or the investors take it positively?

Also, should funding requirements include expenditures by the team while working on the project? As in, suppose I'm working from my home, do I count (even approximately) my home internet bandwidth usage and other cost (like electricity?) for the next few months or so?

My second question is that since the project is in its very early stages at the moment, and we're not really sure about exact market size, but intuitively there's a big market waiting for it, so, how do I mention our expected "market size" and justify it, should we conduct some survey or what? I think proper justification of market size will be a good deciding factor for the impression that we leave on the investors/judges of the competition.

Looking forward for your insights.

Funding Investors Market Research Expenses

asked Aug 24 '11 at 23:37
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Atul Goyal
496 points

1 Answer


1

You should include any expenses that you would reasonably expect a company to pay for. Office space might be necessary, since a team has to meet somewhere, but your home internet bill is less likely to pass. However, an internet connection in the office would be a legitimate expense.

Being frugal is not a bad thing - unless it undermines your ability to complete the project. While a massive office with expensive furniture on prime real estate might look nice, it doesn't necessarily improve the quality of your business. However, if your project requires some custom hardware to work properly, then being frugal there is more likely to hurt your cause.

In regard to market size, investors usually want to know a few things:

  • Is there a market big enough for your product (that is, does it exist);
  • How do you plan to enter the market - what are the steps you anticipate making to gain some portion of the market.

Saying the market is a million people, and you plan to capture 5% in your first year is looked upon as foolish - since you haven't indicated how you plan on attracting those 50,000 users to your product. Saying that you plan to attend trade shows where you can showcase your product, and aim to get 25 customers from each trade show is more impressive because it demonstrates that you have thought your plan through.

answered Aug 25 '11 at 14:16
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Elie
4,692 points

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Funding Investors Market Research Expenses