Forget Business Plans—Go for Market and Passion

The MIT Enterprise Forum met recently in a session of over 300 attendees. The topic: “Accelerating Startup Growth: Seed Funding, Incubation and Mentorship Models.”

There was a stellar panel of speackers on the topic that included

• Laura Fitton, founder of Twitter app store oneforty
• David Cohen, founder of TechStars, an intensive 3 month program for seed stage companies
• Dave McClure, oversees the Founders Fund seed-stage investment program
• Gabor Garai, partner at the law firm Foley & Lardner devoted to the legal aspects of investment and entrepreneurship

Mr. Garai listed several key points when it come to brand new startup companies

• Focus on the business.
• Learn to handle crisis.
• Keep a simple structure.
• Don’t worry about core people leaving the team—it will happen sooner or later.
• Don’t bother too much about IP or the dilution an investor wants—it’s not about the slice of the pie, but the pie size.
• Don’t invest energy on issues such as how to cut taxes, etc; it only fragments your focus.

A key takeaway on these comments is that business plans are often way over engineered, especially for new ideas that have not proven value with strong sales.  At the early stage, there will be a lot of assumtptions made in order to get a pro forma and a detailed business plan together and at best, they are going to be educated guesses.  You can't afford to waste a lot of time getting hung up on clarifying details based on SWAG's. 

Here is a link to the review article: http://www.xconomy.com/boston/2010/03/12/forget-business-plans-go-for-market-and-passion-say-investors/