Sequoia Capital’s 2nd Gospel: Good business plans

Found|Read Carleen Hawn | Thursday, March 20, 2008 | 9:33 AM PT | 0 comments

Question of the Day:
Can your business mission be summarized on the back of a business card?

If not, then I want to make sure you all see this: Sequoia’s Gospel of Startups More True Than Ever. In it, Mike has republished Sequoia Capital‘s 1st Gospel for building successful startups called Elements of Sustainable Companies. it includes things like:

  • Clarity of Purpose: Summarize the company’s business on [a] business card.
  • Large Markets: Address existing markets poised for rapid growth or change. A market on the path to a $1B potential allows for error and time for real margins to develop.
  • Rich customers: Target customers who will move fast and pay a premium for a unique offering… etc.

Mike is right that these principles are even more important in the current market (and we’re glad others are fans of Teddy Roosevelt!)

But also I want to draw your attention to Sequoia’s 2nd Gospel, a list of tips for how to write winning business plans. In Writing A Business Plan, the firm says: We like business plans that present a lot of information in as few words as possible. The following format, within 15-20 slides, is all that’s needed.”. So here’s the list…

Company Purpose:

  • Define the company/business in a single declarative sentence.

Problem:

  • Describe the pain of the customer (or the customer’s customer).
  • Outline how the customer addresses the issue today.

Solution

  • Demonstrate your company’s value proposition to make the customer’s life better.
  • Show where your product physically sits.
  • Provide use cases.

Why Now

  • Set-up the historical evolution of your category.
  • Define recent trends that make your solution possible.

Market Size

  • Identify/profile the customer you cater to.
  • Calculate the TAM (top down), SAM (bottoms up) and SOM.

Competition

  • List competitors
  • List competitive advantages

Product

  • Product line-up (form factor, functionality, features, architecture, intellectual property).
  • Development roadmap.

Business Model

  • Revenue model
  • Pricing
  • Average account size and/or lifetime value
  • Sales & distribution model
  • Customer/pipeline list

Team

  • Founders & Management
  • Board of Directors/Board of Advisors

Financials

  • P&L
  • Balance sheet
  • Cash flow
  • Cap table
  • The deal

That’s it! Straight form the burning bush otherwise known as Sequoia Capital! Good luck.

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