At the start of this decade, I sat in my “b school” classes discussing case studies and dissecting business plans. As part of my course in entrepreneurship and venture initiation, the main deliverable at the end of the quarter was a business plan. This wasn’t a fluffy report…we actually presented the plan to a bunch of VCs as part of a contest to win funding. But at the end of day, what we presented was an idea, some slides, and a traditional business plan (including some very scientific financial projections). Nothing more.
During that time, not so long ago, the business plan was still considered a main avenue to pique interest and secure investment. Today, the business plan increasingly appears to be a document for allowing an individual to articulate and capture personal vision, where its main use and value is to a founder. Externally, that is, to investors, venture capitalists, and other parties, its best use is probably to level unbalanced desks. The business plan is dying.
Anecdotally, I’ve engaged with enough investors to know that these days they aren’t seeing as many business plans come across their desks. Beyond that, I admit that I haven’t done an in-depth analysis of how many business plans are stabilizing VC’s desks throughout the world but consider two scenarios. The first is one where a business plan is sent in the mail or attached to an email to pitch an investor on the next big thing. The second situation is one where a VC is using a product, even a minimum viable product, that he finds innovative and useful. Both situations represent companies or individuals that need investment. Which is a more likely candidate to get funding?
There are many reasons that building a prototype or minimum viable product (MVP) are easier today. I’ve explored several of them in the past, including requiring less capital and the presence of marketplaces like the App Store. With fewer barriers to launching some sort of product and the opportunity to immediately begin engaging and learning from potential customers and users, leaving a business idea on paper only is a major risk to not achieving success. So, don’t spend time in Microsoft Word writing a business plan. Roll up your sleeves and get prototyping.