In the first screening phase of business models, venture capital investors (VCs) initially only read the executive summary – a summarized presentation of the business plan. A convincing executive summary brought to the point is essential to pass the first of many hurdles on the road to a successful investment.

Failure is the norm

Very few start-ups are able to write an executive summary that convinces VCs. Many start-up teams already fail at this stage because, on the one hand, they have huge difficulties in summarizing the most important information from the business plan. On the other hand, they have difficulties in choosing a wording that makes the core idea of the business model clear to the VCs. Even promising business models that are suitable for VCs disappear in the bottom drawer of the founder’s desk that way – possibly forever. Here lies frequently and frivolously wasted potential.

Stand out from the crowd

VCs have in principle a very great interest to have a look on any business model, which is presented to them. Mainly because they don’t want to miss any promising investment opportunity. Therefore their aim is to filter out those business plans from the mass of business plans that promise the greatest potential return on investment. With a deal flow of more than 40 business plans a week it is rather a wishful thinking than reality for VCs to have a close look on every business model that is presented to them. Thus the VCs have scarcely more time than for a fast read of the executive summary in this preliminary stage. Accordingly high is the probability that a good business model is not recognized and falls through the first screening stage because the executive summary did not convince them.

Buildership advice

As a founding team you should walk in the VCs shoes and make the executive summary a reading most clear to VCs to recognize a promising investment opportunity quickly and easily. For this, however, the executive summary should stand out from the crowd by way of the authors’ ability to reflect the business idea to full extent. The language should be credible, professional and hardly marketing-oriented. Also current standards with regards to language and structuring must be considered.

Great executive summary – what's next?

When the executive summary is rated great, the founding team usually receives an invitation to a personal presentation of the business model – the so-called pitch. Again, the founding team should be prepared pretty conscientiously and should not rely on sunshine only. Experts can help at this point with their experience. They know what it takes. After a successful pitch VCs will start with a more detailed analysis of the business model before they start negotiating talks regarding the investment with the founders.

Conclusion

Only a founding team who is able to inspire the potential VCs with their business model in the form of a convincing executive summary can expect an intense observation of their business plan. The executive summary is therefore the ticket to investment projects.

Do you need support in formulating a compelling executive summary? We look forward to your mail@buildership.de.