[argonaut]

I know this doesn't answer your question, but I have to ask: why are you even writing up a business plan?

I don't mean to be harsh, but in Silicon Valley writing up a business plan is seen by many as a negative signal. Lots of people (myself included) see it as something a business student with no real-world experience would do as their first step.

The reason for this is simple: you can't really know if users will actually like or use or pay for your product. A business plan is only going to be a bunch of guesses, the vast majority of which will turn out to be unfounded. If you think you can predict what users will like before users themselves tell you, then you should change your first name to Steve and your last name to Jobs. So instead of spending time on a business plan, the recommended route is to build a quick prototype and see how users respond to that.

An exception to this might be if the product you're building is something you need, in which case it might be excusable to build something that's more than just a prototype. Nonetheless, the same problem applies: you don't really know if other people will find what you build useful until you get it in front of them.

[chris_dcosta]

I can answer the point from a different perspective. You are right in what you say, except in the UK for example you won't raise any money at all without a business plan. It answers questions like "what are you going to spend our money on?" and provides background to the founder(s).

Perhaps in the USA it is different and money is thrown at any company that has an "idea" even if they are not able to put it on paper... but I'm not convinced and never have been that this is really the case.

I seem to recall I had a similar discussion with someone else along these lines, and the bottom line was they they had not raised money, and so it was just an impression they had of what goes down in the Valley.

[argonaut]

You completely missed my point. Read what I said here: "So instead of spending time on a business plan, the recommended route is to build a quick prototype and see how users respond to that."

A business plan is nothing more than an idea wrapped up in some estimates and guesses. Sure, you can do "market research," but those are nothing more than guesses and they usually turn out to be wrong. So in a sense, when you criticize money being thrown at an idea, you are criticizing the notion of business plans. My point was that business plans are a negative signal because all it indicates is that you have an idea and that you haven't built anything to test your idea.

It is not a point of whether or not you can put your idea on paper. It's a point of wasting your time over-analyzing things you cannot know - and then putting all that useless analysis on a multi-page business plan or a 15 slide presentation, etc.

No, it is not the case that Silicon Valley just throws money at ideas (alone), and you're arguing against a straw man if you think I ever made that point. In fact, the process of building a prototype and validating your product by testing it in the real world is the quickest way to get huge multi-million dollar valuations in Silicon Valley. The exception would be having a very strong team with experienced founders.

[chris_dcosta]

I totally agree that actions speak louder than words, and a app or site with traction certainly demonstrates that an idea works, but the point you missed is the money point.

If you have money coming in, why do you need to raise more money?

If you plan to raise more money on the back of traction how much do you need, why do you need it and how will you spend it?

What does your balance sheet look like?

What is your cash flow?

All these questions are answered by a business plan, and you cannot avoid answering them just because you have traction, no matter what you say.

[argonaut]

> the point you missed is the money point. Explain how I missed the point. Nothing you said indicates anything about how I missed the point.

You don't need a 5 page business plan or a 15 slide presentation to answer those questions. You can answer all of those questions in 5 minutes of questioning from investors.

And yes, you CAN avoid answering those questions if you have traction. If you have MASSIVE traction, your cash flow and balance sheet is pretty much irrelevant since the assumption is you can monetize later (see: Facebook, Instagram, Twitter, Tumblr, many other social companies). Even in Silicon Valley this is the exception, make no mistake, and generally doesn't apply to B2B or B2D(eveloper) companies, but it is one possibility.