Resources to help writing a business proposal
February 23, 2010 5:46 AM Subscribe
My friends and I have what we think is a pretty lucrative, clever, and unique idea for a web-service. However, none of us are especially web or business savy, but we are enthusiastic and confident and so would still like to move forward with the idea.
It seems like the best thing to do would be to perform a market study to demonstrate demand for this service, and once that it done, it'd be easier to find potential investors, but coming from my mouth this sounds hoaky. You probably can tell that I'm not sure how to proceed. Is there are decent online guide to pitching an idea? Or resources for writing a business proposal?
Sure would appreciate some suggestions!
Thanks.
It seems like the best thing to do would be to perform a market study to demonstrate demand for this service, and once that it done, it'd be easier to find potential investors, but coming from my mouth this sounds hoaky. You probably can tell that I'm not sure how to proceed. Is there are decent online guide to pitching an idea? Or resources for writing a business proposal?
Sure would appreciate some suggestions!
Thanks.
If you want to go after investors, you will need a demo site. Putting a basic site together shouldn't be too expensive depending on the amount of coding that needs to be done. Initially you and your friends should invest in the idea to build the basic site. Unless you have a successful site up and running I don't think you can really attract much in the way of investment unless you have a rich favorite uncle.
posted by JJ86 at 5:58 AM on February 23, 2010 [1 favorite]
posted by JJ86 at 5:58 AM on February 23, 2010 [1 favorite]
Well, VCs really invest in teams not ideas. They are more interested in people with a proven track record, that they know will be able to execute then they are in the perfect idea. That's what they say on their blogs anyway. I think there's also a lot of "knowing the right people" involved as well.
I don't exactly what to do, but I think that actually sitting down and writing a prototype would be the best thing first off. You can then let a few people see it and see what they think. It could go viral and take off on it's own. Building a web site doesn't take a lot of money. It's only if you're going to need massive amounts of computing power (like google) or scale super huge (like twitter, facebook) And you'll of course have everything working before it gets huge. People will be much more interested in investing in something that works (technically and with a small audience) then a cold idea. IMO.
posted by delmoi at 6:01 AM on February 23, 2010 [1 favorite]
I don't exactly what to do, but I think that actually sitting down and writing a prototype would be the best thing first off. You can then let a few people see it and see what they think. It could go viral and take off on it's own. Building a web site doesn't take a lot of money. It's only if you're going to need massive amounts of computing power (like google) or scale super huge (like twitter, facebook) And you'll of course have everything working before it gets huge. People will be much more interested in investing in something that works (technically and with a small audience) then a cold idea. IMO.
posted by delmoi at 6:01 AM on February 23, 2010 [1 favorite]
A different approach, but my recent query brought some very kind and helpful answers, some of which might give you food for thought. More mechanical than web-based, but some useful general comments there.
posted by aqsakal at 6:02 AM on February 23, 2010
posted by aqsakal at 6:02 AM on February 23, 2010
My friends and I have what we think is a pretty lucrative, clever, and unique idea for a web-service. However, none of us are especially web or business savy
Your hurdle will be squaring the circle of having a "pretty lucrative, clever, and unique idea" despite also not having any "web or business savvy."
Put another way: how will you convince potential investors or employees that you're the real deal?
I don't mean to squash any dreams, but I suppose I am: if you have neither business nor web experience, how do you know that your idea is either lucrative or clever or unique?
posted by dfriedman at 6:06 AM on February 23, 2010 [2 favorites]
Your hurdle will be squaring the circle of having a "pretty lucrative, clever, and unique idea" despite also not having any "web or business savvy."
Put another way: how will you convince potential investors or employees that you're the real deal?
I don't mean to squash any dreams, but I suppose I am: if you have neither business nor web experience, how do you know that your idea is either lucrative or clever or unique?
posted by dfriedman at 6:06 AM on February 23, 2010 [2 favorites]
Check out Hacker News. It's a community of (mostly) software entrepreneurs, that has its roots from the venture firm Y Combinator.
See also the similar The Business of Software forum.
As for personal tips, I'd say this: It's way better to create a small solution to big problem, than to create a big solution to a small problem. I've been burned myself by being blinded by the technical beauty and complexity of my solution, without considering the market potential. Meanwhile the guy who created the iFart app for the iPhone made hundreds of thousands.
posted by cheerleaders_to_your_funeral at 6:08 AM on February 23, 2010 [1 favorite]
See also the similar The Business of Software forum.
As for personal tips, I'd say this: It's way better to create a small solution to big problem, than to create a big solution to a small problem. I've been burned myself by being blinded by the technical beauty and complexity of my solution, without considering the market potential. Meanwhile the guy who created the iFart app for the iPhone made hundreds of thousands.
posted by cheerleaders_to_your_funeral at 6:08 AM on February 23, 2010 [1 favorite]
However, none of us are especially web or business savy,
You can hire talent as necessary. There's lots of web experts out there. Business-savvy ... well hopefully you can become a bit more savvy as time goes. But know your limitations, you might and will need to bring business expertise into the picture as you grow.
Make sure that anyone you bring in, you get them to sign nondisclosure and noncompetition agreements. Otherwise they'll run off and become a competitor.
posted by thermonuclear.jive.turkey at 6:39 AM on February 23, 2010 [1 favorite]
You can hire talent as necessary. There's lots of web experts out there. Business-savvy ... well hopefully you can become a bit more savvy as time goes. But know your limitations, you might and will need to bring business expertise into the picture as you grow.
Make sure that anyone you bring in, you get them to sign nondisclosure and noncompetition agreements. Otherwise they'll run off and become a competitor.
posted by thermonuclear.jive.turkey at 6:39 AM on February 23, 2010 [1 favorite]
...and get a lawyer involved too, not just investors, to decide how your business will be structured.
For instance think about you and your buddies. How will this work? Will you be shareholders? How will the voting rights be distributed a.k.a. who makes the final decisions? Suppose you no longer get along, what then? If desired, will there be a mechanism for the rest of you to buy out the dissenter's shares? How will the shares be valued?
Also what's your goal?
-Do you want to build your company up for the long term, and turn it into another Microsoft?
-Or do you instead want to grow your company, and then when it's on the upward ramp in the short term, hope Microsoft or Apple comes along and buys you out?
-Otherwise, do you intend to go public? At what point in time & revenue?
-or is all this just a "spiritual" thing of creating a product or service, and being gratified by having people use this product /service, with the money a secondary thing in your mind?
Pardon the cynicism but I've see companies that operated for the short-term financial gain, they really weren't concerned about the long (20 years+) term but the short term (~5 years), their company was just a vehicle to get others jazzed up, with a hope of having these others buy them out - either by an IPO or being acquired - and then they get wealthy that way. Leading up to this, the focus was on the appearance of progress if not actual progress, an emphasis on hype (sorry, marketing and publicity) and near-term success with less concern over long-term viability. Many if not most tech start-ups these days fall into this type of category. Is this what you want as well?
Decide on your goals. This will be key, IMHO.
sorry for rambling.
posted by thermonuclear.jive.turkey at 7:03 AM on February 23, 2010 [1 favorite]
For instance think about you and your buddies. How will this work? Will you be shareholders? How will the voting rights be distributed a.k.a. who makes the final decisions? Suppose you no longer get along, what then? If desired, will there be a mechanism for the rest of you to buy out the dissenter's shares? How will the shares be valued?
Also what's your goal?
-Do you want to build your company up for the long term, and turn it into another Microsoft?
-Or do you instead want to grow your company, and then when it's on the upward ramp in the short term, hope Microsoft or Apple comes along and buys you out?
-Otherwise, do you intend to go public? At what point in time & revenue?
-or is all this just a "spiritual" thing of creating a product or service, and being gratified by having people use this product /service, with the money a secondary thing in your mind?
Pardon the cynicism but I've see companies that operated for the short-term financial gain, they really weren't concerned about the long (20 years+) term but the short term (~5 years), their company was just a vehicle to get others jazzed up, with a hope of having these others buy them out - either by an IPO or being acquired - and then they get wealthy that way. Leading up to this, the focus was on the appearance of progress if not actual progress, an emphasis on hype (sorry, marketing and publicity) and near-term success with less concern over long-term viability. Many if not most tech start-ups these days fall into this type of category. Is this what you want as well?
Decide on your goals. This will be key, IMHO.
sorry for rambling.
posted by thermonuclear.jive.turkey at 7:03 AM on February 23, 2010 [1 favorite]
Make sure that anyone you bring in, you get them to sign nondisclosure and noncompetition agreements. Otherwise they'll run off and become a competitor.
This is terrible advice. Investors are not going to sign an NDA. No one serious is going to want to legally tie themselves to someone who could potentially be a litigious.
posted by delmoi at 7:26 AM on February 23, 2010
This is terrible advice. Investors are not going to sign an NDA. No one serious is going to want to legally tie themselves to someone who could potentially be a litigious.
Pardon the cynicism but I've see companies that operated for the short-term financial gain, they really weren't concerned about the long (20 years+) term but the short term (~5 years), their company was just a vehicle to get others jazzed up, with a hope of having these others buy them out - either by an IPO or being acquired - and then they get wealthy that way. Leading up to this, the focus was on the appearance of progress if not actual progress, an emphasis on hype (sorry, marketing and publicity) and near-term success with less concern over long-term viability.That's because that's what VCs want. They churn these companies, get one in ten to sell, and move on. Since VCs are the ones who get most of these tech companies going, that's how it works.
posted by delmoi at 7:26 AM on February 23, 2010
Make sure that anyone you bring in, you get them to sign nondisclosure and noncompetition agreements.
This is terrible advice
I was actually thinking more along the lines of, say, if they hired a web developer, or an accountant, or a sales & marketing expert. The original query said that the entrepeneurs were unfamiliar with business or web skills, so if those experts are brought in, they need to take precautions. NDAs are common.
For investors, I suppose I'm less sure how that's supposed to work, that you show your ideas to potential investors, but need to do so in such a way that they don't turn around and make trouble for you. I guess a lawyer is appropriate.
that's what VCs want. They churn these companies, get one in ten to sell, and move on.
Indeed. The question is, if this is what the entrepeneurs want as well - if that is the model they too want to follow.
I've seen businesses where the owner(s) indeed wanted to do this, to start something, get it growing, then cash in either via IPO or sale to another company, and then they've accomplished what they've set out to do. I've also seen cases where they wanted to genuinely grow a business into a long-term entity, and personal wealth was not their primary concern. I've also seen business startups where the owner(s) wanted to keep it small, cosy and managable, without placing a premimum on growth or personal wealth.
IMO I think the individuals here need to ask themselves what they want to achieve and why, before they even start taking concrete steps to implement their idea or talking to investors.
posted by thermonuclear.jive.turkey at 9:31 AM on February 23, 2010
This is terrible advice
I was actually thinking more along the lines of, say, if they hired a web developer, or an accountant, or a sales & marketing expert. The original query said that the entrepeneurs were unfamiliar with business or web skills, so if those experts are brought in, they need to take precautions. NDAs are common.
For investors, I suppose I'm less sure how that's supposed to work, that you show your ideas to potential investors, but need to do so in such a way that they don't turn around and make trouble for you. I guess a lawyer is appropriate.
that's what VCs want. They churn these companies, get one in ten to sell, and move on.
Indeed. The question is, if this is what the entrepeneurs want as well - if that is the model they too want to follow.
I've seen businesses where the owner(s) indeed wanted to do this, to start something, get it growing, then cash in either via IPO or sale to another company, and then they've accomplished what they've set out to do. I've also seen cases where they wanted to genuinely grow a business into a long-term entity, and personal wealth was not their primary concern. I've also seen business startups where the owner(s) wanted to keep it small, cosy and managable, without placing a premimum on growth or personal wealth.
IMO I think the individuals here need to ask themselves what they want to achieve and why, before they even start taking concrete steps to implement their idea or talking to investors.
posted by thermonuclear.jive.turkey at 9:31 AM on February 23, 2010
There is a certain mythology to inspiration, especially regarding invention: the belief that the lightbulb idea is the important part and the business end just follows naturally. We romanticize the guys in a garage with a great idea taking the world by storm, but this is little more than a creation myth. The actual business plan, and the implementation thereof, is what brings the idea to life. Millions of people probably have the same idea - what separates the victor from the also-rans is their business acumen.
Rands in Repose has a good article on this.
Or, as Edison put it, "genius is one percent inspiration and ninety-nine percent perspiration."
posted by modernserf at 9:54 AM on February 23, 2010 [2 favorites]
Rands in Repose has a good article on this.
Or, as Edison put it, "genius is one percent inspiration and ninety-nine percent perspiration."
posted by modernserf at 9:54 AM on February 23, 2010 [2 favorites]
The question you should start with is what unique contributions could you and your friends contribute to the development of this business, setting aside the idea itself and anything that could be as easily done by another party for less than you would like to work for (e.g. don't say "answering phones" unless you're happy to do it for less than a competent secretary would expect to get paid). Substantial seed money (which does not mean the moon: Y Combinator makes start-up investments of $14-$20K in exchange for 2-10% ownership of the company) definitely applies.
If you are not bringing anything special to the table besides the idea, it is fairly unrealistic to expect that there is any scenario where you will end up with much more than a minor stake in the eventual company. Ideas are not worth money, only execution is. Once the execution of an idea starts to look like it might have legs, the first thing real investors would start pushing for would be to push you and your friends out of your equity stake by buying you off for the absolute minimum they could get you to take. The would be putting their full pressure on your "actually making the idea work, can't succeed without them" partners because all you represent is people who want a slice of the pie but contribute nothing special to ongoing productivity. If you can make it fly without big investors and are willing to put start-up founder level work and enthusiasm into getting the business up and running (which is to say a ton of work with basically no immediate reward) as well as every penny you can spare you might be able to work out a situation where you come out owning part of the business.
posted by nanojath at 11:28 AM on February 23, 2010 [3 favorites]
If you are not bringing anything special to the table besides the idea, it is fairly unrealistic to expect that there is any scenario where you will end up with much more than a minor stake in the eventual company. Ideas are not worth money, only execution is. Once the execution of an idea starts to look like it might have legs, the first thing real investors would start pushing for would be to push you and your friends out of your equity stake by buying you off for the absolute minimum they could get you to take. The would be putting their full pressure on your "actually making the idea work, can't succeed without them" partners because all you represent is people who want a slice of the pie but contribute nothing special to ongoing productivity. If you can make it fly without big investors and are willing to put start-up founder level work and enthusiasm into getting the business up and running (which is to say a ton of work with basically no immediate reward) as well as every penny you can spare you might be able to work out a situation where you come out owning part of the business.
posted by nanojath at 11:28 AM on February 23, 2010 [3 favorites]
First step is speak to someone in a similar industry or who has Ecommerce experience. You could write the best business plan in the world but if you don't understand the industry you will most likely fail due to unforeseen roadblocks. At this point you really don't need to worry about approaching VC's or other investors, you need to get feedback on your idea. I would approach someone who could build you this site and get feedback. If you can find someone that can build sites and market them even better. (I'm talking about SEO companies.) Maybe you partner with this company and have them build the site and market it for a % of revenue. Never be afraid to share your idea with people, no need for NDA's. Business is built on passion, you will find that people are more willing to help then try and seal your idea. In the web world if you don't have a working product there is no chance of investment dollars. Investors will rarely invest in conceptual ideas, so you really need to pool your money together and get a working product. If you need any help finding someone with this expertise to speak with let me know. I have a few great resources I could line you up with. Good Luck!
posted by pandrew3 at 2:44 PM on April 12, 2010
posted by pandrew3 at 2:44 PM on April 12, 2010
This thread is closed to new comments.
It speaks in general terms of the philosophy of designing and marketing a web idea. It doesn't have a lot of specifics, but is good for a general feeling of what one might want to do.
Good luck.
posted by TheOtherGuy at 5:53 AM on February 23, 2010 [3 favorites]