INVESTMENT BRIEF PRO FORMA

Executive Summary
Investment Summary
Business Plan
A firm’s ability to become ‘investment ready’ is critical if they are to be successful in
attracting any type of equity investment. Whilst every business angel or venture capital fund
is different, a number factors constitute investment readiness. As the British Venture Capital
Association notes (1998:9-10) small to medium enterprises (SMEs) need to ask themselves a
number of questions before going down the venture capital road. They are:

 Does your company have high growth prospects and are you and your team ambitious to
grow your company rapidly?
 Does your company have a product or service with a competitive edge or unique selling
point?
 Do you and / or your management team have relevant industry sector experience?
 Do you have a clear team leader and a team with complementary areas of expertise, such
as management, marketing and finance?
 Are you willing to sell some of your company’s shares to a venture capital investor or
business angel?
If you are serious about going down the venture capital path and you feel that you are
investment ready, then you must be able to confidently answer ‘yes’ to each of the questions
above. If not, you should take the time to find out more about the venture capital game and
attend investment ready seminars and workshops before making the next step. Private sector
organisations run seminar and workshop programs on venture capital and investment
documentation. It is important to note also that the market may not warm to any project just
because it has an excellent business plan. Due to the high risk involved and the effect of
financial market expectations on investment, even a firm with the best business plan can fail
in their initial attempts to attract equity investment. Alternatively, it is essential to investigate
other finance options suitable for your particular operation.
If you are realistically confident in proceeding then the following pro forma document will be
of use to you in preparing your business plan and investment brief. The brief is broken down
into 3 sections:
1. The Executive Summary (which may be given to any interested parties)
2. The Investment Summary (which is generally submitted to the analyst)
3. The Business Plan (which should only be provided to VC Funds during serious
negotiations)
It is advisable to conduct research and seek professional advice to assist in the preparation of
these documents, and to ensure that laws, eg Corporations Law are not contravened. It is
worth noting however, that the entrepreneur’s ability to actively contribute to the
development of these documents is a good indication to the investor of the management
team’s ability to successfully operate the business, and inturn, generate a high return on the
Venture Capitalist’s investment.

Please contact the Capital Raising Unit 3227 9241 if you have any queries. Good Luck!

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1. Executive Summary

This document can be made available to any interested parties and should concisely refer to
the following:
A short paragraph on each:
 Purpose of the Business Plan – to raise money ($x) to fund commercialisation of…..
 The Background – history of product development to date, where you are up to in
commercialising the product eg. cencept stage, R&D, trading, about to export etc.
 Funding to Date – what investment has the company so far attracted or your own “hurt
money”.
 Management Team – experience in relevant industry sectors, skills in marketing,
accounting, running a successful business, experience in commercialising a product and
raising investment.
 The Market and The Opportunity – the product/service, what it does, what need it meets,
how that need is/will be fulfilled, the opportunity that presents in the marketplace.
 Strategic Competitive Advantage of Product/Service – how product/service better than
existing competitors, intellectual property protection and other sustainable barriers to
entry.
 Investment Opportunity – equity share offered in return for money and how the money
will be spent ie marketing, employing research/management team, production, R & D and
the expected return on investment, how investor will exit with funds.

The executive summary should not be more than four pages (the preference is for 2 pages)
and should clearly summarise the business plan and the investment opportunity using concise
language. Additionally, given the quantity of proposals a Venture Capitalist receives and the
time restrictions placed on them, the quality of the summary will be the deciding factor for the
investor in determining whether to pursue the opportunity or throw the proposal in the
rubbish! “The first paragraph is essential, the first sentence is critical”1

Finally, whilst a strong and convincing sales pitch is essential even at this point in time, it is
important that confidential or strategic information and other intellectual property are omitted
from the document to protect trade secrets from “falling into the wrong hands”.

2. Investment Summary

The investment summary will generally be submitted to the analyst and should clearly
establish the deal proposed to potential investors, namely:

 The financial and operational status of the company (to the extent which would be
reported to the Australian Taxation Office)
 The amount of funds being sought
 The length (life) of the investment
 Entry strategy for the equity investor (ie, how will the venture capitalist come on
board)
 Structure of the deal
 Transactions to be completed (eg common shares issued)

1
Chris Golis (1998:84) Enterprise and Venture Capital, Allen and Unwin, Sydney. Chris Golis is also Executive
Chairman of Nanyang Management, an independent venture capital fund manager.

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  Exit strategies

Whilst it is almost guaranteed that the deal initially proposed will be renegotiated by both
parties, it is nevertheless important to clearly state the investment opportunity from the outset.

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3. Business Plan

The third and final section of the brief is the business plan, which should be thorough in
detail, covering all aspects of the company, its product and the deal structure, requirements
and exit strategies involved. As this document will contain highly sensitive information
regarding factors such as intellectual property and marketing strategies, the business plan
should not be made available until the parties involved have entered into serious negotiations.

The fundamental elements of a business plan are outlined below:

• Executive Summary

Incorporates the key elements of the business plan namely:

 The product or service

 The market, the opportunity, and the strategy

 Business Operations

 Management

 Risk identification and analysis

 Financial Projections

 Amount and use of finance required

 Exit Strategy Options and Timing

 Mission Statement

 Legal Status of the company

• Table of Contents

• Market Segment

 Product or Service
1. General Description and stage of product life cycle -
(ie. Research completed / prototype / 1st version ready / 2nd version ready etc)
2. Unique Selling Points
3. Opportunities for second generation products
4. Legal protection

 Market Analysis
1. Define the market (domestic and key overseas markets)
2. Competitor analysis
3. Who are the customers

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 4. What are the projections for the company and the market
5. Niche market opportunities / Market segmentations

 Market Strategy
1. Market positioning
2. Pricing
3. Promotion and advertising
4. Overseas markets
5. Distribution
6. Strategic alliances
7. Product life cycle analysis

• Business Operations

 Manufacturing
1. The production process, out-sourced operations (and how trade secrets are
protected)
2. Production costs, resources required, production capacity and suppliers

 Research and Development

1. Status of developments and strategic alliances
2. Legal protection (including overview of any patents held or applications)
3. Development plans

• Management

 Profiles of CEO and management team, skills, experience and track record

 Establish complementary areas of skill

 Current and potential skills gaps and how this will be resolved

 Appointment of Non Executive Director (NED)

 Remuneration

 Organisational Chart

• Risk Identification and Analysis

 SWOT Analysis

 Identify risks and how they will be managed

 Identify key success factors

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• Financial Segment

 Independently audited statements should be available during later stages of the

process, including due diligence

 Financial Statements (5 years including past 2 years where possible)

1. Monthly cash flows
2. Profit and Loss Statement
3. Balance Sheet
4. Several ratios: net margin, gearing, stock, creditors and debt ratios, return on
equity, interest cover, annual sales/employee, contribution and break even point

• Application of Funds

 Amount of funds required (in this initial round), from what sources and their
intended use

 Anticipated future rounds of capital-raising

 Capital structure and ownership (before and after funding, and include
expected rate of return

 Implementation schedule

• Exit Strategy

 Possible exit options

 Best time for exit

 Realistic Exit Value

• Appendices

 Market research studies (Professional market analysis studies are essential)

 Product brochures

 Resumes of CEO and Management Team

 Other detailed information of value

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Sources and other useful information sources:
Golis (1998) Enterprise and Venture Capital: A Business Builder’s and Investor’s Handbook; Allen and Unwin;
Sydney

Activities and Resources

Department of Trade and Industry (UK) Website: www.dti.gov.uk/SMEP/finbus/t1.htm

Aurora Funds: The Investment Process

Aurora Funds Inc Website: www.aurorafunds.com/iprocess.htm.

Winning Australian Venture Capital

AVCAL Website: www.avcal.com.au/guideprint.htm

Venture Capital: investing in Britain’s Future

BVCA Website: www.bvca.com.uk/BVCA/Publications/Welcome.html

e.M Business Plan

Enterprise Market Website: www.em.asx.com.au/sample.htm

Private Capital Council

PCC Website: pcapital@ocean.com.au

Steps to Growth Capital – Canadian Government websites for growth companies

Website http://strategis.ic.gc.ca/sc_mangb/stepstogrowth/engdoc/homepage.php

Personal Communication:

James Paulsen, Executive Director, Corporation Builders, Brisbane

For further information please contact:

Venture Capital Unit
Department of State Development
Ian Gilbert: (07) 3224 8624 Email: ian.gilbert@sd.qld.gov.au
Peter Bonney: (07) 3238 3120 Email: peter.bonney@sd.qld.gov.au
Heather Hardy: (07) 3224 8514 Email: heather.hardy@sd.qld.gov.au
Facsimile: (07) 3227 8464

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