Interview with Jon Staenberg of Staenberg Venture Partners

BizPlanIt recently spoke with Jon Staenberg, Managing Director of Staenberg Venture Partners (SVP) to gain his advice regarding business plans and business planning from the investor perspective. SVP invests in Internet, software and telecommunications companies at all stages of development, and focuses on investments in the Pacific Northwest and Silicon Valley to create synergies and share resources between these two technology and investment hubs. Visit SVP’s website at http://www.staenberg.com

BizPlanIt: What advice would you give to an entrepreneur who has a great business idea, but doesn’t currently have connections with potential investors?

Staenberg: Well I think that it’s really the job of an entrepreneur to go out and “create connections”. I look for teams that will make things happen, and an important component of that is the ability to develop relationships with the right people. I also find that the way that I’m sold a concept during early introductions is often indicative of the level of success the team will have in selling and growing the business after an investment is made. So in some regards I think it’s analogous to a job interview. That very first time you walk in with hopes of securing a new job, you are in a selling mode. And that same type of approach is just as important for entrepreneurs who are pitching to new investors. Those first exchanges are important and they form lasting impressions.

BizPlanIt: What type of business plan packages do you like to receive initially?

Staenberg: At first I like to see a short 2 to 3 page document that outlines a solution to a market opportunity and gets me excited and interested to learn more about the company and the team. I also find it useful at this stage to review a well-organized PowerPoint that walks me through highlights of the business concept and the benefits of the business model. If I like what I see at that point, the next step is to request the complete business plan and financial package and start moving closer to the due diligence phase.

BizPlanIt: What are your specific goals during that early read of the business plan?

Staenberg: At the start I don’t attempt to determine if the business plan is “perfect” or if it answers every question I might have – because it can’t at this stage. Instead, I’m trying to establish a feeling for what the business plan tells me about their presentation strengths and their ability to sell an idea or a business concept. I’m trying to discover if there’s merit in the overall vision of the business and if there’s strength in the team behind the business.

Then again, things like proper grammar, spelling and organization are very important too. Sometimes on that “first pass” of the business plan I’m looking more closely for reasons to put it down, get rid of it, or move on to another deal. So for example, if I discover a typo in the very first sentence, then I have very little reason or motivation to go any further with it. You’d be surprised how often that kind of thing occurs. The point is that details are also important, and mistakes of this sort send a message of carelessness. Frankly it turns me off as a potential investor almost immediately.

BizPlanIt: How have changes in the markets altered the flow of business plans that land on your desk?

Staenberg: We’re seeing maybe 10 to 20 percent of the business plans that we saw during the boom times. But then again, the quality of the plans that we see today is on average much higher than before. My sense is that the “real entrepreneur” is back, and many of the individuals who had dreams of becoming entrepreneurs when things were a little easier are back to whatever they were doing before the funding bubble. Also, quantity can be deceptive. It’s really the quality of the plan, team and potential fit with us that matters the most.

BizPlanIt: What are some of the things you look for in the business plans you read today?

Staenberg: I like when I can be shown that you’ve identified a market condition that needs solving, and that you really “know” the current or potential customer base. When I see a business plan where I’ve been convinced that the management team has gone out and demonstrated that a customer exists – and that they know these customers intimately – that captures my attention. Naturally all the other elements come into play when deciding to make an investment, but I’d say that it’s this intimate understanding of the customer and how to solve their problem that’s of interest to me.

BizPlanIt: You must receive a lot of unsolicited business plans, any advice on that topic?

Staenberg: My recommendation is that you really need to have a connection with an investor or some type of an introduction to increase your changes of your business plan being seriously considered. This doesn’t mean that I don’t review unsolicited plans. But it often surprises me just how little some business plan writers consider the specific criteria that are of interest to specific investors. Again, connections and introductions are important, but if you decide to send a plan unsolicited then I recommend really doing some homework so you can target potential investors who will be most interested in your deal.

BizPlanIt: Any thoughts about how companies should use a business plan for more that just raising capital?

Staenberg: We really view the goals and strategies outlined within the business plans of the companies we become involved with as a measurement stick for future performance. My view is that that the ideas expressed in the plan become the operating expectations of the business and the management team. It’s rather easy just to put down exciting possibilities on paper and call it a business plan. But we look for plans where the management team understands that those benchmarks outlined in the document are now goals which are expected to be achieved. I think it brings a whole new level of thought to business planning when the entrepreneur realizes they’ll be held accountable to the goals outlined within the plan. It becomes a living, breathing guide to run a successful company - which is really what it should be.

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