When you create a business plan slide package for your high tech startup, make sure you understand and answer the question that is really being asked.  It’s easy to “fill in the blanks” of a business plan outline without really giving investors the information they want.  Here are some topics where it’s easy to give quick answers without really answering “the question.”

Competition

The question is not, “who are your competitors,” which is how most companies answer this. Some go a little farther and show a checklist of their features compared to the competitors’ features. But neither really answers the question. The question is also not, “Who else makes a product like yours?”

If you boil this down to a simple question, it would be something like, “What are the competitive dynamics within your industry, and where do you fit?”  Some important sub-questions might be, “What is the basis for competition within your industry?” “How do companies compete?” “How to you plan to position your company within the industry?”  For an in-depth look at how to analyze competition in your industry, refer to Michael Porter’s book on Competitive Strategy.

Team

Most companies answer the question, “Who are your founders and what positions have they held?”  But this isn’t really the question. The important question is, “Who are your team members, and what relevant past successes have they had that would lead us to believe they are the best team for this project?”

Business Model

There is a lot of confusion about what a “business model” is. Some companies simply show their different sources of revenue. The best response is to show how your project “pencils out.” for an investor. How do the revenues produce gross margins and profits? How do the profits relate to the total dollar investment required? It’s an over-simplification, but it may be useful to think of “return on investment” as “total profits” divided by “total investment.” The best way to show this, reflecting the “time value of money,” is to prepare a net present value spreadsheet for cash flows over about a five-year period of time.

How Much Better is Your Product?

Everybody wants to argue that they have a “better mousetrap.” The important question is, “How much ‘better’ is your product, and how do you measure ‘better’?”  In the world of mouse traps, “better” might mean “catches more mice,” or “catches mice faster,” or “catches mice in a cleaner way.”  How many more mice? How much faster? How much cleaner?  How much cheaper? These are the questions you have to answer to persuade investors that your mousetrap is better.

How Proprietary is Your Product?

One of the reasons that venture capitalists traditionally invest in “high tech”  projects is that it is sometimes possible to obtain “sustainable unfair competitive advantage” with certain proprietary technologies.  This often means that a product or technology is protected by patents. But patents vary in their value. Some are highly protective, while others can easily be worked around. It’s important to explain exactly what protection your patents offer. If your “sustainable unfair competitive advantage,” comes from trade secrets, special knowledge, or a proprietary process, it is important to explain why you think the advantage is “sustainable.”

For every section of your business plan, it is important to not just “answer the question” or “fill in the blanks.”  You need to put yourself in an investor’s “shoes,” and try to understand, “What is the real question?  What would an investor really want to know?”  Avoid superficial answers.  Dig deep to understand the question and provide as much specific, defensible information as possible.