Imagine encountering a contractor brimming with enthusiasm and armed with a plan so nebulous it might as well be invisible. “Trust me,” they assure, “I’ll dedicate three months to your home project. Thirty percent for plumbing, another thirty for framing and roofing, ten for electrical work, and the remainder for paint and such.” Inquiring about the livability of the house upon completion elicits a nonchalant shrug. “Who can say? But isn’t the journey exhilarating?”
This scenario seems ludicrous enough to usher the contractor out through a yet-to-be-installed front door. Yet, it parallels the vague pitches often delivered by startup founders to potential investors. Research suggests that over half of founders lack a coherent “use of funds” slide—a concerning trend. Founders, there’s room for improvement.
Constructing a house demands a blueprint, a timeline, and a clear vision of the final product. You wouldn’t accept a contractor improvising. In the startup realm, however, founders often anticipate investors to embrace dreams woven with threads of ambiguity.
Investors, akin to homeowners, seek to invest in a foundation that leads somewhere—a “house” that stands at the end of construction, ready for the next phase, be it habitation or sale.
For startups, the “finished house” isn’t bricks and mortar but a structure built on milestones and accomplishments. Will patents be filed? How many customers will be acquired? What revenue figures will be achieved? These milestones constitute the “rooms” and “fixtures” investors seek in the startup house. Alignment with investors’ expectations for the next funding round enhances the prospects of successful fundraising.
The house analogy extends further: Mistakes occur, and flawed estimates are commonplace. A contractor isn’t expected to predict the future with certainty; unforeseen events like weather delays and supply issues are inevitable. Nonetheless, a competent contractor devises a plan, adheres to a schedule, and implements contingency measures.
In startup ventures, scrutinizing plans and identifying weaknesses constitute “due diligence.” While founders can’t foresee every market fluctuation or challenge, they can outline goals, strategies, and approaches to surmount potential obstacles. This plan serves as their blueprint for success, grounded in feasibility.
Undoubtedly, founders may hesitate to furnish detailed plans, fearing failure or criticism, especially in debut ventures or amidst uncertainty. However, demonstrating a capacity to plan amid uncertainty is essential.
The startup journey mirrors the unpredictability of home construction—a rollercoaster of unexpected twists and turns. Yet, amidst the chaos, a plan is indispensable. No one furnishes a pickup truck, a blank check, and directions to the nearest hardware store. Founders must nail their “use of funds” plan to secure investor confidence.
