Venture capitalists will work out the estimated return for your venture on the basis of your business plan, taking account of the length of time before an exit route will be achieved and a forecast of the size of the capital gain.  Your business plan must include details information on: 

The Management 
The Market 
Financial characteristics 

In a survey by Bruno & Tyebjoe published in "Sloan Management Review", the reasons given for the rejection of venture proposals were: 

Doubts about the management - 37 per cent 
Markets and competitive characteristics - 27 per cent 
Financial characteristics - 23 per cent 

By way of an afterthought, show your business plan to your bank manager and you may be surprised by his favourable reaction. 

Most business plans drawn up by accountants are boring and unhelpful.  Boring because there is far too much detail on "Company History", etc., and unhelpful because the average accountant has little feel for the product and marketplace.  The proposal must spell out why the risk funder is going to make a lot of money and this is mainly to do with the product or service, its market, the competition and the people thrusting the business forward.  The Company History (if lengthy) should be relegated to an Appendix. 

THE MANAGEMENT 

The Team 

One-man bands are unlikely to be backed by any risk funder and a "team" (however small) is vital.  This team must have a clear leader, it should be well balanced and have a strong financial controller (sometimes even part-time when the company is small).  A skilled management team is all-important and evidence of each individual member's success in the past must be shown.  If a complete team has not been accomplished by the time the business plan is presented, it must be made clear in your plan that these gaps are understood and it should be explained how they will be filled. 

Key points to include are: 

Who the individual team members are and their achievements 
Their motivations and aspirations - and their ambitions for the company 
Why were they chosen in particular - how do their skills contribute to the whole - and how they balance the team 
To what extent they are committed to the company (including financial commitments) 
Management succession - how this will be ensured. 
Distribution of responsibility 
How much outsiders will be relied upon (eg. bankers, lawyers, accountants, non-executive directors) 
With anticipated growth, the effect on the structure of management and the skills required. 

Personnel 

The business plan should outline the employee requirements, current labour costs and whether relevant skills are available in the marketplace.  You should be able to show that you will be able to attract, recruit and retain staff with appropriate skills and be able to motivate personnel to grow with the company. 

THE MARKET 

In this section of your business plan your product should be described and distinguished from its competitors.  Marketing strategy should be detailed and a market need demonstrated as well as a thorough knowledge of the market, the customers and the competition. 

Any claims for the future must be justified and substantiated with information and data prepared by third parties. 

Your marketing strategy should be explained.  Detail how you aim to attract customers away from competitors.  Show to what extent the success of the business will be dependent upon marketing/advertising.   What have you done to identify potential customers and how will you reach them?  Don't be afraid to include copies of sales brochures and to explain the obvious extras concerning the product's life cycle, your R&D effort, patents, trademarks, export potential, past history, cyclical trends etc.  Don't overburden the proposal with technical data, but do overburden it with details of orders on hand and prospective orders. 

FINANCIAL CHARACTERISTICS 

The financial information in your business plan should include the financial history of your business and, more importantly, the future cashflows and future balance sheets.  This section should detail the assumptions that have been used in preparing the projections and it must be demonstrated that your proposal is an investment opportunity that cannot be ignored.  You must, of course, spell out the amount of cash you are seeking. 

Don't be afraid to examine and comment upon the upside/downside of the forecasts and the principal factors affecting this volatility.  Many sensible managers decide to go no further when they have really examined these facets. 

You must be able to demonstrate to the venture capitalist that your product can be manufactured efficiently and to the timescale, quality and quantity that your financial forecasts are based.  A detailed explanation of the production process will therefore be necessary. 

You should devote a section to production and operations in which you: 

describe the production process and explain how your product will be manufactured successfully 
explain how quickly you will be able to react in the event of an increase in demand for your product 
demonstrate that facilities are sufficient to produce your forecast effectively. describe the management controls used and their effectiveness 
explain the position as to the business premises - ie. are they owned or rented, in which case the business will then be affected by increased rents or lease termination 
refer to any labour agreements and union practice which will affect production 

To sum up, a typical business plan for presentation to a risk funder must explain why the proposal is "special" and should contain: 

An executive summary 
Description of the product(s) or service(s) with reference to the competition, market, research and development 
An explanation of the production process and operation 
An in-depth description of the management team with reference to staff requirements 
Financial information 
Forecasts for the future, including exit routes for the investor 

Now you have prepared your business plan, make sure you find out the funders minimum investment level and whether your target venture capitalist actually has the funds to invest before presenting your plan. 

Remember that venture capitalists now have less money to spend and there are fewer of them than ever before. 

Pre-eminently, remember that the funding proposal is a selling document - it must be truthful too.