Business Plans for Angel Investors Don't Work

Business Plans for Angel Investors

"There's one thing I've learned about entrepreneurs' business plans. Every one is wrong."

That's not my voice. It is the voice of Josh Kopelman, the co-founder of the venture capital firm The First Round Capital. Kopelman is one of the leaders of a very small group of angel investors: "super angels", those angel firms that seek out startups and invest in them.

BusinessWeek has an outstanding article on Kopelman and other super angels in its June 1st issue. The article highlights four super angel groups:

FIRST ROUND CAPITAL. Headed by Kopelman and ex-professor Howaqrd Morgan, it has financed 70 startups.

BASELINE INVESTMENTS. Ron Conway and former eBay exec Steve Anderson lead the firm, investing in 30 startups.

MAPLES INVESTMENTS. Mike Maples, a former IBM-er, runs a $30 million fund with 20 startups such as Twitter, Digg and Chegg.

SOFT TECH VC. Jeff Clavier, a former venture capitalist, has a $12 million fund and has financed 50 startups.

Kopelman is part of a very elite group. When he says that business plans are wrong, he's right. Today's entrepreneurs are schooled in B-school style business plan writing that is so boring that even I can't handle it for more than a few minutes.

When approaching angel investors, accept the fact that the business plan isn't going to be perfect. By the time you and the angel firm are finished, the business plan will be a shadow of its old self. And that's fine. That is how it should be. Your business plan should be designed to capture the imagination of the investor. Once you've got their attention, so to speak, then your head and theirs can fine tune the idea to make it really successful.

Go with energy. Go with flexibility. Go with lots of knowledge and the ability to adapt that knowledge. That's what makes business plans for angel investors work.