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International Small Business Journal
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What do Investors Look for in a Business Plan?

A Comparison of the Investment Criteria of Bankers, Venture Capitalists and Business Angels

Colin Mason

University of Strathclyde, UK colin.mason{at}strath.ac.uk

Matthew Stark

Tenon Limited, UK Matthew.Stark{at}tenongroup.com

Most potential funders wish to see a business plan as a first step in deciding whether or not to invest. However, much of the literature on how to write a business plan fails to emphasize that different types of funder look at business plans from different perspectives. Using a real time methodology this article highlights the different investment criteria of bankers, venture capital fund managers and business angels. Bankers stress the financial aspects of the proposal and give little emphasis to market, entrepreneur or other issues. As equity investors, venture capital fund managers and business angels have a very different approach, emphasizing both market and finance issues. Business angels give more emphasis than venture capital fund managers to the entrepreneur and ‘investor fit’ considerations. The implication for entrepreneurs is that they must customize their business plan according to whether they are seeking funding from a bank, venture capital fund or business angel.

Key Words: banks • business angels • business plans • small business • venture capital

International Small Business Journal, Vol. 22, No. 3, 227-248 (2004)
DOI: 10.1177/0266242604042377
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