Lately I’ve seen quite a few articles (including this one sent to me by James Cherkoff) talking about how the most successful startups and entrepreneurs – tech startups in particular – didn’t have a business plan. Part of the popularity of this idea seems to be coming from certain VC’s who – in a perfectly reasonable bit of marketing – are trying to look “a bit maverick” in order to appeal to young startups.
However, every example I’ve seen so far proves to me the opposite; that a business plan is in fact an essential ingredient in the success of a business.
Take the example of Edison from Marc Andreessen’s blog – by the end of the article you see clear examples that Edison’s got a handle on:
- building a team: he might have started on his own, but eventually had a number of people working with him (one of which is named in the article).
- building a business: his company appears to have an income from the telegraph industry.
- appreciation of resource planning: he does not divert all resources to the phonograph the moment he comes up with it because at first it is not clear to him if it is worth it.
- cash flow planning: he understands when money is coming in, and when he needs to save
Now I doubt for one minute that Edison actually wrote his plan down – and if he did it was probably on the back of a napkin (the equivalent of the 10 PowerPoint plan) – but it sounds to me like he did in fact have some sort of plan.
What all these entrepreneurs have done (Edison, Ellison, Gates) is build strong teams that enable them to react to forced/serendipitous changes. Once they reacted, the “business plan” is adjusted and off they go on the new path. As many people have said, the reason investors are so interested in the “team” is that a good team is capable of reacting to such opportunities.
So in the end I’m with Tim Berry and Guy Kawasaki and others on this one: writing a business plan is a good thing to engage the team and enable transparency and clarity in the figures/assumptions. However, for a startup that probably ought not to be much more than can be written on a napkin – after all it’s much more useful (not to mention more fun) actually getting the customers now rather than spending time and money trying to estimate exactly how many you might get at Year 3.
I read this article about Bay Partners launching a Facebook app fund. What’s most interesting for me is not the article itself, but the comments. It seems to me that not one of the 50-something people who’ve responded have any idea how to monetize Facebook beyond PPC – which as many people have discovered isn’t exactly an ideal platform for it.
There’s developers out there like this one who are actually going round telling people they won’t develop Facebook apps. Well, good luck to them, but it looks to me these guys are going to be kicking themselves down the line: this is the democratization of gold-star marketing data! It is not, IMHO, an opportunity to miss.