Cover Story: No Business Plans… Please! –

To raise capital these days a company needs more than just a business plan. Venture capitalists will fund the young, passionate and driven, but the starry-eyed entrepreneurs who make the trek up Sand Hill Road with an idea and a book of algorithms shouldn’t even bother. Even the winner of this year’s Harvard Business School’s Business Plan Competition, FBC Systems of Urbana, Ill., has 7-year-old software and a 6-year-old R&D deal with tractor giant Deere & Co.

FBC Systems beat out 23 competitors in the HBS competition and now is negotiating its first round of institutional financing because it has the characteristics a venture capitalist is looking for in seed-stage deals these days-products and customers. Like the winners of all this year’s business plan competitions, it illustrates the new conservatism now facing young entrepreneurs. Why finance an inexperienced management team and an unproven technology, the logic goes, when, for the same price, you can take the technical risk out of the equation and finance a company with a market-ready product and a team that’s built a company before?

Risk-aversion dots the investment landscape. Take the Band of Angels, for example. The same Silicon Valley group that helped companies like GetActive Software and Pure Carbon get off the ground in their infancy most recently

invested in an $18.4 million fourth-round financing for ChipWrights. It is the second follow-on financing that the Band of Angels has participated in so far this year.

Times are tougher for entrepreneurs, but the passion and innovative spirit that drives entrepreneurs to create is alive and well. And, if they succeed in building new companies, with or without the backing of venture capitalists, they may bring investors out of their shells and into the market for new seed- and early-stage deals.

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