The Executive Summary: The Key to Raising Capital

The executive summary is rarely given the importance that it deserves. Too often, companies seeking to raise capital focus all of their attention on their business plan. The fact is, investment bankers and venture capitalists view literally thousands of executive summaries. For this reason, one must get the immediate attention of the investor in order to assure that he or she will definitely read the business plan.

The best way to attract the potential investor’s attention to the full-blown business plan is to keep the executive summary as short as possible — from one to three pages. This means that you must distill the data from the business plan to what you think are the most important elements to be included in the summary.

Keeping brevity in mind, you obviously cannot include all of the topics of the business plan in the summary; therefore, you must discreetly choose which headings are most likely to garner immediate attention.

Listen to Ted di Stefano (7:56 minutes)

The following are topics that I consider critical to an executive summary:

  1. Business Description — Here you must succinctly describe what the company is all about. What I like to do is to show differentiating factors — why your company is unique and what sets it apart from the competition. For example, if your company has a patented product or some other form of proprietary property, this should certainly be mentioned in the summary because it adds to your company’s uniqueness.
  2. Business Mission — Although the mission statement is often overlooked by companies, in my opinion, it is critical. Not only does this statement tend to keep your employees focused, it also sets the corporate culture, that is, how your company will produce exceptional goods or services, how employees will treat and respect one another, and how they will deal with their customers. Believe it or not, there are companies who not only do not have a mission statement, they would also be hard put to articulate a clear one.
  3. Financial Information — Here again, you are limited to what you can include in the executive summary. The full business plan must, obviously, contain very detailed projections that include balance sheets, income statements, and cash flows. The summary must synopsize this data, while still assuring that it will have sufficient impact on the reader. You could put a note under this caption saying that detailed financial projections are included in the business plan.
  4. Management Team — This is probably the simplest part of the executive summary. What I would do is give a brief bio of the executive officers, as well as the individual members of the board of directors. The main thrust is to show how all of the management team and board are equipped to create and manage a successful company and, therefore, a successful investment for the banker or venture capitalist.
  5. Amount of Capital Requested — Although many summaries use this caption, I personally prefer to call this section Investment Opportunities. This is one of the most important elements of the executive summary; and, if you really believe in your company and the possibilities of its success, you would not be exaggerating to use such a positive caption. I’ve told clients that when an investment banker or venture capitalist reads this section, he or she should be convinced that an investment in your company would be a great opportunity.

Facts Always Override Puffery

It is critical that everything that you include in your executive summary, and your business plan for that matter, be completely accurate and reasonably achievable. The fact is that these two documents, by their very nature, contain projections and suppositions.

However, that being said, I’ve seen business plans that go beyond reasonable projections and get into the realm of exaggeration or puffery. There is nothing that turns off an investment banker or venture capitalist more than this. He or she will be sure to toss your summary or plan in the wastebasket if it is overly optimistic.

Though executive summaries and business plans must have projections or so-called “forward-looking statements,” if these projections become too aggressive, the reader likely will regard them as fantasy — the death knell for your quest to raise capital.

Time Line Advice

Some professionals feel that the executive summary should be written only after the business plan has been completed and finalized. Their thinking is that the executive summary should be a brief synopsis of key elements in the business plan, and only when the business plan is finalized can you have a truly complete and accurate executive summary.

There certainly is some truth to this opinion. However, there are situations when a company is seeking to raise capital and wants to put out “feelers” to determine the possibilities of a successful capital raise. In such an instance, I see no reason why the executive staff can’t prepare a summary outlining the business and the opportunities that it presents.

This summary can then be distributed to potential investors to determine what the interest is. If you do get some genuine inquiries, you must then quickly proceed to prepare the business plan.

One cautionary word: Business plans, if properly done, can take weeks to prepare. So if you are in a rush for additional capital, I would first prepare the business plan, then the executive summary. You can then send out the summaries with a note that the business plan will follow immediately if there is a sincere interest in investing in your company.

The executive summary is somewhat like a portal. What you are trying to achieve is have an investor open the portal in order to take the next step, which is to thoroughly examine your business plan. You must therefore make the executive summary as interesting and intriguing as possible. This enhances the chances that the investor will make the next move — study your full business plan, and then invest in your company.

Good luck!

Theodore F. di Stefano is a founder and managing partner at Capital Source Partners, which provides a wide range of investment banking services to the small and medium-sized business. He is also a frequent speaker to business groups on financial and corporate governance matters. He can be contacted at [email protected].

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