Business Plan for Tech Startups: How to Win Early Funding

As an early-stage startup, the question of whether you should do a full-blown business plan for a tech startup comes up as soon as you need to source so much-needed funding. With shows like Shark Tank, the pitches are often based on a working product, sometimes patented, and with a few business metrics for a discussion. For example, Cycloramic presented a fully functional app that was downloaded about 660,000 times with  $175,000 in revenues. Hater App, a dating app matching based on what you hate, didn’t include the product presentation. It was presented as just an idea with a few styled posters, even though the founder had a working app with 10,000 daily users. As a result of those presentations, seemingly without any business plans, Cycloramic sourced $500,000 for 15% equity, while a Hater App got $200,000 at 10% (but the founder also got an offer of $500,000 for 15%).

Even though it may seem like the pitch is the main thing, the off-screen conversation represents a deeper dive into financials, including the business plan. But what about a truly early-stage startup without a working product? Numbers like $500k or $200k are mostly for scaling stages. In the case of an early-stage start-up, a one-pager business plan with a pitch deck will suffice. But what should you focus on in this one-pager to get the funding you need? 

In this blog post, we’ll unpack for you what you might want to include in a business plan for a tech startup to get the funding you need.

Business Plan For a Tech Startup Today: Not Dead, Just Different

Steve Blank, in his “The Startup Owner’s Manual,” famously wrote:

“No Plan Survives First Contact With Customers”

Then, he backs this up with a real case of his acquaintance, a tech college graduate who had a brilliant idea for a startup. That acquaintance proceeded to gather a team of friends with whom they spent almost 4 months researching the market, competitors, and trends. This resulted in a well-crafted, detailed sample business plan for a tech startup.

The document amounted to several dozen pages with a dozen spreadsheets and a 15-slide pitch deck. They even managed to enter their business plan into a competition for business plans. In addition, they considered the pricing model, developed cash flow and cap tables, and considered pricing, sales, and customer acquisition costs. Moreover, they even managed to produce a 5-year Profit & Loss statement. As a next step, just before pitching it to investors, they decided to interview target customers for their app. This was when half of their assumptions failed in their traditional business plan template for a tech startup. Consequently, they realized they would not get any funding with that plan. 

An opposite extreme: scrap the planning altogether

One would almost be able to believe that business plans are useless with that kind of evidence. And there are those entrepreneurs who just have the idea and are ready to pitch as is. And sometimes it works. Take, for example, Facebook, Dropbox, or Airbnb. When these companies needed funding back in the day, they had only the novelty and excitement about their idea, some tested prototypes, and zero in the way of a business plan. 

The thing is that even though no business plan or full-fledged sample business plan for a tech startup works, their use cases are limited and represent the minority. They are, for example, big corporations opening a new tech business that might want a detailed business plan template for a tech startup. No business plan route is suitable for a revolutionary industry-redefining idea, which does not happen often. 

Some real-world examples include Uber, Lyft, and Bold. When Uber opted for funding, that was based only on potential.  But for Lyft and Bolt, each had to present a detailed business plan template for a tech startup. Lyft took Uber’s business model but put a community-oriented, friendlier spin on it. Bolt also used Uber’s business model but entered a market where Uber wasn’t as popular, while offering more affordable prices. Both Lyft and Bolt had solid business plans with long-term projections, worked-out metrics, and KPIs at their early stages to acquire funding. 

However, everything in between big tech and new disruptive potential needs a new, evolved approach to a sample business plan for a tech startup.

The new business plan for a tech startup is a dynamic business model

The bulk of business ideas appear in-between highly corporate regulatory environments and revolutionary, disruptive ones. They are either based on optimizations, newer technology integrations, new research/studies, or creative potential. To illustrate more precisely, sample ideas that should follow a newer approach to a sample business plan for a tech startup are shown in the table below.

Ideas requiring a flexible and dynamic business plan for a tech startup

Conclusion: Incorporating assumption testing into a business plan for a tech startup

In the cases of a local farm-to-table app and an AI-personalized health app based on the latest research, a lot of validations must be done first. Only afterwards will it be clear the potential market size, revenues, and such. Moreover, during testing assumptions, new ideas and potential earning opportunities can be uncovered. This is why a full-blown sample business plan for a tech startup like that makes no sense. At the same time, it is not sufficient to come to investors with the idea only and say that consumers will love it, and that is it. Requirements for a new business plan template for a tech startup are:

• There should be a plan for exploration of the idea, potential scenarios, and next steps. 
• It should be clear what the scope of work is and the target success criteria. 
• The goal is to validate assumptions in the critical areas that will allow you to find the appropriate business model.
• Critical areas of the business model are pricing, cost structure, customer acquisition, sales & marketing, and revenue model. 

Key Sections of a Business Plan For a Tech Startup Investors and Partners Expect to See

Let’s take idea #1 from the above to flesh out key sections. It must be noted that some sections may have variations in naming. 

Section 1: Problem & Solution or Market Opportunity

This is the section where you focus on user pain points to identify the market opportunity. In contrast to the traditional business plans, the focus is on learning and adapting rather than clearly stating the market niche, its size, and whatnot. Of course, there is a need to back up the problem you have identified in a business plan for a tech startup. So, you can include the results of early testing. 

For instance, for the farm-to-table idea, you can have a survey of the local population done and launch a wider survey for other areas online. The results might look as follows: “X out of 200 survey people in Y city said they would prefer farm fresh food delivered. Online survey of N people across the USA indicated that X% would opt for a farm-fresh food delivery if the option was provided.“ 

Often, idea validation and initial research are the first stage in a professional startup app development agency. Startup software development services often include early assumption testing in order to ensure the project is viable for funding. 

Section 2: Validation Strategy or Market Analysis

In the table above, the strategy included some points that are relatively fast and cheap to implement. For instance, a landing page that will collect sign-ups or social media presence to gather customer interest. There is surely no need to conduct a few months-long deep market analysis. However, you can do quick and cheap validations of the initial assumptions so that you can include real-world data into a business plan template for a tech startup. In addition, this section can already contain some customer feedback. This is in case you have talked to customers through social media, done focus groups, or surveys. 

In case of our farm-to-table idea, you can include:

• Analytics from a landing page;
• Number of sign-ups or pre-orders, e.g., “Notify Me When Deliveries Start” or a paid deposit for the same.

Then, you would include a phase 2 validation plan, which includes building an MVP for:

• Gathering metrics from farmers/sellers at the market and early adopters;
• Testing pricing and revenue model with A/B testing. 

Section 3: Business Model or Monetization Strategy

At this stage, it might be hard or not viable to define the exact monetization strategy and pricing. However, you should indicate ballpark figures within the options you will be testing. You should base it on the costs and target profit margin. However, competitor research also comes in handy here. After all, you are basing your model on the existing one. So, startup software development includes researching several competitors that are closest to what you are offering and analyzing their pricing, costs, and whatever else is available. 

If you want to consider the most profitable business & revenue models, you can read it in our post “Top 10 Business Models & Revenue Models to consider for your startup”.

For our farm-to-table tech startup, let’s fill in the business plan template for a tech startup with the following data: 

• Testing the pricing for a delivery fee, keeping it at a 25-35% profit margin on a pay-per-order basis. Estimates are that the average delivery cost is around $4, so:
  • Orders between 30$ and 60$ will be priced at $4.95;
  • Order $60+ at $5.45.
• Testing the pricing for farmers with the target of 10% commission from goods sold, but with the initial offer of 7%.
• Testing the flat subscription delivery fee set at $12 per month.
• Testing the farmers’ box bundles at three target selections for $30, $55, and $75 with respective margins of 10% ($3), 9.1% ($5), and 8%($6). 

Section 4: Go-to-market strategy or Sales & Marketing

In this section of the business plan for a tech startup, you should show what channels you have experimented with already and/or plan to add. Early-stage startups often use a mix of channels to find the most productive ones and the most cost-efficient ones. It is a given that digital channels are most important for a tech startup, scalability-wise. However, at early stages, especially for startups launching in selected geographic areas, offline marketing can be efficiently utilized. 

For a farm-to-table tech startup, we can include in the sample business plan for a tech startup the following:

• Community-based marketing, such as farmers’ markets, meetings of groups that support local produce, and local food bloggers.
• Social media engagement on TikTok, Instagram, and Facebook on topics like eating sustainably, filming visits to farms, and culinary videos with fresh farmers’ produce.
• Geo-targeted social media ads.
• Landing page promotions, sign-ups. When scaling, organize waiting lists by locations to select the next best location for launch. 
• Email marketing and special limited promotions, such as winter best veggie mix – 15 boxes only. 
• Partnering with micro-influencers and encouraging UGC, such as #unboxing.

Section 5: Team & Expertise or Team Structure

In a traditional business plan template for a tech startup, you will have to provide an organizational structure and supplement it with bios, skills, and relevant experience of key employees. Considering a small-scale startup in the early stages, the strength comes from having a few people on your team and having a good development agency on board. Why? Because experimentation and working out your business model require flexibility and being cost-efficient. So the fewer in-house members you have, the more reasonable it looks.

The more flexible and adaptable the outsourced development agency you signed up with is, the better it looks for investors. When you hire developers for your startup, pay attention to their successful startup launch metrics. 

With the farm-fresh delivery tech startup, the team setup can be as follows:

• Co-founder John: an enthusiast of farm-fresh produce who is engaged in the community, has the contacts, and knows the latest trends;
• Co-founder or operations manager Tim: previously participated in launching a niche marketplace.
• Content & social media lead Jane: has extensive experience in media creation and online community management;
• Development agency: flexibly provides developers or development teams based on the startup’s needs.

Of course, the description can operate with exact numbers of years of experience, performance metrics, technology stack, development rates, and such.

Section 6: Roadmap or Key milestones

In the table above, we highlighted the key phases: local launch and then scaling. However, there are usually some more milestones in-between. They can be linked to the number of active customers or sales and connected additions of key functionalities. As a rule of thumb, be ambitious about revenues but flexible about deadlines. In a traditional business plan template for a tech startup, setting up milestones is linked to reporting quarters. With a never approach to a business plan for a tech startup, you can be more flexible and focus on validation goals. For example, they can be:

• X% conversions on the landing page;
• Customer acquisition cost under $X;
• Average repeat purchase of X times per month;
• Retention rate of X% over Y period.

Achieving a combination of several metrics should lead to Milestones like moving into an MVP phase, expanding into a new geographical area, adding a mobile app, etc.

Tips for Keeping It Flexible

Any business plan for a tech startup should be considered as a living document. Update it as you go along. Since the focus is on testing assumptions concerning customers, what they are willing to pay, and the ways of capturing the value, it is better to be concise. Include only relevant metrics and pertinent research.

For instance, rather than putting a number of people in the area, assuming all of them eat, choosing which income level can afford farm-fresh food, and then how many of them would want it, just do a survey in the streets and online. It costs very little, but it is much more accurate than statistical guesswork. In addition, it actually shows you are willing to test assumptions. Overall, prioritize actionable steps, and from time to time, support this with data. For investors, a business plan for a tech startup should be synonymous with an action plan rather than predictive statistical research. 

Final Thoughts: Planning for Growth, Starting Lean

In the early startup stages, a business plan serves as an anchor. Founders and their teams are often driven by excitement about their idea, passion, and vision. Using a dynamic business plan helps to bring clarity with concrete statements. 

• How do you know the business idea is validated? 
• What is a break-even point? 
• Does the product retain users? 
• Will the costs of acquiring users pay off? 
• Are we sure that paying micro influencers is more efficient than giving out flyers with a QR code? 
• Are people willing to pay for farm-fresh food delivery? 
• Will we have to pivot to grow your veggies at home, business selling starter kits, and monthly club subscriptions? 

With startups, there might be a need to pivot. In any case, most startups do not require 50-page-long business plans with spreadsheets and 5-year-long projections. Often, a business plan for a tech startup can fit into 1 page. The focus is on updating it and using it to align actions across team members.

FAQ: How to Write a Business Plan for a Tech Startup?