In this lesson, we're going to talk about business plans. We're going to introduce what a business plan is. We're going to talk about why it's important, and we'll go through some key issues that you want to address in your business plan. Then we'll talk about a separate document called the private placement memorandum, which also has some pretty key aspects that you want to keep in mind. What is a business plan? As an entrepreneur and as a founder of a startup, you know this, you know what a business plan is. It's essentially a roadmap that outlines your business goals, and it provides details on how your business plans to achieve those goals. The question becomes, why is a business plan important? Why is a lawyer talking about a business plan? Well, there's several reasons why a business plan is critical for your business. First, it helps with business planning. It allows you to commit to writing the details of how your business will operate. Also, it provides focus for a company's objectives. You may have a great concept, a great idea for a product or service offering, but figuring out what objectives must be met in order to bring that product or service offering to the market can sometimes be quite daunting. By having a business plan, what it does is it brings focus to what objectives must be met and allows you to move your business forward. Business plans are also needed to attract capital. It's going to be very difficult for you to get funding from a venture capital or angel investor and sometimes even friends and family, without having a very compelling business plan. It's very critical for the success of your business to have a very detailed and compelling business plan. But for purposes of this lesson, we're going to talk about why business plans are important with respect to the law. Now, typically when you're going to be raising money for your business, it will involve the exchange of securities. You're going to be granting equity ownership. You're going to be granting stock in your business. Where this comes into play with the law is, the law prohibits making any type of false or misleading statement in connection with the sale or transfer of securities. If you're in any type of transaction where you are giving stock or transferring stock or selling stock, you cannot achieve that by using false or misleading statements even in a business plan. As early as drafting up your business plan, you want to be sure that statements that you're making or not false or are not misleading. You want to make sure that every state when you're making your business plan or your oral pitch to investors are supported by facts, and that's why business plan is important. Let's give a few tips on a business plan. Some of this you know. You want to have a great presentation. You want to make sure that you have a very compelling use case for your business. Why is your business different from others that is in this space? What problem is your particular product or service offering solving that others haven't been able to solve, and then you want to make a very memorable connection. You want to catch the investor's attention. You want to bring them in the wow factor. You want to be very careful about this because while you want a wow factor, you don't want to get into a place where you're making misleading or false statements in order to capture your investors intention. You may want to consider using referenced pitching, and this is helping the investor conceptualize your business by reference to other businesses. For example, you may say your business is the Uber for hotels. Or for example, with the product google Glass, you may say, your business is glasses meet smartphones. It's a way of referencing other familiar concepts so that the investor can conceptualize what you're bringing to the market. In your business plan you also want to prove up the product. You want to make sure that you show why your product is a compelling product, the features of your product, the market that your product is targeting. You also want to be straight up about the strengths and weaknesses of your team. You as a founder, your business partners, your key employees, talk about the strengths and weaknesses and why your team will be successful in bringing this product to market. The areas where your team may need additional help. You need to be upfront and honest about those in your business plan. You also want to identify the risk that's associated with your business and the competition is out there with your business. Keep in mind that every statement that you make in your business plan should be supported. You don't want to make any unsupported statements in your business plan. Now let's talk about the private placement memorandum, and this is typically a separate document from your business plan. In this document, you disclose all the risks and benefits associated with investing in your business. The private placement memorandum is usually used when you're going through funding rounds for your business. This document is given to potential investors so they can learn about your company, learn about your business operations, learn about the risk and benefits to help them make the decision whether they'll invest in your business. As you're disclosing all the risk and benefits of investing in your business, you also want to make sure you disclose all material information about your company. You want to make sure that you give supported evidence for all the information that you're including in this private placement memorandum. Now, the law requires very technical disclosures, so in this private placement memorandum, because it typically involves the sale of securities, you have to be very careful about things that you're disclosing so investors know exactly what they're getting into before investing in your company, and because these disclosures can be quite particular and quite technical before you get into the business of drafting up a private placement memorandum, you want to make sure you seek the advice of experience securities council to help you navigate the law around these disclosures. In summary, business plans are very important to your business for a variety of reason. They bring focus to the business. They help lay out the details on how your business plans to operate, and how your business plans to be successful. But it's also important to remember the legal consequences associated with statements you may make in your business plan, or in your pitch to potential investors. Any statement that's false or misleading can land you into trouble with respect to securities laws. Now oftentimes when you're engaging with investors, you may make oral statements about your business, and you should be very careful about this. No oral statements that you make into investors should be inconsistent with what's written in your business plan and in your private placement memorandum. Your private placement memorandum and your business plan should be written records of the statements about your business. You don't want to say anything that's inconsistent with that in oral conversations with potential investors. Before engaging in any type of transaction that involves the sale or transfer of securities, you should definitely seek the advice of experience securities council to ensure that you're getting it right.