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© 2019 by JOSHUA TREE CONFERENCE GROUP

Harvard B-School Business Plans

“Odds are basically against you,” said Dana Dunford, CEO of Hemlane, opening an otherwise hopeful panel on how to create top-tier business plans.

She was being dramatic to make a point. In the world of venture-backed businesses, the rate of failure is only slightly lower than the national failure rate for businesses. When three quarters of venture-backed businesses fail, how do you ensure that you’re the one in four that succeeds?

The panel started fast, with Ms. Dunford getting straight to the point: Where should companies be spending most of their time on their business plans?

Alec Page of RETV Management stressed that multifamily companies need to worry more about their sales cycle. In contrast with other industries, multifamily’s cycle is long. This means that conscientious companies need to keep costs lower than what may feel natural.

Andrew Beebe of Obvious Ventures -- which focuses on sustainable systems, people power and healthy living -- dismissed the notion of spending a lot of time on the business plan in general.

 

“We look mainly at very early stage companies,” he explained. “Usually, it’s two people and a napkin, not a 700-page business plan. I divide it into team, time and TAM. We often find people who mistake slow growth business ideas with venture-backable business ideas. They confuse that for venture.”

Ms. Dunford echoed the sentiment, noting that she once had a professor who observed that there is no reliable correlation between business plan and future success.

So what is it that excites investors like Mr. Beebe and Mr. Page?

“We looked at 1,200 deals last year. We did less than 1 percent of them,” Mr. Beebe said. “You have to be in the target zone. The difference between warm versus cold intros could not be more important. If you’re planning to fire a blind email, that will work 1 in 1,000 times. It’s quite rare. If you have a very innovative idea, it’ll speak for itself.”

Shifting gears, Ms. Dunford asked the panelists what type of businesses are easy to scale on the venture side.

 

Mr. Page acknowledged that it can be hard for multifamily businesses to scale and grow, simply because the industry is sticky.

Mr. Beebe agreed.

“I love that everyone is so nuts & bolts in this industry,” he said. “For owners and operators, you can be losing money for a long time and that pain just settles in. We care about NOI and bottom lines. That’s it. This allows for innovations in some boring categories around security, access, energy efficiency. As well as how I can miraculously triple my returns in the topline.”

Continuing on the theme, Mr. Beebe said that if he hears weak answers to his questions about cost per unit and NOI increase, he simply won’t take a meeting.

“I think NOI and quantification is more important here than anywhere else,” Mr. Page agreed. “Especially when you’re talking to REITs, who are so focused. If your business model and pitch centers around rent occupancy and rent lift, you’ll have a lot of trouble in this industry. Because that’s what everyone’s promising. You need to quantify. The only way to do that is to have airtight case studies and show it.”

The conversation then moved to that industry buzzword: disruption. Both Mr. Beebe and Mr. Page took the stance that disruption is a flashy idea, but it doesn’t always mesh with the needs of multifamily.

“In multifamily, there are a lot of innovative tech companies that are not necessarily building disruptive tech,” Mr. Page said. “There’s not a lot of disruption in home technology. It’s more about taking products and solutions that already exist in the homeowner space and moving them into multifamily.

 

“For us, it’s not about: ‘Are they solving this groundbreaking issue?’ Really great teams execute in a disruptive way with technology that isn’t necessarily rocket science.”