Form or Substance: The Role of Business Plans in Venture Capital Decision Making

30 Pages Posted: 10 Jan 2010

See all articles by David Kirsch

David Kirsch

University of Maryland

Brent D. Goldfarb

University of Maryland - Robert H. Smith School of Business

Azi Gera

affiliation not provided to SSRN

Date Written: December 11, 2009

Abstract

We explore a well-known instance of fast decision making under high uncertainty, venture capital (VC) opportunity screening. We analyze a sample of 722 funding requests submitted to an American VC firm and evaluate the influence of the form of the submission and content of business planning documents on VC funding decisions. We improve on prior literature by a) using a large sample of known representativeness, b) relating request characteristics to actual VC decisions, and c) developing an inferential logic that takes account of the multiple sources of information to which VCs have access. We find that the presence of planning documents and some information contained therein are weakly associated with VC funding decisions. Based on our inferential strategy, we find that this information is learned independently of its inclusion in the business planning documents. Copyright 2009 John Wiley & Sons, Ltd.

Keywords: business plans, venture capital, entrepreneurship

Suggested Citation

Kirsch, David and Goldfarb, Brent D. and Gera, Azi, Form or Substance: The Role of Business Plans in Venture Capital Decision Making (December 11, 2009). Robert H. Smith School Research Paper No. RHS 06-108, Available at SSRN: https://ssrn.com/abstract=1533384 or http://dx.doi.org/10.2139/ssrn.1533384

David Kirsch (Contact Author)

University of Maryland ( email )

College Park
College Park, MD 20742
United States

Brent D. Goldfarb

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States
301-405-9672 (Phone)
301-314-8787 (Fax)

Azi Gera

affiliation not provided to SSRN

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