Research Article

Form or substance: the role of business plans in venture capital decision making

  1. David Kirsch*,
  2. Brent Goldfarb,
  3. Azi Gera

Article first published online: 4 MAR 2009

DOI: 10.1002/smj.751

Issue

Strategic Management Journal

Strategic Management Journal

Volume 30, Issue 5, pages 487–515, May 2009

Additional Information

How to Cite

Kirsch, D., Goldfarb, B. and Gera, A. (2009), Form or substance: the role of business plans in venture capital decision making. Strat. Mgmt. J., 30: 487–515. doi: 10.1002/smj.751

Author Information

  1. Robert H. Smith School of Business, University of Maryland, College Park, Maryland, U.S.A.

*Robert H. Smith School of Business, University of Maryland, 4544 Van Munching Hall, College Park, MD, 20742 U.S.A.

Publication History

  1. Issue published online: 4 MAR 2009
  2. Article first published online: 4 MAR 2009
  3. Manuscript Revised: 6 DEC 2008
  4. Manuscript Received: 6 SEP 2006

Funded by

  • Sloan Foundation
  • Library of Congress' National Digital Information Infrastructure Preservation Program
  • School of Business at the University of Maryland

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Keywords:

  • business plans;
  • venture capital;
  • entrepreneurship;
  • rare-events logit;
  • prototype theory;
  • fast decision making

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.

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