VC’s de-emphasize business plans – University of Maryland study

A recent study out of the University of Maryland claims that business plans do not matter when seeking investors.  This is mostly a numbers game as the average VC looks at 2,000 deals a year which is about 40 a week.  Beyond analysts who are hired to find the best opportunities, senior partners will infrequently review a business plan focusing more on the people running the business and the opportunity. 

"“In general, business plans don’t matter,” said Brent Goldfarb, an associate professor of management and entrepreneurship at the Robert H. Smith School of Business, who wrote the study with David A, Kirsch, also an associate professor at the school, and Azi Gera, a doctoral student. “Nobody is going to read them.”"

Though the study seems to have some basis in reality, we are not sure the NY Times go it right when it claimed the following.

"That means, the study said, that they pay little attention to the documentation from entrepreneurs about their academic credentials, work or start-up experience, previous success in raising equity capital, ability to form a top-notch management team or even how much money they want."

Comments are welcome.

You can find out more here, http://www.nytimes.com/2009/05/14/business/smallbusiness/14hunt.html?_r=1&dbk

If you enjoyed this post, make sure you subscribe to my RSS feed!