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

Kirsch, David A.; Goldfarb, Brent; Gera, Azi

doi:10.2139/ssrn.1533384

Cited by 26 publications

(35 citation statements)

References 51 publications

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“…Kirsch, Goldfarb, and Gera (2009) found that the presence of business plan documentations and information contained therein are weakly associated with vc funding decisions. In all financing cases, the elaboration and evaluation of all business plans are characterized by asymmetric information, which can also be simplified as lack of trust by the investors in the original owners and their submitted business plans.…”

Section: Market Failures On the Vc Marketmentioning

confidence: 97%

Government Sponsored Venture Capital: Blessing Or Curse?

Jáki¹,

Molnár²,

Walter³

2017

MNG

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Young companies with growth opportunities face serious problems when it comes to financing. The private venture capital (vc) market fails to provide sufficient funding for this segment. First, we present the main characteristics of start-up companies and market failures that can lead to government intervention. These failures include asymmetric information embodied in the business plan; high transaction costs of the investment process from the investment decision to the exit; and positive externalities in the economy, as the government prefers other goals than profit realization. Government participation is categorized as direct or indirect intervention. We present international studies showing that indirect government intervention can have both beneficial and negative effects on the vc market. Finally, the Hungarian government's participation and intervention are evaluated on the domestic vc market.

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Section: Market Failures On the Vc Marketmentioning

confidence: 97%

Government Sponsored Venture Capital: Blessing Or Curse?

Jáki¹,

Molnár²,

Walter³

2017

MNG

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“…This kind of financing, irrespective of it having a high rate of interest, is highly preferred by some entrepreneurs since they do not need collaterals to secure the loan for starting or expanding their businesses. It also offers liquidity quickly and even though there is the fear that the debt may be converted to equity, in most cases the lender that issued the loan will not want to become an equity holder, thus in the end the business will still maintain its ownership as the lender issuing the loan will not take control of the company but will try to work with the borrower to repay the loan with interest (Kirsch, Goldfarb & Gera, 2009). …”

Section: Loans and Grants From Other Sourcesmentioning

confidence: 99%

The status of small business growth and entrepreneurial start-up capital availability during the current extended economic downturn

Southern¹

2016

Problems and Perspectives in Management

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Since the 2007 and 2008 economic downturn in the United States and most other countries of the world, it has become difficult for small business and entrepreneurial start-ups to obtain funds for expansion and seed capital even if they are brave enough to attempt to grow their businesses or startups in the depressed widespread economic conditions. Different sources of possible funding are reviewed along with short and long term costs and benefits of each are discussed. Good decision making and wise choices are discussed and encouraged from a long term business success perspective

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“…Experience in the industry, with entrepreneurship, and in general business are other important considerations (Mason & Stark, 2004). Investors may also consider the education, completeness, and prominence of the entrepreneur and/or management team (Kirsch, Goldfarb, & Gera, 2009). The proportion of the entrepreneur's own wealth invested in the venture is another signal of his or her commitment to the project, which angel investors take into consideration (Prasad et al, 2000).…”

Section: The Decision To Invest: What We Knowmentioning

confidence: 99%

“…As signaling theory (Akerlof, 1970;Leland & Pyle, 1977;Spence, 1973Spence, , 1976 articulates, information asymmetry, such as that between and principal (angel investor) and agent (entrepreneur or firm management), can be lessened with successfully sent and received signals (Connelly, Certo, Ireland, & Reutzel, 2011). Investors interpret signals concerning the quality of investment in the firm from the leadership of the entrepreneurial firm seeking investment (Clark, 2008;Kirsch et al, 2009;Mason & Harrison, 1996;Mason & Stark, 2004;Payne et al, 2009;Payne & McCarty, 2002). Key questions remain in this area.…”

Section: The Decision To Invest: What We Don't Knowmentioning

confidence: 99%