A study dated December 2008 shows that submitting a business plan to venture capitalists would be at best a symbolic act, at worst of no interest or at least with no relation to the investment decision.

The paper entitled “Form or Substance: The Role of Business Plans in Venture Capital Decision Making” was written by David Kirsch, Brent Goldfarb and Azi Gera of the University of Maryland and published in the Strategic Management Journal.

Based on the analysis of more than 1000 documents, les authors have tested 7 hypotheses relative to business plans:

1- the impact of a standard document,

2- statements of prior non-VC external private equity funding

3- the articulation of financing requests

4- reference to management team members

5- reference to prior educational human capital

6- reference to the prior entrepreneurial experience of founding team members

7- reference to the prior professional business experience of founding team members.

The results are quite striking: hypotheses 1, 2, 3, 5 and 7 are not validated et only hypotheses 4 and 6 would received a limited validation.

Their conclusions are quite clear: “business planning artifacts are not important sources of information for venture decision makers. The submission of planning documents is, at best, a ceremonial act.” and they add “neither the presence of business planning documents nor their content serve a communicative role for venture capitalists… Critical information is learned through alternative channels.”.

But I need to add, and this is now a personal point of view, that all this does not mean that a business plan is not necessary for any entrepreneur who wishes to raise capital…