The Myth of the Product Visionary: How Successful Entrepreneurs Reason in their Business Plan

Abstract

[Motivation] Investors anchor their investment decision-making on the business plan, as it is the initial point of communication between investor and entrepreneur. However, due to information asymmetry and uncertainty, the contents in a business plan are not indicative of future startup performance. [Approach] Therefore we investigate other aspects of the business plan that may predict startup performance. Using a constructed coding protocol, we operationalize 23 indicator variables in a sample of 59 (N) pre-filtered business plans from which we infer the Model of Entrepreneurial Logic (MEL). [Results] The MEL indicates that investors should screen for (1) means-based action over goal-based analysis, (2) opportunity exploitation over idea validation and (3) grounded market exploration over product development. The idea that successful entrepreneurs are product visionaries is a myth – and diverges from how successful entrepreneurs think, or should think.