Investors Not Interested in Business Plans?

Came across this article in the New York Times about how venture capitalists and other early stage investors pay little heed to comprehensive business plans. The research behind the article was conducted by the University of Maryland business school. Why is the business plan not looked at by investors? The reason, apparently, is that most of what's in a business plan is not relevant to an early stage investor. Five or ten year financial projections, work experience, etc. aren't what investors are looking for. Instead, they're looking for what one VC mentions as:

... “market validation,” hard evidence that the entrepreneur has actually sold his product or at least lined up enthusiastic potential customers. Mr. Fagnan [general partner of Atlas Ventures] says that, rather than reading a report, he wants to hear the evidence in PowerPoint slides, white board presentations or “somebody just talking.”

And the number one way of getting an audience with a VC is through a referral. Makes sense. So just abandon the business plan, then? The article goes on to describe many of the merits of the planning process. Coming up with the plan lets you think through the competitive landscape, risks, and opportunities more thoroughly. Just don't hand over that 50-pages of thought to a VC. Hand them a stream-lined executive summary instead.

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