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Recent Research: Does Feedback on Business Plans Help Entrepreneurs?

May 26, 2016

One of the recurring characteristics of entrepreneurs, based on numerous biographies and case studies, is a driven self-confidence that may border, in some circles, as excessive or even narcissistic. Closer scrutiny, of course, shows there is no such thing as the “self-made” person, but entrepreneurship still is described often as a heroic, lone-wolf quest. Is it paradoxical to advocate for and even expect mentoring and “how to” entrepreneurship training to work? Wouldn’t “real” entrepreneurs leading promising startups succeed without the advice? A recent working paper describes an experiment that attempted to address this issue.

Rodrigo Wagner, an assistant professor with the University of Chile, explored the effectiveness of mentoring by comparing, through a randomized controlled experiment, the longevity of two sets of high-growth entrepreneurial ventures. Wagner specifically set out to measure if written feedback on a startup’s initial business plan correlated with the survivability of the venture. He found the answer might be yes, at least for the panel of 88 companies participating in Startup Chile’s accelerator program. 

A recent working paper authored by Wagner indicates randomly selected companies receiving written feedback through the experiment were found to be 50 percent more likely to be active four years later, as indicated by activity revealed through Angel List, Crunchbase, Facebook, Twitter, LinkedIn and the websites. One set of 44 randomly selected startups received feedback on their business plans from a panel of three experts before entering Startup Chile’s Accelerator program. The second set of 44 received no written feedback on their plans at the same point in their ventures. All 88 companies completed the entire accelerator course.

Many factors influence the success and failure of startup firms, and one may argue with the proxy of using active Internet presence as the most reliable measure of a firm’s survival four years out from a six-month accelerator program. Nevertheless, Wagner believes the experiment’s structure allows an interpretation that written feedback on the business plan can be very beneficial for longevity, either in the value of the specific advice given to the companies or, perhaps, in generating within the individual entrepreneurs a greater willingness to accept input from others early in the entrepreneurs’ “lonely” quests.

Does Feedback to Business-Plans Impact New Ventures? Evidence from a Field Experiment is available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2766566

Internationalrecent research, entrepreneurship