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Licensed Unlicensed Requires Authentication Published by De Gruyter October 23, 2018

Blowing Smoke? How Early-Stage Investors Interpret Hopeful Discourse within Entrepreneurially Oriented Business Plans

  • William Wales , Kevin C. Cox ORCID logo EMAIL logo , Jason Lortie ORCID logo and Curtis R. Sproul


This study examines how written expressions of entrepreneurial orientation (EO) and hope may affect investor evaluations of funding potential in business plan competitions. To understand why some firms are evaluated more favorably, we combine screening and signaling theory when analyzing early-stage venture-investor communication. Findings support that expressions of EO while business planning contribute to greater expressions of hope to cope with the Knightian uncertainty when developing new business models. Results suggest that the impact of hopeful dialogue on investor impressions of fundability critically depends upon the presence or absence of past founder financial investment. Implications for future research are discussed.


A Study Measures

Entrepreneurial Orientation (McKenny et al. in press)
Innovativeness:“ad lib, adroit, adroitness, bright idea, clever, cleverness, conceive, concoct, concoction, concoctive, conjure up, creative, creativity, develop, developed, dream, dream up, expert, formulation, freethinker, genesis, genius, gifted, hit upon, imagination, imaginative, improvise, ingenious, ingenuity, innovate, innovated, innovates, innovating, innovation, innovations, innovative, innovativeness, introduced, introducing, introduction, introductions, invent, invented, invention, inventive, inventiveness, inventor, launch, launched, launching, master stroke, mastermind, metamorphose, metamorphosis, neoteric, neoterism, neoterize, new capabilities, new capability, new compounds, new content, new core areas, new course, new directions, new family, new features, new generation, new generations, new idea, new ideas, new line of business, new medicine, new medicines, new molecular entities, new pharmaceuticals, new platform, new process, new processes, new product, new products, new solutions, new systems, new technique, new techniques, new technologies, new technology, new therapies, new thinking, new tools, new treatments, new ways, new wrinkle, new-generation, new-product, next generation, next-generation, novation, novel, novelty, patent, patented, patents, process development, product development, product launch, product launches, proprietary, prototype, prototyping, push the envelope, R&D, radical, re-engineering, reformulated, refreshed, reinvent, re-invent, reinvented, reinventing, reinvention, reinvents, released, renewal, renewing, research, reshape, reshaped, reshapes, reshaping, resourceful, resourcefulness, restyle, restyling, revolutionary, revolutionize, revolutionized, roll out, rolled out, see things, technologically advanced, think up, trademark, transform, transformation, transformed, transforming, visualize”
Proactiveness:“anticipated, anticipation, anticipation, capitalize, capitalized, capitalizes, capitalizing, exploratory, explore, foreglimpse, foreknow, foresee, foretell, formulate, formulates, formulating, foundation, impatient, industry’s first, initiative, initiatives, inquire, inquiry, investigate, investigation, lead, looking ahead, move ahead, opportunistic, opportunities, opportunity, pave the way, pioneer, pioneered, pioneering, pioneers, plan, poised, positioned, positioning, positions, preparations, prepare, preparing, proactive, prospect, prospects, roadmap, scrutinization, take advantage, well-poised, well-positioned”
Risk taking:“adventuresome, adventurous, audacious, bold, bold-spirited, brash, brave, chancy, courageous, danger, dangerous, dare, daredevil, daring, dauntless, dicey, fearless, gutsy, headlong, incautious, intrepid, plunge, precarious, rash, reckless, risky, temerity, venturesome, wager, hardship, hardships, no place to hide, no safe path, ambitious, ambitiousness, mega-ambitious, not for the faint-hearted, jeopardy, riskiest, risk taking, risk-taking, challenging ourselves, challenged ourselves, challenge ourselves”
Organizational Hope (McKenny, Short, and Payne 2013)
“accomplishments, achievements, approach, aspiration, aspire, aspired, aspirer, aspires, aspiring, aspiringly, assurance, assurances, assure, assured, assuredly, assuredness, assuring, assuringly, assuringness, belief, believe, believed, believes, believing, breakthrough, certain, certainly, certainty, committed, concept, confidence, confident, confidently, convinced, dare say, deduce, deduced, deduces, deducing, desire, desired, desires, desiring, doubt not, energy, engage, engagement, expectancy, faith, foresaw, foresee, foreseeing, foreseen, foresees, goal, goals, hearten, heartened, heartening, hearteningly, heartens, hope, hoped, hopeful, hopefully, hopefulness, hoper, hopes, hoping, idea, ongoing, opportunity, promise, promising, propitious, propitiously, propitiousness, solution, solutions, upbeat, wishes, wishing, yearn, yearn for, yearning, yearning for, yearns for”
Investor Evaluations of Business Plan
(1) The team can effectively develop this company and handle the challenges associated with the venture. If the management team does not have any required skill or experience, a credible plan has been provided to access it, e. g. via an advisory board. (2) There is a clear definition of the product/service offered and the market need to be served, as well as a way to take advantage of that market need. The target customer and market size are well defined and quantified. The market shows high potential. (3) The competing products/services and their marketers are analyzed well. The company provides something novel/unique/special that gives it a competitive advantage in its target market. Its plan to develop and commercialize their product/service is clearly described and is credible. (4) The team has a solid understanding of the financial requirements of the business. The bases for revenues, expenses, capital expenditure projections (if applicable), as well as external funding requirements, are clearly described and are credible. (5) The business plan describes any major business or technology risks that are foreseen, as well as contingency plans to overcome them. The milestones for measuring success at different stages of implementing the business plan for the venture are clear and credible. (6) Investment Profile: The venture’s profitability, risk and return on investment profile are attractive. The business represents a real investment opportunity complete with milestones at the different stages of product/concept development in which you would consider investing.


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Published Online: 2018-10-23

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