How do Venture Capitalists Screen Business Plans: An Art or aScience? Evidence from the Netherlands and the USA

This study investigates and compares the screening process of business plans by venture capitalists in The Netherlands and the US. We review the criteria used for screening business plans and their relative importance for the decision making process during the screening process. Empirical data was collected in the USA and The Netherlands via interviews and questionnaires. All the VCs who were interviewed are involved with early-phase ventures for which a business plan is the main input for their investment decision. The findings suggest that overall agreement exists on the relative importance of the main criteria (Entrepreneur, Product, Market, and Financial) among Dutch and US VCs. However, the relative importance of the sub-criteria reveal differences between Dutch and US VCs. Dutch VCs rank the importance of innovative product/service high whereas US VCs rank proprietary, protected products with high relative importance. The study contributes to understanding of, and provides insight into the screening process of the US (NY) and European (The Netherlands) VCs. It can help venture capitalists to better structure the screening process and therefore their decision making and can help entrepreneurs seeking capital better address their request to those criteria venture capitalist find most important