Steve Jobs famously said that building a company is so hard that “if you don’t have a passion, you’ll give up.” In fact, to this day, it remains a question if passion is really a key component of entrepreneurial success. Chen et al. analyzed the way venture capitalists (VCs) evaluate business plan presentations to give us answers to the question: what does passion mean in entrepreneurship, and do VCs really care about it?
The authors focused on the decision making process of VCs for two reasons. First, dealing with them is unavoidable for most entrepreneurs and their investment decisions can make or break the future of a company. Second, their judgements often depend on their perception of the entrepreneur. That is not to say that VCs do not care about business plans or the market but the personality and background of the entrepreneur and the interpersonal chemistry they might have with him or her often prove the most important factors in the final decision.
Passion was broken down into two aspects for the analysis. First, an emotional aspect, having strong, positive feelings about a business opportunity. Second, a cognitive aspect, continuously mulling about a business opportunity. The first aspect is usually expressed by word choice, facial gestures and body language while the second aspect is demonstrated by being well prepared.
According to the findings of the study, the emotional aspect of passion had no significant influence on the success of business plan presentations. Chen et al. argue that this finding is somewhat counterintuitive as the emotional aspect is what most people think about when they hear the word “passion”. The authors provide multiple possible explanations for their conclusion. As a general rule, VCs who participated in the study were well educated, experienced in investing and trained public speakers. Therefore, they were probably less likely to be influenced by rhetorical devices and they might have been wary of people who emphasized emotions too much. Furthermore, a competition with multiple rounds and significant financial awards was analyzed where most entrepreneurs were coached before they entered the studied round. This might have turned presentations relatively similar in their style by the time they were observed.
The cognitive aspect of passion, however, did have a significant influence on the success of business plan presentations. VCs used preparedness to judge the “passion” of the entrepreneurs and they were far more likely to invest in them if they were satisfied with their knowledge.
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Contributed by Bence Juhasz