We explore how product images and color in business plans influence venture investment screening decisions. Because images are accessible, memorable, and influential, we argue that product images in a business plan will increase the likelihood of favorable judgments during screening decisions. Moreover, because red and blue automatically affect an individual's cognition in different manners such that red elicits negative associations and blue elicits positive ones from the evaluators, we predict that the use of red in a business plan will decrease the favorability of judgments during screening decisions, while the use of blue will increase their favorability. Using a quasi-experimental field study and a series of controlled experiments, we find partial support for a positive effect of product images on favorable screening decisions and a consistent negative effect of red on favorable screening decisions.

Social science researchers have long pursued answers to the puzzle of why some people achieve certain milestones more quickly than others and whether rate of progress matters for long-run outcomes. This “tortoise versus hare” puzzle raises the question of whether speed is a valid indicator of viability in an undertaking: Are those with slower rates of progress any less off in terms of long-run achievement when compared to their faster counterparts? We investigate this “tortoise and hare” puzzle in the context of business formation, an activity pursued by millions in the United States. Our analysis of a nationally representative survey of U.S. business founders revealed that leisure-based founders were slower to make progress initially, but after a certain time threshold, their progress was no different than other conventional types of founders. More importantly, leisure-based founders showed more favorable initial economic and non-economic outcomes, as these founders were more likely to consistently report early sales and profitability and were more committed to investing time into their ventures. Our study findings have both theoretical and practical implications for the evaluation of venture performance, when the rate of progress is considered to be a leading indicator of new business viability.

Entrepreneurs attempt to persuade potential investors that their new ventures are both credible and worthy of funding. A long line of research on entrepreneurial impression management establishes that the ability to present their ventures in a favorable light is a key attribute of successful entrepreneurs. In this study, we examine the opposite side of the issue and test to determine if some entrepreneurs obscure corporate governance information. We create a new metric to measure the level of camouflage used in governance documents for initial public offerings (IPOs). We find that entrepreneurs are less likely to use camouflage during periods of high scrutiny, as measured by industry analyst following, industry concentration levels, and IPO clustering. We also find that greater use of camouflage is associated with raising more capital, due to both greater offer proceeds as well as less underpricing. This effect is most pronounced in corporate charters which are difficult for shareholders to change.