This study provides evidence of significant biases in multi-year management forecasts by analyzing a proprietary dataset on venture-backed start-ups in Germany. In contrast to prior research we do not detect "strategically" understated one-year-ahead forecasts for revenues and expenses. Rather, revenues and expenses are highly overstated in each of the investigated one-to five-year-ahead planning periods. Regarding the accuracy of the forecasts, further analyses uncover that prior start-up experience increases forecast biases while higher asset verifiability and corporate lead investors lead to smaller forecast errors. All key results hold if bias is either measured using a cross-sectional projection approach based on historical accounting data or by traditionally comparing forecasts to ex-post realizations. Consequently, we document that the so far unevaluated projection method developed by prior research performs well and has promising features for future research and practice.


Sönke Sievers

University of Cologne

The Paper on "Biases in Management Forecasts of Venture-Backed Start-Ups Revisited: Evidence from Internal Due Diligence Documents of VC Investors" is available as download from SSRN.




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