I have spent the last 31 years of my life studying leadership. What I know is that companies grow or shrink to the size of their leadership, almost regardless of products and markets. If a leader of a $1 billion company has the vision breadth, depth, executive skill and passion to lead a $100 billion, he will find where the TAM is and bring his company along.
Years ago, one of my courses at Harvard Business School focused on venture capitalists and the criteria they used to evaluate startups. After studying case after case, it became apparent that one of the most important factors in gaining access to venture capital was the quality of the management team. The VC’s looked for strong leadership and a seasoned, compatible management team. The company’s Big Product Idea seemed to carry some weight, but it ranked fourth or fifth among the VC’s evaluation criteria.
As a technical person with a freshly minted PhD in Physics, that made no sense to me. I thought that surely the Big Product Idea was the key to success, and brilliant technical people like me were the superstars that made it all happen!
One day after class I approached the professor to try to make sense of it all. He basically explained that when it came to high-tech startups, one good idea does not guarantee success. Even if it’s a great idea, a strong company needs to have a continuous pipeline of great ideas, not just one. He also pointed out that there are plenty of brilliant technical people available, but relatively few brilliant leaders. That’s why a great CEO will eventually grow and move on from one successful venture to another. The VC’s know who they are and they track them carefully. It’s fairly common for a venture firm to recognize a potentially great company that lacks key leadership, and match that company with the right individual(s) to create a solid management team. In fact, that matchmaking may be the most important role that a venture capital firm provides, even more important than providing seed capital.
As a scientist, I can’t help but perform a deep dive assessment of the underlying technology when evaluating a company to invest in. But I’ve learned that the company’s success is ultimately far more dependent on the vision and execution of the management team. That’s why I shake my head at some of the postings on the Fool boards when we endlessly try to evaluate every nuance of a company’s technology and make endless comparisons of the most miniscule technical features to their competitors. Unless you’re a technologist who works directly for the company or their competitor, you will never know enough to make the kind of technology assessments that I see on these boards.
However, you can do something much more important. You can watch videos of the management team, listen carefully to their earnings calls, and gauge the team’s passion, vision, clarity, honesty, and overall leadership. That will tell you a great deal about their chances for future success. That’s what the venture capitalists do, and you can learn the same critical evaluation skills.
Now go back and read addedupon’s post #69370 six more times 