The importance of a team

DiscussionsCategory: Starting UpThe importance of a team
rune Andersen asked 5 years ago

Do you have research documentation for the statement that the right team is fare more important than the brilliant idea? I need a reference or quote to research qualifying the statement. I would be really nice if there is som numbers involved.

3 Answers
Bill Aulet answered 5 years ago

I hope the community can help with this one. The first time I saw this laid out was by the legendary Venture Capitalist David Morganthaler who talked about the horse (technology/product), the jockey (team/execution) and the race (market). He analyzed his deals after the fact (note the bias here is that they were vetted to be venture capital fundable) and he found the point of failure was most commonly the jockey. It was definitely not the horse and the race was the one in the middle. I have heard this numerous times since then but not kept the studies. It also has been my experience by far and makes logical sense.  
All of this being said, it does not get you the answer that you want and I hope the community will be able to help you. I would look at Noam Wasserman’s work as the place to most likely find this. His book is listed in the recommended books on this site.

Dr. Noam Wasserman answered 5 years ago

Thanks for the question, Rune (and for the heads-up, Bill)!
Thirty years ago (1989), Gorman and Sahlman published their “What Do VCs Do?” paper in the Journal of Business Venturing that sparked my two decades of research into this.  On p. 239 of the paper, they briefly mention that among high-potential ventures that had failed, in “65% of the entire sample, venture capitalists cited senior management as the most important contributing factor.”  It swamped any of their metrics of what today would be called product-market fit and the other “idea” factors that they thought might affect the outcome.
When I ran into that paper around 2000 (early in my doctoral program), I couldn’t find any other papers that had followed up on the result, unearthing the early decisions about founders and senior management that separated success from failure.  So I decided to tackle it myself, collected data on thousands of founders and their early decisions, developed my Founder’s Dilemmas course and book, had the distinct pleasure of meeting and collaborating with The Great Bill Aulet, etc.
In 2004, Kaplan and Stromberg published a paper in the Journal of Finance that confirmed Gorman and Sahlman’s finding.  Taking a very different approach (e.g., looking at investors’ ex-ante predictions of potential risks, compared to Gorman and Sahlman’s ex-post judgments about what had caused failure), they found that 61% of the expected risks were management risks — almost the same exact finding.
(Those papers were so fundamental for me that I opened my The Founder’s Dilemmas book with them and the quote, “It’s unfortunate but true: If entrepreneurship is a battle, most casualties stem from friendly fire or self-inflicted wounds.”)
Note that these are economists (Sahlman, Kaplan, Stromberg) finding that people problems are at the core of startup risks and failures, not organizational-behavior or team scholars. :->
Hope this helps.  Best of luck with your work!
 
Noam Wasserman
Dean, Yeshiva University’s Sy Syms School of Business

Bill Aulet answered 5 years ago

You are the BEST Noam!!! Thanks on behalf of the community.

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