INVESTORS and FOUNDERS: Take the Jockey Over the Horse.
No matter how magnificent the beast is.
Investors usually have a hard time deciding what matters the most — the jockey or the horse.
No, I am not talking about these two:
So, what are horses?
Horses are companies that you could potentially invest in. Horses represent the vehicle, the machine. They are ideas. They are startups.
And what are jockeys?
Jockeys are the company’s leadership team. Not just the Founder or the CEO, but the top executives that hold the reigns of the horse.
As an investor, your venture returns are based around your capacity to predict whether the company will be successful or not.
But what’s a more determinant factor, the idea or the team?
When looking at a horse, you should only ask yourself one question:
“Is there upside in the market?”
Let’s see an example:
If you were in an investor back in 2006–07, you know social media platforms were the market with the biggest upside. Facebook, Twitter, Tumblr, Reddit, and Youtube all popped up around that time. Now they’re all billion-dollar companies.
Today you should be looking at different markets. Smart tech, virtual reality, and artificial intelligence are fast-growing industries with great upside.
So, if the horse has upside, you can now move to the Jockey.
“Is there upside in the market?” is a Yes or No question. If you think there is not, then just do not invest. But if you think there is, then you can move to the defining factor…
…The Jockey.
A startup can look splendid on paper, but is it in good hands? Jockeys are crucial for two reasons:
A+ teams can turn B ideas into A companies.
But also,
C- teams will turn A+ ideas into C- companies.
So, if jockeys have such a tremendous impact — both positive and negative — on a company’s potential success, one should ask…
“What makes a fantastic jockey?”
Here’s where it gets tricky. When you are vetting the CEO and his/her team, remember…
Jockeys come in all shapes and sizes.
In the current technological era, our stereotypical image of what a CEO looks like has changed. The tall, good-looking, charismatic male with slicked-back hair is not the only acceptable option anymore. The doors have opened for everyone else: women, introverts, college dropouts, tech kids, etc.
Success is the finish line — but there are many different ways to get there.
There are many different types of successful CEO’s. Some are great motivational individuals, and they can get their teams to perform at the highest level. Others are great operators. Others are great financially.
But a successful CEO will always be self-aware and humble.
Self-aware enough to know what he’s great at and what he sucks at.
And humble enough to surround himself with people that complement his skills.
So, if you are an investor,
remember that the horse needs to have great upside and that the jockey will determine its final success.
And if you are a Founder/CEO,
know that investors consider you a crucial element on whether they should invest in your company or not.
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