Great ideas and great teams
Wednesday, June 18, 2008/
I’d rather back a great team with a second rate idea than a second rate team with a great idea. DORON BEN-MEIR
By Doron Ben-Meir
I’d rather back a great team with a second rate idea than a second rate team with a great idea. We’ve heard it before… but is it true?
Well… yes, because even great ideas don’t sell themselves. Only great teams can execute.
But how do you define a great team? By what criteria does an investor make the judgement call?
At either end of the spectrum there are the obvious cases.
The successful serial entrepreneur that has created substantial value for investors across multiple start-up companies and who has put together a balanced, experienced team focused on executing a well defined business plan with a proven, compelling value proposition at its core – rare indeed, but definitely a great team.
I’ll leave it to your imagination how bad teams can be, but suffice to say that it reaches a point where almost anyone can tell that a team is most unlikely to achieve its ambition.
What lies between is all manner of combinations and permutations that test the insight, instincts and due diligence of investors (both professional and private).
You may be surprised to learn that we do not necessarily require that entrepreneurs have a track record of successfully starting new companies or making money for investors. They may not have a successful corporate career or an Ivy League qualification.
The best indication of a quality team is a quality proposition which would ideally include all of the following ingredients:-
- A cornerstone value proposition which has been validated by the target market.
- A deep understanding of the addressable market – its size, demands, supply chain, industry dynamics and politics.
- Thorough competitive analysis – who do you have to beat, who might you hurt and what will they do about it. There is no such thing as “no competition”!
- A bottom-up financial model built upon established market validation and proven traction.
- An execution plan with both strategies and tactics articulated and supported.
- An understanding of existing strengths, weaknesses and risks and a plan that builds on strengths, addresses weakness and mitigates risk.
- An understanding of who will want to buy the business once it achieves its planned milestones (that is, how you will make money for the investor).
If you can present all of the above, then it doesn’t matter what you’ve done, what qualification you have, what school you went to or where you’ve been – it’s clear you know where you’re going.
So, as I explained to an entrepreneur who lamented to me last week, “…it’s a great idea…give me a chance…”. In the end, great ideas are worthless – it’s all about execution.
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Doron Ben-Meir has been an active venture capital manager for the last eight years. He founded Prescient Venture Capital and prior to that was a consulting investment director of Momentum Funds Management. He was a serial entrepreneur over a 12 year period, co-founding five new technology based businesses.
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