A start-up company will succeed based on the power of its product, market, and business plan—or so say some venture capitalists. Others are more inclined to bet on the “jockey”: the company’s assembled management team and talent. A couple of professors from the University of Chicago’s business school recently decided to investigate the odds, and found that in the VC race, it’s the “horse”—the quality of a company’s patents, stores and processes—that usually determines the winner. For more on their study of 49 companies that went public, go to www.chicagogsb.edu/capideas/dec05/1.aspx.
But more P.E. firms are now assessing the jockey. At the same time, a recent article at Workforce.com suggests that private equity firms and investment banks are beginning to give a company’s workforce—including its management team—the same careful analysis as its financials. “Ten years ago, maybe one-quarter of organizations were doing talent assessments before making an acquisition or an investment,” says a quoted industry rep. “Today that number is up to 75%.” The article, “Talent Getting its Due Diligence Before Deals,” is available at www.workforce.com/section/09/feature/24/42/70/index.html.
To find out where BV’ers place their bets, check out Early Stage Company Valuations, a recent BVR teleconference (May 23, 2006), available at BVResources.com.
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