In start-up businesses, do you bet on the jockey or the horse?

BVWireIssue #46-2
July 19, 2006

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

But more P.E. firms are now assessing the jockey. At the same time, a recent article at 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

To find out where BV’ers place their bets, check out Early Stage Company Valuations, a recent BVR teleconference (May 23, 2006), available at

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