Betting on the Jockey Can Seriously Lose the Race
Investors and Silicon Valley insiders are always talking about betting on the jockey meaning the founder(s) rather than the horse (meaning the idea or innovation). This works enough to have become a mantra in startup investments and the industry as a whole. I have not seen any behavioral economics studying this often faulty logic in investors, incubators and other startup accelerators, and the industry as a general, but I bet this mantra flies against demonstrable statistics if any were taken. Betting on the jockey feels right as a company needs a leader and a leader can save or sink a company. However, the reality is that most startup founders, at least in the tech arena are not experts in business, they are technology people and have little business sense. I have witness this personally at my accelerator program and have experienced the holes in my own business skills that I had prior to the program. Betting on the idea can win the race because if the idea is solid, any experienced jokey can make it cross the finish line triumphantly.
A professional CEO can make any idea thrive far better and faster than a founder who on top of their regular duties often has to spend time learning new business rules and lose time mired in business duties when he or she is needed on development. While a well balanced team with some founders with solid business skills can indeed be a good bet on the jockeys, a good balanced team is rare. As always there are example for almost any point of view but here are some examples of why the innovation usually trumps the founders:
Google—arguably the biggest disruptors in internet history (and tech perhaps). They have literally changed the internet landscape and are on the forefront of innovations with their Google X Labs. Well the founders are super smart, super skilled technically, but at the beginning they needed “adult supervision” to make the company thrive. They are now amazing business people too but it took many years for them to get to this level. The CEO that kept them on a huge growth curve was not the founders. If the investors had betted on the jockey, Google may not be around today or they may be a completely different company today.
Facebook—Facebook was never in danger of going down but it was not until Sheryl Sandberg came into the picture that Facebook took off like a rocket. She gave Facebook the structure and management it needed.
Yahoo—the first of the old internet guard to get “adult supervision” was Yahoo. They really needed it and it took a long while before the founder could take over.
While a founder’s passion is a great inspiration for success, I argue that providing a professional executive to help out is wiser than betting everything on the founders. The bet on the founders is that they can develop the product well. The bet should not be that they can make the company work well because that is a hard thing to do that requires a different set of skills that most founders do not have. The idea or innovation on the other hand can stand on its own when properly developed and properly guided by sound business practices. It does not require passion to thrive or even be developed (though it certainly helps), it only requires a solid foundation that can make the bet less risky. While it is hard to drive people, ideas and innovations can be driven by the right executive so it deserves much more credit than it is usually given by investors and the startup industry.
A good jockey can make a good horse great and can win races even against stronger horses with worse jockeys but in the end it is the horse that wins the race, if the horse suffers from even a small flaw that is not noticed at the beginning (such as a condition that only shows under heavy stress) there is no jockey that can make the horse win the race because it will fall before reaching the end even if it was way ahead. There are many cases where betting on the jockey is a prudent bet but most of the time betting on a sound horse can make an innovation a success no matter who the jockey is even against stiff competition. So I challenge the bet on the jockey mantra among investors and the startup industry and caution that significant studies need to be done to find the right mix for investors and for startups!