Horse -> Bet on the solution Jockey -> Bet on the team Track -> Bet on the market
Kaplan, Sensoy and Strömberg (2009) developed a “jockey vs. horse” framework to examine what factors are more constant over the life of a successful VC investment
🏇🏻 entrepreneurial team is the “jockey” 🐴 strategy and business model are the “horse” (some include the market within the horse concept)
Wide range of supporters for both positions, so it depends on the perspective.
Peter Thiel: we live and die by our founders Founders were cited by 95% of VC firms as an important factor in decisions to pursue deals - HBS Survey Business model was cited as an important factor by 74% of firms, the market by 68%, and the industry by 31% Andy Rachleff: when a great team meets a lousy market the market wins; when a lousy team meets a great market the market (sometimes) wins; when a great team meets a great market something special happnes Georges Doriot: always consider investing in a grade-A man with a grade-B idea. Never invest in a grade-B man with a grade-A idea
Some say that it's all about the team: smart people who work well together, enough time, and determination, they will come up with a great idea; conversely, a bad team won't be able execute even the best of ideas – they will just screw it up and forfeit their chance.
Some say that it's all the idea: with a crappy idea, any team, no matter how good, will fail. More – they claim – if a crappy team is paired with a good idea, you can always replace the team. As usual, the answer to the question at the top is "it's both".
But a problem with the VC's perspective is that it's usually not clear whether an idea is good or terrible. So, the entrepreneur retorts, that's where the team comes in. Leave it to the team to pursue an idea even if it initially seems ridiculous.
Take the more holistic view, and agree with Andy Rachleff who gets this question a lot, but has a witty answer ready. It's both the team and the idea. One may be more valuable to you than the other, but that depends on where you stand, what you can control, and what you're more invested in.
Letter from Reid Hoffman on Founder´s Psychology
The founder vs market question is very interesting. I’d posit that it’s rarely such a stark choice. It’s much more often about the right founder for the right market or for the right moment in time. Satya Nadella (a “re-founder,” as I christened in my podcast Masters of Scale) is a generational CEO at Microsoft, could he have this same transformative impact at, say, McDonalds? Or a small 5-person start-up in the fashion business? Maybe. Maybe not. Fit matters. Similarly, when you look at founders, there are distinct stages from 0 to 1, and then 1 to scale. The founder who can get you from 0 to 1 might not be the right one to scale an organization. As you know, I was the CEO at LinkedIn from 0 to 1, but ultimately, Jeff Weiner was the “re-founder CEO” that led our team to truly global scale. In those early days of 0 to 1, there often seemed to be a fifteen-minute gap between believing that “we were going to rule the world” and then feeling as if “we’re so gonna die.” That’s just one of the different challenges and experiences from building to a global scale!
Given this – the many different types of markets, stages, and dynamics at work – I think a singular archetype of a “great founder” is likely illusory. Certainly, all great leaders are voracious learners, but there are many different styles to this – some learn by doing whereas others by talking and listening. At this point, though, relentless self-improvers and learners are probably table stakes. Founding leaders require an almost irrational self-belief (some may say self-delusion) that their vision for the future is possible. It might sound like a contradiction, but it’s necessary to hold that belief while also being conscious of the inherent risks...