It’s a VC cliche that great management trumps a great idea.  In this case there’s a lot of truth to the cliche. Over the course of my venture career I’ve been exposed to all combinations of teams and ideas and am constantly reminded of not only the power of great teams, but also of the pitfalls of poor ones.  We’ve thought about this a lot at Foundry and have pushed each other hard on investing only in people we’re ecstatic about as entrepreneurs (and resisting the temptation to "fix" management teams that are not A+ or fool ourselves into believing that an outstanding idea is more important than the people who implement it).  This last point is often missed on our industry – I think there’s an incorrect belief that a mediocre team can push their way through a great idea. While certainly there are cases where a company manages to a great outcome with a sub-par team, my own experience has been unequivocal.  While I’ve had a handful of cases where – with the benefit of 20/20 hindsight – the idea we were pursuing was only fair but where a fantastic management team has managed to guide a company to a good outcome, I’ve had almost no cases where we’ve placed a company in the hands of sub-par managers and reached a happy ending (as I mention above there are some edge cases where mediocre teams manage to a happy place, but to me these are just lucky exceptions). 

It’s tempting at times as a VC to get behind an idea you’re really excited about with a team that you take on as a "project", just as it is easy to fall into the "here and now" trap when hiring a replacement CEO (or deciding not to replace an existing one who has grown a company as far as they can realistically take it).  Doing so is a mistake.  Bad management = bad outcome.  Not to mention that life is too short to work with people who aren’t great…

  • David G. Cohen

    Amen brother!

  • Cai

    You seem to be suggesting that you can't train a bad managment team to be a good managment team. If that's the case, where do good managers come from? Are they just born like that?

    Of course, it could just be that there isn't enough time in a startup to train managment. Which also makes sense.

    • sethlevine

      you can learn on the job for sure – by working for a great manager you can hone your skills to become one.of course some portion of what i'm referring to above is somewhat innate – obviously experience is needed to really become expert at your craft, but some people are just “born ceo's” if you know what i mean.

  • John

    Have you ever tried or offered to build a great team around a great idea that was brought to you by a non-great team? Why wait to replace a ceo when it can sometimes be done on day 1?

    • sethlevine

      absolutely. we've funded a handful of companies with a strong technical founder where we (meaning the founder and us) brought in a CEO to really manage the business (sometimes at the beginning of a company, sometimes at some point during it's lifetime).

  • Scott

    I feel experience/great CEO's can be as much as a liability as an asset. Why? Because many CEO's try to mimic something they've done in the past instead of trying to create something new–innovating. It's a violent paradigm–very interesting to experience :-)

    – Scott from

  • Kevin Pruett

    This is a great take on the VC/entrepreneur relationship. As a VC, do you ever evaluate the team's flexibility, or willingness to adapt when pursuing a venture? In other words, if you think highly of a particular idea or project, but not necessarily so about the management team, do you ever approach the team early in the process about the likelihood of them changing their team, or their willingness to adopt different senior managers at the request of the VC firm?

    It seems to me that an unproven team with a great business model should still be taken very seriously. Of course, as you pointed out, if they are unproven and inexperienced, an unsuccessful execution will likely result no matter how great or innovative their business venture appears to be. I feel as though a CEO or founder that is willing to “forfeit the reigns” for the betterment of his someone worth holding onto no matter how inexperienced he may be.

    • sethlevine

      absolutely, kevin. while this isn’t necessarily typical, we have on occasion brought in new management to an idea that we really like. this generally does not involve firing the existing team – just supplementing them. we always have this conversation up front with entrepreneurs (“we really like this idea, but it seems to us that you need to fill in the senior management team here and here”) rather than any kind of bait and switch (not a good practice).

  • scott

    Entrepreneurs should also expect to be pushed aside when receiving VC money (not in a violent, blunt way); however, when you take VC funding, your baby is now your VC's baby :-)

    • sethlevine

      i don’t agree, scott. it’s relatively unusual for entrepreneurs to be “pushed aside” when taking in VC money. sure, it happens, but is definitely the exception, not the rule.

  • sethlevine

    from Bernie Dana (had technical difficulty getting his comment up)…

    Good thought, Seth. And the devil is in the details. What makes a good manager for an early stage enterprise (powerful drive to push projects linearly) often makes a poor manager in a later-stage company charged with executing and commercializing (poor because he's impelled to drive everything himself, so can't delegate effectively and therefore cannot scale). This problem usually reflects a cognitive problem-solving style that doesn't change easily or speedily, or a personality makeup that will never change. Early-stage investors are frequently attracted to these qualities combined with charismatic social skills and domain knowledge and skill. Trouble is, the latter two areas are pliable and subject to learning or coaching, but the cognitive and personality dimensions are not. A close reading of the leader's intellectual capability and style, and his personality dynamics, can be extrapolated to a predict the trajectory of his viability over the long haul. If the longer-term projection is unfavorable, and all other factors are equal (e.g., good idea, good market, etc.), best to invest with the understanding with the leader that he has a predetermined shelf life as CEO, or not invest without creating a more suitable position for him (e.g., Executive Chairman and CTO) and recruiting his successor from jump start. A parallel problem-solving leader, who can orchestrate the complexity of a growing enterprise, can be encouraged to roll up his sleeves and dig into the details in the early stage of scarce resources, so long as his personality does not render him oblivious or averse to such activities. Moreover, not much can be done to avoid or improve upon unfavorable team dynamics if the leader and/or several reporting executives are hampered in their effectiveness to grow by cognitive or personality factors. Best to treat these two realities as “givens” that will not change, and invest developmental efforts in areas subject to change, e.g., social skills, insight, managerial capabilities, domain knowledge. Early diagnosis is the key. Bernie Daina, Organizational Psychologist

  • Jeff Widman

    Seth–thanks for posting this… I've seen it true in my own experience, but always wondered whether others experience corroborated this.

  • Mike F

    To follow up with what Scott said, I am curious what your thought is on what happened to Friendster. That website was taken over by whichever VC funded it and fundamentally changed, then it died. When you get funded, things do change. I have a couple VC friends and their comments were “we want 1 of 10 to take off (large returns), not 10 of 10 survive. This is very different thinking than the entrepreneur, whom isn't necessarily driven by money.

    • sethlevine

      mike – i don't know specifically what happened with friendfeed, so i can't comment on that specifically. more generally, you're talking about the tradeoff that entrepreneurs make when taking venture capital. some of this can be solved with due diligence on the entrepreneurs part (although i rarely see this happen, i believe that entrepreneurs should always due diligence their venture partners just like vc's do for the companies they invest in). some is just unavoidable given the dynamic of taking capital from outside sources. i wrote a post called “Thinking of taking venture capital: don't!” that might resonate with you:

  • sayenjole

    Wonderful post.It sounds to me like you’re the one with the excellent management style and creativity:)