One of the great paradoxes of early-stage investing is that you have to invest in breakthrough ideas. Peter Thiel outlined it as investing at the intersection of really really dumb ideas that would actually be pretty cool if they worked.
An example, what if you could call a car to give you a ride on your phone. When ride-sharing first debuted, it was a stupid idea that would be really cool if it worked.
Ideas are great, but execution gets them across the finish line. You need a founding team that can do that.
Professor Steve Kaplan at Chicago Booth has done a lot of research on venture investing. Here is a deck of his on research looking at “jockeys or horses?”
I am a big proponent of investing in great people at the seed stage that have great ideas. But, even if they have a good idea, it still might be a great investment because of the people.
Last week I was at Money 20/20 and ran into Ethan Austin. Ethan is a great entrepreneur working on a new company. Then we ran into Sheel Mohnot of Better Tomorrow Ventures. Running into Scheel reminded me of the jockey and horse paradox.
Here is an anecdote on jockeys versus horses.
Way back in the dark ages when Chicago Techstars was called Excelerate Labs, they had their first-ever startup class. In that class was a company called FeeFighters. It actually was called TransFS, but thankfully the name was changed pretty close to their launch.
Via Hyde Park Angels, the angel organization I co-founded in Chicago, I invested in FeeFighters. Bob Giamannco led the deal. FeeFighters had an exit. Groupon bought them and frankly, it wasn’t a hugely profitable exit but it was in fact a positive cash flow exit. “You never go broke taking a profit” was an old saw from the trading floor and it works in venture too.
The key is this. FeeFighters had a tremendous team. Without that team, it is doubtful that they would have had a positive exit. Despite all the difficulties, curveballs, and twists, they found a way.
How do I know they had a tremendous team?
Look what the FeeFighters team has gone on to do since the sale and earnout was over. Sean Harper started Kin Insurance which did a billion-dollar SPAC. Sheel has his own venture firm. Stella Garber went on to Trello, and is a great individual angel investor in her own right. Joshua Krall went on to found more companies.
They all are young and successful. They all have a lot of green fields in front of them. They were a great team.
Ethan calls them the FeeFighters mafia.
👍💯