Team over technology, people over profits

There is an adage in the venture capital world that a good investor will always pick a great team with an average technology over an average team with a great technology.

In fact, a study published in August 2016 led by Paul Gompers of Harvard University examined how venture capital investors make decisions. It showed that 95 percent of investors ranked “Team” as an important factor in their decision to invest and 47 percent ranked it as the most important factor.

“Product” came in third; 74 percent ranked it as important but only 13 percent ranked it as most important.

Additionally, 56 percent ranked the team as the most important factor of their successful investments and 55 percent ranked it as the most important factor of their failed investments.

Technology came in at 45 percent and 8 percent, respectively, on the same criteria.

In my vernacular, “idea” or “product” can be substituted for “technology” and the adage holds true.

The reason it holds true is, contrary to salesman folklore, ideas don’t develop themselves and technologies don’t sell themselves. They require a certain breed of human being known as the entrepreneur.

Men and women who can put together a solid deal by knowing more than just the widget or the code; who can create a sound business model, and an executable strategy to monetize their technology.

Finding good ideas is the easy part, but finding and developing these entrepreneurs is by leaps and bounds more challenging.

It was also an entrepreneur, Andrew Gough – e2e inaugural cohort and CEO of Wichita’s Reverie Coffee Roasters – who inspired me to write this article. During a lunch presentation to the Rotary Club of Wichita, Andy spoke of the importance of “People Over Profits” at Reverie.

He puts this mantra into action by empowering his employees, who in return understand the value of their contribution. This leads to more engagement, better decisions and loyalty.

“We are a community-based business in a commodity-based industry,” Gough said. “Reverie’s People Over Profits culture has united our team and created mutual sense of ownership to get Reverie where it needs to be.”

During Andy’s presentation, I began to wonder whether the rest of corporate America – or corporate Wichita for that matter – truly shares Reverie’s approach. I have my doubts.

We have building codes, OSHA and EPA regulations, ISO standards, maintenance procedures and a litany of other mandates that force companies to reinvest heavily in their tangible assets. Yet at-will employment laws allow them to hire and fire people with impunity.

For example, if you are a property owner and your building’s sign gets damaged or roof begins leaking, you probably would rush to fix it and not rest until you knew it was repaired.

If you have an employee suddenly demonstrating bad behavior, would you rush to help, understand and correct the issue with the same enthusiasm as the sign or roof, or would you simply fire and replace them?

Naturally, you don’t owe me an answer, but I find it extremely encouraging that the entire ecosystem is kicking into high gear to produce more investors willing to back good entrepreneurial teams and more entrepreneurs who share Andy’s mentality to join these teams.

If we are to collectively grow the Wichita entrepreneurial ecosystem, we must not lose sight of the fact that it all revolves around the people and the teams.

This story was originally published April 12, 2017 at 2:13 PM with the headline "Team over technology, people over profits."