How much does a founder really matter?

Two Harvard professors are battling over how much a founder matters.


November 24, 2020

Prevailing wisdom in the VC community holds that the founding team behind a new business is often the most important determinant of investment worthiness.

In certain cases — Bezos (Amazon), Zuckerberg (Facebook), and a South African entrepreneur who likes memes (Tesla) — this has held very true.

But, hold onto your seats…

A new study by Harvard Business School (HBS) egghead professor Tom Eisenmann suggests that management might not be the ultimate harbinger of success after all.

Eisenmann conducted a survey across 470 founders and CEOs, targeting companies that had raised $500k+ (and under $3m) in funding across biotech, energy, and material-science startups.

When it comes to founder DNA, Eisenmann concluded that founder variables such as age, education, and personality traits didn’t “move the needle” when it came to early stage company valuations.

Another HBS professor says, ‘Hold my beer’

Eisenmann’s colleague Paul Gompers threw some shade across the Cambridge quad, finding the research “problematic on several fronts” (e.g., small sample size).

In an earlier study, Gompers surveyed almost 1k VCs, and 47% said management was the top reason to invest, while 37% said the business itself was the primary driver.

Clearly, investors have been happy making founders the most important variable — contrary to what prevailing data might say.

If you want a nonacademic take, famed founder and investor Marc Andreessen believes that, of the 3 “core elements” of a startup — team, product, and market — the most important is market.

“In a great market — a market with lots of real potential customers,” writes Andreessen, “the market pulls product out of the startup.”

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