Age Old Questions

Some age old questions remain not yet answered:

• Which came first - the chicken or the egg?
• Is light a wave or a particle?

In that vein, the big question in Venture Capital is always

• Markets versus Team i.e. do you bet on big markets or bet on great teams

Clearly its best to bet on both but often you need to make that trade off and different firms have had different philosophies on that.  Arthur Rock was known for his focus on great teams.  He wrote a $250,000 check to Robert Noyce and Gordon Moore to form Intel on his pure conviction on the strength of the people.  Don Valentine is famous for betting on big markets even if the team is less than stellar.  Warren Buffet (one of my personal heroes) has this great line about teams and market:

When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact

My friend, Robin Bordoli, of Mobius has this great piece on the way he looks at deals and market spaces.  I take a slightly different approach to Robin.  While markets clearly matter and I agree that  M&A is going to drive most of the exits for VC's, if I had to tradeoff the two, I would go with the great team.  The rationale for my preference is driven by the following:

1. I am a young VC who is looking to partner with great people for the next 30 years so the more great people I partner with today, the better the leverage over my planned time line ( assuming my partners actually let me stay in this business for that long ;-))
2. Great people attract other great people so again over my planned time line I will be able to fund the alumni of my hopefully successful companies (the number of semiconductor companies founded by alumni of Fairchild or software companies founded by alumni of Oracle/Siebel are astounding)
3. Great people can usually figure out to make at least a single/double out of a bad market
4. People are a little easier to judge than market (this is a marginal point since both is equally hard)
5. Markets can change but people normally don't

So that's my answer and I am sticking to it ;-) ;-)