The most successful venture capitalists carry one slogan around in their heads as they review new investment opportunities: "Bet the jockey and not the horse." This means that the quality of management is the key ingredient in a successful early stage investment strategy. This is not new news to anyone even casually familiar with private equity investing. In fact, it makes me curious about the avalanche of criticism in the media aimed at directors of public companies who award lush employment and option contracts to key managers. The fact is, the quality of management makes just as much difference in a public company as it does in a private, emerging growth firm…a make or break proposition. If the company has $1 billion in gross revenues and $100 million in margin in today's environment, it is likely to be headed in one of two directions…on the way up to $2 or $3 billion, with a consequent effect on shareholder value, or exactly in the opposite direction. As Dick Foster and Sarah Kaplan have pointed out, very few public companies are able to stand still these days. The gifted managers are continuously involved in the process of reinventing their firms. Intense global competition means today's good times, left unattended, are tomorrow's death spiral.
