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Forget the Jockey, Bet on the Horse! by Thomas Thurston |


startup reportA MICRO-EXPERIMENT

Framework in Question: Great management leadership is predictive of superior firm performance. (i.e. ‘bet on the jockey, not the horse’)

Framework Background: Venture capitalists and angel investors cited the “quality of the management team” as a top indicator of likely startup success in a 2009 poll. Indeed, few people would prefer bad, dysfunctional teams to good, effective teams. There are numerous empirical studies supporting the view that good leadership can, indeed, make a positive difference in company performance. But is it predictive?

First, it should be noted that there have been many studies around this general topic. For example, a study of 132 Methodist churches over 20 years found that new ministers with a history of growing membership and donations made similar improvements to new churches after being transferred (Pfeffer & Blake). A study of major league baseball coaches found that better managers boosted team performance (Kahn). A 40-year study of labor and capital productivity in the automobile industry found that leadership had an impact on firm performance (Lieberman, Lau & Williams).

Landmark research by psychologist Dean Keith Simonton similarly concluded that approximately 10% of contributors frequently account for 90% of contributions (Simonton). This is analogous to the “80/20 rule” where 80% of work is typically done by 20% of those involved. Similarly, one study found that only 16 composers out of 251 had produced roughly 50% of the classical music that is now performed and recorded (Sackman, Erikson & Grant). The best and brightest have a disproportionate impact.

Our Analysis: Great teams are, by definition, better than bad teams. This is not in dispute. However it is quite another thing to assert that great teams are predictive of superior firm performance. Are startups with great leaders statistically more likely to survive than startups without great leaders?

To test the predictive validity of the “great leadership” variable, 100 startups were separated into two categories (50 that survived, and 50 that were shut down). A number of leadership-related classification schemes were then tested against the sample.

Conclusion 1: Highly subjective. The most obvious challenge in attempting to make predictions on the basis of “great” or “bad” leadership is the inherent subjectivity within the classification scheme itself. After all, what makes a great team “great”? Experience? Education? Track record? Intellectual horsepower? Intra-industry expertise? Extra-industry expertise? Height? Weight? Eye color? Animal spirit? Other? What is “great”? Leadership can be largely intangible. Therefore a relatively limited number of easily measured factors were tested in this study. Considerations beyond these factors were not tested and therefore will not be addressed here.

Conclusion 2: Not predictive. Acknowledging the challenges of this subjectivity, the following potentially leadership-related attributes were tested in this sample (with their obvious limitations):

  • Total years of higher education held by the leadership team (Bachelor’s degree or higher): No statistically significant correlation to firm survival or failure
  • Years of work experience post-higher education: No correlation
  • Years in same industry: No correlation
  • Years in “big companies” ($500 million in annual revenue or more): No correlation
  • Years in “startups” (0-3 year old firms): No correlation
  • Years in professional consulting industry: No correlation
  • Number of team members with MBA degrees: No correlation
  • Number of team members from Ivey League schools: No correlation
  • Total team age: No correlation
  • Age of CEO/Leader: No correlation

Secondary Research: As stated earlier, this analysis was a limited attempt to address a much broader question. To more fully explore the issue, other external studies were reviewed.

An analysis of intelligence quotient (IQ) found that IQ is the most powerful predictor of job performance across studies, but still seldom correlated more than 0.4 with performance. In other words, IQ did not account for approximately 84% of performance (Pfeffer & Sutton).

The impact of changes in leadership was studied across 167 companies over a 20-year period and concluded that company and industry have far larger effects on sales and profits than leadership (Lieberson & O’Connor). Leadership studies of large samples of CEOs, University Presidents and Managers of sports teams showed that organizational performance was largely determined by factors beyond a leader’s control (Pfeffer). Several studies have also shown that changing CEOs has no statistically significant impact on organizational survival or death (Carroll and Hannan).

A wide review of leadership studies as far back as 1977 found that, while leaders have some impact, their actions rarely explain more than 10% of the difference in performance between the best and worst organizations and teams (Pfeffer & Sutton).

Summary: Bad, dysfunctional teams can have an infinite ability to destroy any business. No argument there. However this experiment found that the tested factors did not create statistically higher likelihoods of firm survival, and secondary research suggests that teams can have an impact - but less than you might think.

We conclude that teams with the tested qualities may indeed be nice to have, but they were not significantly predictiveof survival or failure in our sample. While a seemingly anticlimactic finding, it does suggest that betting on the "jockey" (leadership team) and not the "horse" (business itself) can easily lead to bad decisions by managers and investors alike. Good and bad teams - as defined in our samples - failed at the same rate. Perhaps the horse deserves a second look after all.


  1. Pfeffer & Blake, Administrative Succession and Organizational Performance: How Administrative Experience Mediates the Succession Effect, Academy of Managemnet Journal 29 (1986)
  2. Kahn, Managerial Quality, Team Success, and Individual Player Performance in Major League Baseball, Industrial and Labor Relations Review 46 (1993)
  3. Lieberman, Lau & Williams, Firm-level Productivity and Management Influence: A Comparison of U.S. and Japanese Automobile Producers, Management Science 36 (1990)
  4. Simonton, Greatness: Who Makes History and Why, Guilford Press (1994)
  5. Sackman, Erikson & Grant (1968), republished by Brooks Jr., The Mythical Man Month, Addison-Wesley (1995)
  6. Pfeffer & Sutton, Hard Facts, Dangerous Half-Truths & Total Nonesense; Profiting from Evidence-Based Management, Harvard Business School Press (2006)
  7. Lieberson & O’Connor, Leadership and Organizational Performance: A Study of Large Organizations, American Sociological Review 37 (1972)
  8. Pfeffer, The Ambiguity of Leadership, Academy of Management Review 2 (1977)
  9. Carroll & Hannan, The Demography of Corporations and Industries, Princeton University Press (2000)


Thomas Thurston is President of Growth Science International, LLC, a research firm that predicts if businesses will survive or fail. A former venturing professional at Intel, Thomas serves on multiple boards including the Revenue Capital Association. He holds an MBA, JD, was an Attorney for startups (OSB#044359) and was honored as a Research Fellow at the Harvard Business School.

Interview about the future of Entrepreneurship in the United States


Kauffman FoundationJohn Tyler: The Outlook for Entrepreneurism in America

Watch this interesting interview with John Tyler, General Counsel and Chief Ethics Officer for the Kauffman Foundation.  The Kauffman Foundation is one of the largest and most effective centers supporting entrepreneurism in America.  Mr. Tyler addresses how we can enhance the entrepreneurial ecosystem in the United States in order to grow and develop our economy and create jobs.  How many new startups would we need per year to have an impact on our economy? And why does Mr. Tyler believe we need more start up companies to fail faster?  What can we do to make entrepreneurship easier for everybody?

Is America losing its edge compared to the growing entrepreneurial ecosystems of India and China?

What Kauffman Foundation programs are available to assist entrepreneurs in the United States?  What is Kauffman Foundation doing to assist minority and women entrepreneurs to grow their businesses and provide better access to capital?

Are business schools teaching entrepreneurship the way they ought to?

Watch now and let me know what you think! 

Interview with John Tyler

Ask an Angel: How do I become an Angel Investor?


angel investorThe following excerpt is from an Angel Capital Association article on December 21, 2010.  The full article can be found at the Angel Capital Education Foundation website


December 21, 2010

We asked three experienced angel investors, Jean Hammond of Hub Angels Investment Group, Launchpad Venture Group, and Golden Seeds, all located in the Boston area; Bob Goff, founder and chairman of Sierra Angels of Incline Village, NV and recipient of the Hans Severiens Award; and Steven Mercil of RAIN Source Capital in St. Paul, MN and lead instructor of the Power of Angel Investing, to talk about the what, why, and how of becoming an angel investor.

ACEF: Just to level set, why do people get into angel investing?

JH: There are lots of rational reasons. Early stage equity investing done directly is a good asset class. Done right, this asset class can out-perform other things. You get to use your smarts, your Rolodex, and your ability to interact with other smart people to the benefit of your investment. You know the person you are investing in. It is local. It is creating jobs right in your neighborhood. There is the sense of being there and doing the right stuff. All of those things make a combination of rational, economic, and morale good sense.

For me, the working with smart people and the energy from the smart entrepreneurs is a blast.

ACEF: So how do people figure out if they want to be an angel investor or not?

SM: We get questions from investors about how to become involved with angel investing almost every week. Most of our inquiries are people who have made money and want to leave some kind of legacy and pass their experience and knowledge on to someone else as well as make an ROI. They want to help an entrepreneur grow a business and experience the challenges. They know this is important work.

First, they need to be an accredited investor according to the Securities and Exchange Commission.

JH: Assuming that's the case, there are three basic paths for potential angels that I've seen. One is to have been an entrepreneur and internalized the receiving of investments process to the extent that you now feel comfortable being on the other side.

The second is to go and see how other people do it and shop for an angel group that works for you. This works best where there is more than one angel group and existing activity. Many times people come as guests to angel group meetings. They listen to other people talk about the decision to be an angel at a fairly high level and then down to more nuances.

The last path is more like an apprenticeship. Find someone who is doing angel investing-maybe someone who is blogging or is around your area-who is willing to have you tag along.

ACEF: Angel investing takes time as well as money.

SM: That's right. If you are going to be an angel investor, you have to decide how much time you can commit to this activity. If you don't have the time to be involved, if you want to invest passively, then invest through a professional venture capital manager.

BG: For general education on entrepreneurship and angel investing, we suggest people visit the Kauffman Foundation, Angel Capital Association (ACA), and ACEF Web sites which contain a wealth of valuable information. We also encourage all new Sierra Angels members to participate in a Power of Angel Investing seminar, preferably in their first year.

SM: I also steer people to the ACEF and the ACA sites. If they don't know much about angel investing, I highly recommend they attend one of the Power of Angel Investing (PAI) programs. Almost every time I've taught a course, there is a percentage of audience that has not been familiar with angel investing at all.

JH: We are doing classes here in the Boston area that will include a session on "so you want to be an angel." This will tell participants whether they want to be an angel and what they feel comfortable with.

SM: I also recommend that a person think about the kinds of companies-industry, stage, and location-they like to deal with and how much of their net worth they are willing and able to put at risk.

ACEF: Let's talk about risk. Angel investors seem to have a tolerance, almost an appetite for risky deals.

BG: Investing in any early stage businesses is inherently highly risky. Within an asset allocation context, this segment should generally represent no more than a single digit percentage of net worth (except, perhaps, in special situations). However, when done well and right it can be a highly rewarding activity.

JH: I'm of the opinion that people have an understanding of their own risk profile that helps them figure out whether or not they should be an angel investor and how early a stage of angel investor they want to be. I also think that understanding doesn't come from an extremely rational place.

The other day I heard myself saying that super-early stage angels are born not made. The list of people who like really early stage investing is small.

By their nature, lots of angel groups tend to end up at the "mid-stage" of what is actually the early stage of a company. They skew toward what I would consider a stage of risk that is often equated with market entry stage. The company has something ready to sell and they have to find people to buy it. The reason groups end up a bit later than individual angels is that by the time a diverse set of people feel ready to write a check-the company is at a later stage.

SM: Often angels need to be prepared to make more than one investment in the company. They need to assess whether they can create a viable portfolio within the limits of the time and money they have to invest.describe the image

Have entrepreneurs lost their spirit in the U.S.?


entrepreneurEntrepreneur magazine had an article in their December issue about the decline in the entrepreneurial spirit in the U.S. 

"The Small Business Administration recently did a study that showed that the U.S. has dropped to third place from first place when it comes to fostering entrepreneurial creativity and zeal.  The U.S. now ranks behind Denmark and -brace yourself- Canada! So what are we doing wrong?" 

Here are some answers given by Entrepreneur magazine readers:

  • Complacency
  • The cost of insurance, licensing, small business taxes and hiring employees is astronomical.  Most mom and pop businesses are on a shoestring budget.
  • Americans are not developing new technologies to sell on the global market.  We need to slow down our consuming and increase production in order to export more goods.
  • By the time young executives get out of student loan debt, they are at a point in their lives where it is hard to take the risk of entrepreneurship.  There are student loan forgiveness programs for teachers...why not entrepreneurs?
  • Running a business is like balancing on a log in the water.  Fancy footwork will keep you up, but it takes a bulldog tenacity to stay there.  With so much negativity, undermining, and unpatriotic chin-way, it discourages honest, hard-working people from giving it a go
  • The education system is our main problem.  There are no programs readily available to foster entrepreneurial spirit
  • Bureaucracy

Does the U.S. have a problem with a lack of entrepreneurial spirit?  Why do you think the entrepreneurial spirit has declined? What can we do to get it back?

Can Arizona entrepreneurs attract foreign investment?


Arizona entrepreneur
Arizona has the potential for global presence

by Kathleen Ingley - Dec. 4, 2010 05:34 PM
The Arizona Republic

A giant Canadian private-equity fund makes investments around the planet. Why not in Arizona?

The answer's simple: Nobody asks.

The Caisse de Depót in Montreal gets a constant stream of businesspeople pitching opportunities in places like New York and Chicago. But Arizonans aren't making those international sales calls.

Maybe it's a relic of the Old West, a lingering ornery notion of self-sufficiency. (Forget the fact that developing the West required massive infusions of capital and government money.)

But staying as disconnected as a cowboy on the open range makes no sense for modern Arizona.

"There is a lot of money looking for places to go in this world," according to R. Glenn Williamson, founder and CEO of the Canada Arizona Business Council. "There's no reason why Arizona shouldn't be on that map."

Foreign investment is just one place where we're missing out on the global economy. We should expand exports, attract companies and become a magnet for talented international workers and entrepreneurs.

Step 1 is to get rid of an inferiority complex.

"We sell ourselves very short," Williamson said last Wednesday in a breakout session at Global Arizona 100. The conference, co-sponsored by Science Foundation Arizona and the Morrison Institute for Public Policy at Arizona State University, is aimed at developing strategies and partnerships to make the state more internationally competitive.

The 200 attendees developed a set of recommendations to bolster international trade, which they'll share with the state's political and business leaders.

In Williamson's view, Arizona right now has "an adequate product to sell globally," with a good supply of small and medium-size businesses that are attractive for investment. This is one of the few places in the world with the capability to build aircraft "from tip to tail."

global mindsetA true global strategy is a mix of action and mind-set. My checklist would include:

A state focal point

The fledgling Arizona Commerce Authority, a public-private partnership, needs a section to promote foreign trade. And the resources to support it.

A wide-angle lens 

Arizona must encourage a global perspective at all levels of leadership.

This means putting up a strong fight against xenophobia. The issue of illegal immigration can't continue to obscure Mexico's importance as our No. 1 export market and the economic potential for various partnerships.

The urgent job of teaching children whose first language isn't English should not stop us from recognizing the competitive advantage of nourishing their linguistic skills. (Foreign-language skills in general need more respect and emphasis.)

Thinking regionally

Nearby states and metro areas aren't always competitors. They can be partners in a megaregion that includes Utah, Southern California and New Mexico. That can create demand and economies of scale that could, for instance, build overseas business for Sky Harbor International Airport.

Within Arizona's borders, cities need to have a team strategy for global economic development, presenting a common message and avoiding destructive rivalry.

Smart immigration rules

Arizona's delegation should push for an immigration policy that supports economic development. Goodyear made creative use of incentives to land the first U.S. plant for China-based Suntech, the world's largest manufacturer of solar panels. But when the company wanted to bring a plant manager from China, it couldn't get a work visa.

Promising foreign students get engineering and science degrees at Arizona universities and then take their skills and training home because potential employers don't want to tangle with the complex visa process.


As the state looks at big cuts in K-12 and university funding, no one should ignore the economic impact. Former Intel Chairman Craig Barrett said in a breakout group: "Let's not shortchange education in Arizona, because no one's going to invest long-term without good education."

Going there

Even with the Internet, face-to-face contacts are important. Overseas travel has to shed its image as a junket. And we have to realize that multiple trips are often necessary.

Any major Arizona official who hasn't been out of the country should be sent on the next available trade mission, to get a firsthand view of the opportunities and the level of competition. The legislators who think rock-bottom costs are the deciding factor for corporate locations should check out the plants that Phoenix-based First Solar is building in Germany and France.

Building on local links

Arizona has a lot more international connections than most people realize, from the Russian Children's Center to the Indonesian American Association, and we should profit from them in as many ways as possible. The Greater Phoenix Global Guide, a just-completed ASU guide that catalogs a wide variety of groups and businesses, is a valuable new tool (check it out at

Endurance and persistence

Succeeding in the global economy requires doing the homework, cultivating the contacts and making the cross-connections. North Carolina knows how to do it, with an approach that includes heavy participation in trade missions and meticulous follow-up, said Margaret Mullen, chief operating officer of Science Foundation Arizona. "They constantly keep their name in front of the business community around the world."

This isn't a sprint, it's a marathon. And Arizona has the potential to be at the front of the pack.

Global Entrepreneurial Leadership by Robert Hisrich, Ph.D.


In today’s fluctuating economy, the notions of entrepreneurship, entrepreneurial leadership and entrepreneurial decision-making is receiving increased attention by citizens, academics, managers and politicians on a global basis. The current global financial crisis has put added pressure on creating new ideas and bringing these to the market resulting in financial fruition, economic development and employment. Being an entrepreneur and creating value by establishing a new organization in both the profit and non-profit sectors in business as well as the arts impacts both economic and social conditions. This creation process takes more time and effort than one can imagine and is by no means easy, with a high failure rate reaching over 70 percent in certain countries.Global Entrepreneurship

Since entrepreneurs are found in all professions—education, medicine, research, law, architecture, arts, engineering, social work and distribution—the definition of entrepreneurship in my book Entrepreneurship, 8th edition (McGraw-Hill/Irwin, 2010) is relevant: “Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.”

Global entrepreneurial leaders create visionary scenarios that assemble and mobilize participants who become committed by the vision to discovery and creation of sustainable value. They have a wide variety of attributes including being a visionary, having a passion for their idea, being a risk-taker, having perseverance, building a team, recognizing opportunities and needs, solving problems, and giving back. Let us look at a few examples.

Leonardo Da Vinci

 In addition to his many other titles, Leonardo Da Vinci should be labeled as one of the great global entrepreneurial leaders of all time. It is in fact the breadth and depth of his work, his wide-ranging skills and his lasting impact on both the arts and society that reflect the strength of his entrepreneurial vision. Leonardo created many new and different pieces of art, devices, and ways of thinking that were ahead of their time. 

Edward Teach (Blackbeard the Pirate)

From 1716-1718, Blackbeard the Pirate ruled the seas and was also an entrepreneurial leader who flourished in his trade. The pirates who joined Blackbeard’s command often came from the lowest classes of society or were former members of the British Navy, who found the conditions and treatment they received better than life on farms or plantations. All booty taken by the pirates would be divided evenly among the crew, one part each, save the captain’s two.

Peter the Great

Peter I (Peter the Great) ruled Russia from 1682 until his death in 1725, bringing about major modernization to his country.  His global entrepreneurial vision and leadership gave Russia a new position of power as the country was transformed into a western empire; educators, military personnel and businessmen were invited to Russia; the army was modernized; a strong navy was developed; and arts and education flourished.

John Rockefeller

John Rockefeller was an extraordinary American entrepreneur and philanthropist. Through hard work, determination and a strong competitive nature, he became the world’s first billionaire. Rockefeller chose to change his entrepreneurial pursuits away from making money towards giving it away. From his equity position in Standard Oil, a company he co-founded, he felt the need to disperse his wealth to those less fortunate and formed the Rockefeller Foundation; this started the rise of American social philanthropy.

Madam CJ Walker

Entrepreneurs often find opportunities and success in spite of great odds and obstacles. Madam CJ Walker was one such person who identified a gap in the market—hair care products for black women. CJ Walker became the first self-made female black millionaire in the United States. At one point, she employed over 3,000 women and had a wide range of hair and skin care products.

Muhammad Yunus

Muhammad Yunus is an example of a selfless global entrepreneurial leader. After seeing the impact of his first micro-loan and the way in which he was repaid, Yunus began to envision a model that could work anywhere. He found that the poor would often quickly repay their loans with few problems. By the early 1980s, Yunus had expanded to other developing countries and in 1983 formed The Grameen Bank, the institutional home of his micro lending practices both of which were recognized with a Nobel Peace Prize in 2006.

Bill Gates

Microsoft founder Bill Gates’ entrepreneurial skills are varied. His company revolutionized the computer industry, ushered in the internet age, and had a deep and profound impact on the daily lives of people around the world. Because of this persistence and risk taking, he shaped the evolution of the information age making Bill Gates the world’s richest man in 1995. In 2000, the Bill and Melinda Gates Foundation was founded with the goal of alleviating many of the problems that are afflicting the world’s poorest people and has grown into one of the premier philanthropic organizations in the world.

The role of global entrepreneurial leaders throughout history indicates the diversity in backgrounds, mindsets and goals that spawn entrepreneurial actions, decisions and leadership. From public sector to private, for-profit to non-profit, in science, arts, religion, medicine, politics and business, and across industries, the variety of forms that entrepreneurial leadership takes is clear.

For the contemporary entrepreneur who actually starts his or her own business, the experience is filled with enthusiasm, frustration, anxiety and hard work. There is a high failure rate due to poor sales, intense competition, lack of capital, or lack of managerial ability. The financial, social and emotional risks are high, as are the rewards.  As history has shown, the individual’s reward can easily set the stage for an accelerated impact on the larger community, region, country, or even the world.


Robert D. Hisrich, Ph.D. is the Garvin Chair of Entrepreneurship and Director of the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management.  He is the author of numerous publications and books including the textbook, Entrepreneurship; the most widely used text on the subject, published in nine languages.  A self-described serial entrepreneur, Dr. Hisrich has established and sold numerous companies.

Investors attend Invest Southwest Capital Conference 2010


investor conference
Invest Southwest Capital Conference December 8-10, 2010


Invest Southwest is the premier capital conference in Arizona and the Southwest. Since 1992, this event has connected the region’s most promising ventures with knowledgeable investors. On December 8–10, 2010, investors and venture capitalists from across the country will gather at the Four Seasons Resort Scottsdale at Troon North in Scottsdale to see the “Best of the Southwest” present their business plans and investment opportunities. These companies are ready for investment, and have participated in a competitive application process and an extensive mentoring period in anticipation of their conference presentation.

The event also includes an investor seminar, an internationally known keynote speaker, and presenting company exhibits and interactive sessions. For accredited investors only.

Here are some videos of conference sponsors and participants talking about why Invest Southwest is important for Arizona venture capital and entrepreneurship.

To register for the conference (accredited investors only) go to

Entrepreneurs Unite during Global Entrepreneurship Week!


EntrepreneurGlobal Entrepreneurship Week: November 15th-21st

This week is Global Entrepreneurship Week. Nearly 100 countries participate in GEW every November, and each year there are more than 40,000 events that occur around the world with over 10 million participants. 

The United States is second (UK is first) on the list of countries participating with 414 scheduled events and 37,665 people participating.  

What featured events are happening during the Week?

There are a number of featured events that demonstrate the global scope and scale of the initiative. Some of these featured events include:

  • Global Cleantech Open Ideas Competition 22 countries

  • Speednetwork the Globe 50 countries

  • Startup Weekend 15 cities around the world

  • Global Student Entrepreneur Awards 8 countries

  • Creativity World Forum 12 Districts of Creativity 12 countries

  • EO 24 38 countries

  • Your Big Year England

  • La Fête de l’Entrepreneur France

  • YBI Global Forum Mexico

  • The Hunger Project Sweden

Global Entrepreneurship Week has several great sponsors:


Check out the list of ASU's Global Entrepreneurship Week events (some are open to the public)

ASU GEW events

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