[SmellTheGlove]

I'm not too surprised by the result - at the beginning of any new business, all you really have are the initial people on board and the quality of their abilities. What's going on now matters less than the ability of the founders to react and shift as needed.

For the tl;dr crowd, what mattered most to investors is the quality of the founding team. The paper finds that operational abilities and expertise of the founders is important. Relevant paragraph:

"Given the importance of team information, what is the channel through which human capital information is important for early stage investors? One explanation is that the operational or technical capabilities of the founding team raise the chance of success, especially in the earlier stages of a firm’s lifecycle, when experimentation is important. An alternative explanation is that high quality teams have attractive outside options, and can therefore credibly signal the quality of the idea. We find evidence that human capital is important at least in part due to the operational capabilities and expertise of the founders."

[20yrs_no_equity]

Measuring quality of a person is very difficult in a resume. I don't think that investors are able to identify quality people really easily. So I'm assuming they are making assumptions based on pedigree (eg: went to stanford, worked at amazon therefore must have high ability!)

[gwbas1c]

"We find evidence that human capital is important at least in part due to the operational capabilities and expertise of the founders."

That's not a statement of pedigree.

"operational capabilities" basically means that investors have some way to figure out that the founders can organize labor, manage money, define the product, find customers, ect.

How is such a judgement made, though?

[mbesto]

> How is such a judgement made, though?

That's exactly what the parent was saying, investors can only draw that conclusion based on pedigree and experience. "Oh they ran the software at the warehouses in Amazon, they must be experts in that, here's $5M for your warehouse management software". Unfortunately this often gets conflated with pattern matching that doesn't always correlate with a person's pedigree and their ability to "organize labor, manage money, define the product, find customers, ect.". In other words, you're both saying the same thing.

Investors telling the public that they can appropriately assess startup teams in a 1-hour pitch is a glittering lure to increase deal flow, not something that makes one investor necessarily smarter than an other.

[gwbas1c]

"Oh they ran the software at the warehouses in Amazon, they must be experts in that, here's $5M for your warehouse management software"

That's only 1/3rd; the other 1/3rd is "Successfully founded xyzCorp that had $xxxx / year revenue and sold for $x,xxx,xxx after 5 years."

Investing in a founding team where the founders have a solid history of starting successful companies isn't relying on pedigree.

The final 1/3rd is looking at the team dynamic during a pitch. Is the team on the same page? Are they happy with each other? Does one person do all the talking?

[20yrs_no_equity]

> Investing in a founding team where the founders have a solid history of starting successful companies isn't relying on pedigree.

If that's what they were doing then there would be a lot of talk about how those who have never founded a company can never get funding.

[hanniabu]

Is it seen as beneficial when one person does the talking?

[mbesto]

Yes. Regardless of equal equity, having a dominant player in the management team is highly valuable.

[ryporter]

Prior successful exits is obviously a key factor.

[20yrs_no_equity]

I helped make Amazon a billion dollar company. Really. Is that a successful exit even though I wasn't a founder of Amazon?

You don't really know because you don't know if I was a warehouse employee hired for a holiday season or if I was instrumental in something in the early days.

Obviously investors are funding people without prior exits where they were founders, otherwise there would be a chicken and egg problem.

I would like to see stats as to the number of "successful exits" the average founding team that raises an A round has.

But clearly I should emphasize the exits on the pedigree slide of our pitch deck.