Big Red Car here. What a day, ya’ll! It is a bluebird day in the ATX and it’s Friday.
[And, we are going for BBQ today. Now you know when I write in brackets, well nobody but YOU and ME can read it. So now you know a little secret.]
Most startups and most small businesses are a combination of a jockey, a horse and a course — a race course. You are betting on one of them, sometimes two of them and if you are very, very luck all three of them. But startup businesses and small businesses are a risk any way you look at them.
The Jockey
The jockey is the founder, the leader, the owner, the management. He’s the guy sitting in the saddle.
The one guiding the horse. Guiding the horse around the course. Through the jumps and hedges like a steeplechase. Trying desperately to keep the horse headed down field along the course and without losing his seat.
Oh, the horse will run if only it has a bit of direction and a few oats. And some running room.
The Horse
The horse is the business model, the engine, the business process.
The horse may be good or lame. A smallish pony may become a champion with the right training, oats and a damn good jockey. Takes some training and patience.
And some oats and some time.
Sometimes a unimposing pony turns out to have the heart of a champion. You never really know until you turn them loose — give them their head — and put just a touch of the spur to them. And then get out of the way.
The Course
The course is the marketplace, the industry, the economy.
Sometimes the course is muddy or uphill — both ways — and it doesn’t make any difference what the jockey and horse do. The course is going to eat them alive.
Other times, it is fair sailing and nobody can figure out how to ruin it. Even after trying hard to do just that. Not lately.
But there were times, in Texas in particular, when the streets were paved with gold. And times were good.
Combinations, permutations and luck
Think about potential combinations and permutations of these three individual elements of a startup or a small business.
1. Great jockey, adequate horse, adequate course — bumpy ride but maybe that ride ends up at the paywindow.
2. Mediocre jockey, good horse, great course — hmmmm?
You see where this is going, right?
Play around with the combinations and permutations and ask yourself what is the minimum viable combination to get to the paywindow? To flirt with greatness?
BTW, what the Hell is the difference between a combination and a permutation?
Venture capitalists are “punters”
What is a punter? A punter is a gambler particularly one who fancies the ponies. [It’s also an Irish colloquialism for a chap who is willing to pay for a certain type of frisky lady’s company on an evening or a stock market manipulator. Well, good thing that was in brackets, eh?]
So these punters, these venture capitalists are walking around the paddock sizing up jockeys, stink eyeing the horses and trying to assess the course — they are lining up their bets and making their decisions.
Who do they like today — the salty and seasoned jockey for whom this is not their first race? The serial entrepreneur.
Or do they like the new and clever young lad who not knowing better may just succeed because he does not recognize the signs of failure?
Or does he bet on the pedigree alone? The bright young gal with the Stanford or Harvard degree with a ton of assurance and a thimbleful of experience?
Oh, the venture capitalist pinches the horse and checks its teeth and slaps it hard to test its musculature. But most venture capitalists have never vaulted up on that saddle and put the spur to a nag, now have they? No. They are numbers guys primarily though they must become judges of jockeys, horses and courses. Keen judges hopefully.
So is this the right horse for this particular course?
“Horses for courses” — sometimes the right combination of the business model, the times and the economy captures lightning in a bottle and it may not even matter whose hand is holding the bottle.
So which bet is the best bet for the punters? What do you think and why?
But, hey, what the Hell do I know anyway? I’m just a Big Red Car.
Be kind to yourself and be sweet to those you love and don’t let the sun come up on Saturday morning without having been extraordinarily kind to someone. Even yourself.
And if you get a chance, run like you stole a watermelon. Run for the roses.
You are killing it JLM with these posts. I can’t believe how much I missed after a week!
So true about VC’s thinking like a betting business. The best VCs know that and don’t lament on any losses. They move on to the next one. It’s one of these unwritten rules of Venture Capital that not all entrepreneurs realize. But it’s better to be naive and brave than to know everything and be afraid.
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The ability to understand risk and to know when it is not able to be diluted or controlled any further is the beginning of real wisdom.
You have to believe your parachute was packed right but always remember how to deploy your reserve.
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Steve Kaplan from the University of Chicago has done research on this. Do you bet on jockeys or horses? At the angel level, always jockeys. You can’t change management. VCs sometimes have a cadre of managers. They can change jockeys. So they can afford to bet on horses in good courses.
For me personally, every time I have lost money-I bet on ideas (horses) that look like they are on good courses. When I bet on jocks I win.
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I don’t think there is any question that the jockey is the gatekeeper to success. Particularly with startups and small companies.
Ironically just about every startup that grows to something of significance changes jockeys sooner or later. Many times at the behest of the jockey who only likes to run in the mud — the fire building stage.
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Great post and a very unique analogy. I believe that an equipped jockey and a reliable horse can still dominate on a crappy course. It’s just a matter of realizing there’s a stampede of other horses on that same crappy track and uniquely positioning yourself to earn business, whether it’s new clients to the industry, or better yet, those who are already “betting on another horse”. In a real world scenario, I still believe that service and value sell volumes above “cost”. A good jockey knows this and will be able to train his horse for whatever course they’re moving on. thanks for sharing the post – Ryan
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The first smart bet is always on the jockey. Bad jockey always loses.
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And the best jockeys never complain about the course or the horse…they just work like hell to improve. A great reminder here.
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You are a damn good jockey.
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Very kind of you, sir.