Should investors bet on the jockey or the horse

You know, the jockey is awfully important. If the person can't think their way out of the box and make the change, made a fairly high rate of change across the company happen across the company, then it's not a good angel investment. VCs can invest in a concept and swap out the management. But, even though I've helped change out management a couple times in companies, it's really a lot harder if there's not a jockey and horse that you can believe in.

It's really not good angel territory. Huston: Yes. And I say that because, candidly, I've frequently lost money because the jockey was so good and I wasn't smart enough to understand that they were riding a burro.

I just didn't know the competition as well. Conversely, of course, the horse is important, as is the jockey. The former has very little prospect for driving material revenues, and the latter could become the next unicorn size startup, so it's a relatively easy decision.

There is an inflection point where the idea is worth betting on, more than the entrepreneur. But the reality is, a smart venture investor would try to convince me that I am not nearly as qualified as someone like Bezos to actually pull off this grandiose vision, and to have me hand him the reins to take my business to meteoric heights. Which I may or may not do, depending how confident I was in my own abilities versus the equity value upside I could realize from having someone like Bezos in charge.

Which is exactly my point of this piece. It is not the jockey OR the horse. It is the jockey AND the horse. And, whatever you can do to make that happen, is the Holy Grail of venture investing.

As a little fun, and to help me further illustrate this point, I took a look at some horse racing data to see if I could glean some insights on this topic. I compared them to a typical top winning race horse in The data was pretty incredible. The Triple Crown winners won their races 79 percent of the time, compared to the top that won 48 percent of the time.

Nobody's perfect. When you make a bad choice, let those who are watching and learning from you know that you made a mistake and how you plan to correct it. By apologizing, admitting your mistake, and accepting accountability, you will be demonstrating an often overlooked part of being a role model.

Do good things outside the job. People who do the work, yet find time for good causes outside of work, such as raising money for charity, saving lives, and helping people in need get extra credit. Commitment to a good cause implies a strong commitment to the business.

True role models are those who possess the qualities that we would like to have, and those who have affected us in a way that makes us want to be better people.

They help us to advocate for ourselves and take a leadership position on the issues that we believe in. We often don't recognize true role models until we have noticed our own personal growth and progress. That really implies that it takes one to know one. Thus, if you are asking the question, that may mean you are well along the road to being that role model already.

Read more posts on Startup Professionals Musings ». For you. Until you get an outside source of investment or start generating capital, you are stuck. Friends and family are most often the first point of contact for new startup owners to ask for capital. There is an issue with this that many small business owners might not know; according to US law, you should only be receiving money from accredited investors.

You can also raise money from a non-accredited investor, by making them a sophisticated investor. In order to make a non-accredited investor a sophisticated investor, you need to give them various pieces of information on what their investment entails and the risk they could be taking on. Before attempting to make a close friend or family member a sophisticated investor, be sure to consult with a lawyer in order to follow the proper rules and regulations.

Traditional angels are individuals that have a high net worth and have experience investing in early stage companies. These angel groups are syndicates of some of the most active angel investors in a particular area.

They aim to centralize pitching, due diligence, and the overall investment process. These groups can make the investment process smoother for both the angel investor and the small business. Meeting with different types of investors to see what projects they are interested in will help you with deciding which investor type is right for you. Usually you need to apply to the program by sending in your executive summary and meeting with the management of the program.

Incubators can also take a percentage of the ownership in your firm if that is written in the contract. Other times, the incubators will not give you direct investment, but rather provide free lab space or discounts to certain business services like Amazon Web Services, RackSpace, PayPal, etc.

Incubators can also be funded by Venture Capital firms or super-angels. Venture capital investors are generally long-term investors that take an active role in the early-stage companies they invest in. They do not expect immediate returns on their investment. Rather, they expect to see their money grow over time with the aid of their resources and expertise.