Management quality said to trump best technology in a business venture
By: Alex Gennis
Good management and knowing your market are the keys to success in raising capital for technology ventures, said four venture capital experts at a Princeton University forum on May 4. The four experts, Ed Zschau, Kef Kasdin, Jim Furnivall, and Karen Drexler, all Princeton graduates, gave advice to Princeton students and other technology entrepreneurs seeking early-stage investment at Princeton’s Friend Center.
"We have to make sure that there is a large potential market out there. If you can come to the market with the right solution, you will capture it," said Mr. Furnivall a general partner of Canaan Partners, a venture capital firm.
The actual technology of the venture is of secondary importance to a strong management team, he added. "It’s rarely the best technology that wins commercially. It is often the one that has the best team," Mr. Furnivall explained.
A convincing presentation of the proposal and establishing a positive relationship with potential investors are also of key importance, said Ms. Drexler, a co- founder of Amira Medical and an advisor to high technology entrepreneurs.
"The executive summary and presentation are more important than a full blown business plan," Ms. Drexler said. "You need to have a tough skin, because your passion is what needs to come through. There are going be people who are going to tell you that your idea is stupid."
Ms. Kasdin, a general partner of Battelle Ventures, a large venture capital firm, agreed with Ms. Drexler and added that the confidence of the team about their venture plays a big role.
"When we meet across the table with a CEO, the passion has to be there," Ms. Kasdin explained. "We have to believe that the team believes so strongly in what they are doing that they are ready for the rollercoaster ahead."
She added that identifying the right market for the technology is a crucial ingredient for the venture’s success. "We’re specifically looking for a technology that solves a prior problem that has not been solved before," Ms. Kasdin said.
Accurately assessing the potential market requires knowing the competition in the field, Ms. Drexler said. "It’s important to understand the intellectual property horizon to see what other technologies are out there," Ms. Drexler explained.
Even if a team introduces a novel technology, the management team must have prior experience, Ms. Kasdin added. "We want to make sure that the CEO [of the early- stage venture] has had some experie nce on the market that the compa ny is trying to address ," Ms. Kasdin said. "I would not invest in a company that is just run by Princeton studentsyou need someone who has operating experience."
The four speakers agreed about the inherent high risk of investing in early-stage technology ventures, but said that several steps can help minimize risk. "The hope is that out of ten ventures, one will be a wild success, five may fail, and the others will be somewhere in the middle of the road," Ms. Kasdin added.
There is no formula for determining the future success of a company said Ed Zschau, a former California congressman and now a visiting professor of high technology entrepreneurship at Princeton.
"There are a lot of smart investors that turn down ventures that turn out to be great," Mr. Zschau said in response to a question about the factors that an investor looks for in technology start-ups. "Venture capital investing is not an exact science." Although it is important to minimize risk, Mr. Furnivall said that the investors that will get the biggest returns must be flexible since high technology is an ever-changing field.

