Investing in the Management or the Technology?



Recent business studies have examined whether it is the business or management that underpins the success of a venture. For an early-stage venture, the risk is almost all in execution and that is about people. Betting on a jockey with no horse makes no sense and to win the horse needs to be from quality stock. Betting on a horse with no jockey makes no sense. Clearly, one needs both but, the jockey can make the horse jump in the steeplechase while, left to itself, the horse would just turn away from the challenge. However, great horses can be ridden by a number of jockeys. 

An outline of a potential investment, whether a pitch or a written summary, needs to grab your attention. The technology needs to excite. The presentation must have hooks that get you wanting to know more. 


Some good jockeys can make a poor horse look better, but they can’t make it look great.


If you can’t articulate the technology and the market then you are not even in the race. So if the proposition is good and the message clear, that’s a point to the Jockey.


I have never made an investment where the technology has been the problem, but a few where the management has turned out to be flawed.


An angel investor invests in people and products. It should be in that order of priority. When you fool yourself into changing the order it will prove problematic. Accepting obvious weaknesses in one over the strengths in the other, things will also go wrong.


It is fine to recognize the weakness in the people if the money sought is to strengthen those inadequacies (e.g. no sales experience, but you are recruiting a Sales Director).


Everyone has shortcomings and the sooner they are known about the better they can be dealt with or dismissed. An honest entrepreneur will tell you upfront, without waiting for due diligence to flush it out.


I only invest at the stage that first sales have been made and a customer base engaged and projected.





I have seen a technology that applied artificial intelligence to the metal casting industry with step changing results. The technology was brilliant. The customers loved it and wanted more. But the inventor, despite having ambition and drive, would not leave his comfortable academic existence to become an entrepreneur.


As Reid Hoffman, founder of PayPal and LinkedIn, said “The whole entrepreneurial thing is that you jump off a cliff and assemble your airplane on the way down”.




In another case, where an obvious maverick team had brilliant technology and, against the biggest names in the industry, they had signed blue-chip customers, what could go wrong?


When the people and product are so deeply entwined, the race becomes long, slow and difficult. It requires a lot of putting the jockey back on the horse and pointing him in the right direction. Reminding him it is a steeplechase and he is not on a show pony.


The failure to recognize management weakness combined with the pressures of rapid growth and looming competition does not make a good environment for some.


Patience is a virtue for the Angel Investor.




Its people that make businesses great and people that make great products.


David Hulston, 26 January 2011



All material copyright David Hulston Associates Ltd.  @davidhulston1
Meet the team

David Hulston

Indycube Ventures

Indycube Ventures offers funding and expert advice to entrepreneurs. Entrepreneurs and small-business owners based at coworking space network Indycube are being offered access to a half-million-pound annual funding stream and expert advice.



"We have benefited greatly from David's experience, counsel and contacts on a wide range of issues. His past experience in the IP space is particularly useful to Inngot, but even without that, he is just the sort of investor and non-executive director a high growth business needs. He sees potential, makes connections, and keeps us focused on the things that matter."Martin Brassell, CEO, Inngot Ltd