It's the Management Team, Stupid

Is it possible to do a regression analysis on the factors that make for entrepreneurial success?

A couple weeks ago, a business school professor of entrepreneurship Michael Ensley, Ph.D., from the Rensselaer Polytechnic Lally School of Management & Technology presented to a group of TriState Angels on this subject. Dr. Ensley reviewed 6000 ventures over a 14 year period and had done a regression analysis to determine the variables with the greatest ability to predict the success of a venture. Evaluators found that the biggest determinants were:

1. Conflict management – the ability for a team to have a huge fight while in the process of making a decision for the company, yet buy each other a drink after work, congratulating each other on how well they had hashed through the choice they had to make.
2. Cohesion – How much do each of the critical team members feel like they are part of the team and how glad and excited are they to be a part of this team.
3. Self Belief – How sure are the team members that they, as an overall team (not as individuals), have the resources to achieve their goals?
4. Shared Vision – Does the team all have a similar vision of the company?

He concluded in his book that these characteristics were 70% correlated to "success". (Success was defined as the ability to generate positive cash flow, or minimize negative cash flow over the first three years of a company’s life.) In other words: it is not the founding entrepreneur that makes for new venture success, nor the popularity of a certain technology concept, but the chemistry of the management team the founder puts together that makes for a successful venture.