It goes without saying that management is important in any company. However, this is particularly true for smaller companies. A small company is generally less established and hence much more sensitive to mistakes or failures. There is no shortage of great ideas or great business plans amongst small companies. In terms of volume, the small company universe dominates the number of total companies in the public markets. But, it comes down to execution in order to capitalize on an opportunity. And, this is where management and the quality of the team often mean the difference in creating true success out of an idea or plan versus failure. A team that can execute the business plan well will often create substantial shareholder value. In simple terms, it is about the people in an early stage, emerging growth company.
I’ve had the unique opportunity to spend time inside a couple of different operating companies and been part of the management teams. Small companies are not easy and full of twists and turns. That experience, along with having spent 25+ years evaluating small companies from the other side of the table (as an analyst and portfolio manager) has only reinforced my belief that strong teams will make the difference in true success in a business. It’s also one of the hardest aspects to evaluate when researching a new idea. We won’t always get it right, but we try to spend as much time assessing the team as we do evaluating the balance sheet, P&L, and market opportunity.