Ryan A Graves.com

Venture capital is all about finding the right combination of profit potential in a business and the correct individuals to take that business down the right road. There have been businesses out there with incredible profit potential and a phenomenal idea but the people in place either weren’t the right people or didn’t make the right decisions at the right time. You need both.

The way I see it, quality venture capital investments are made up of good financial analysis and great judgment of the people at the wheel. There are loads of people who can analyze the profit forecasts of a start-ups pitch. Loads of people can evaluate a current market and see the differentiating factors that a start-up holds onto so tightly during their “funding pitch”. Almost any experienced VC knows the right questions to ask in order to poke holes in a funding pitch and find out where the weak links of a start-ups team may be. But, we all know that profit forecasts on a start-ups funding pitch will probably not be accurate. It is possible that the forecasts will be hit but many times that $1 billion dollar potential market turns out to be $250 million or maybe just $50 million and there goes all those pretty numbers. Now it’s time to react. The critical, but often overlooked piece of the venture capital pie is the ability to evaluate the person or team giving that pitch. Many times the right entrepreneur can take a bad situation and turn it to gold. It is well known that a start-ups first idea will often evolve into a more sustainable/profitable venture and the success of that transition is completely dependent on the founders.

Today Fred Wilson wrote a post on the human aspects of venture capital. He discussed the ages of many of the most recent web start-ups and how in the end it really just comes down to having the correct skills to help a start-up grow up but not blow up. With start-up incubators like Y-Combinator or TechStars becoming more and more popular we will continue to see great innovative start-ups run by younger and younger entrepreneurs. Right now these are the people using these tools most and it makes sense for them (young people) to be the lead innovators in this space. Hopefully as these young people grow up we will find that the innovative spirit follows them. Then there will be a really powerful group of people who have the innovativeness ingrained into their personalities with plenty of experience to help them threw the challenges of starting, growing, and sustaining a business.

A few of the examples given in Union Square Ventures portfolio of young start-up founders/CEO’s are:

Tumblr’s founder/CEO David Karp is 21.

Disqus’ founder/CEO Daniel Ha is 22.

Etsy’s founder/CEO Rob Kalin is 28 and he recently turned over the reigns of the company to new CEO Maria Thomas.

Greg Yardley, the founder/CEO of Pinch Media is 29.

Jack Dorsey, Twitter’s CEO and the initial creator of the service, is 31.

Return Path’s CEO, Matt Blumberg, is 37, but he’s been running the company since 1999, when he was 28 years old.

This is a quite impressive list of founders, especially given their age. If you’re a VC and age is a factor that is stopping you from investing in a certain start-up, open your eyes because great investment opportunities full of ‘profit potential’ and the ‘right people’ are passing you by.