The Baseball-Startup Parallel

Baseball is a romanticized sport in our nation's history. It is also a big business that knows the right internal structure to make it work. It builds teams and attracts fans. It is all about winning and building brands with enormous value.

Tech startups share these same goals. Look under the covers, and you'll find that startups follow a similar leadership structure to baseball.

The Baseball Coach

The primary leader in the dugout is the Coach. He is a former professional baseball player. He walked the walk. He is responsible for the day-to-day on-field decisions, player development during games, and setting the team's in-game strategies. He works closely with assistant coaches, specializing in different skills to support the players. The coach and his staff are primarily responsible for winning through player development.

Angel Investors as Coaches

The lead angel investor in a startup financing takes on the role of coach. His job is to work with the entrepreneur, help him develop his team, and attract raving fans—the customers. The angel investor is there for the founder, and he is all-in on the founder's vision. The overarching objective is to help the entrepreneur do his job of growing the company. It is all about winning. If the entrepreneur wins, the angel wins. If the entrepreneur fails and loses his company, the angel fails and loses his investment.

The Baseball Manager in the Front Office

The leader in the front office who oversees baseball operations is typically the Manager. This executive is responsible for the overall construction and direction of the team, including player acquisitions (trades, free agency, drafts), player development at the minor league level, scouting, and often the hiring and firing of the coaching staff.

Venture Investors as Managers

A venture investor, by contrast, is like the Manager who eventually replaces the Coach. When a venture investor joins, the angel investor typically steps back from his coaching role. The venture investor now works directly with the entrepreneur, but in a fundamentally different way. Unlike the hands-on coaching of the angel, the venture investor operates more like a Manager—setting expectations, monitoring progress against milestones, and making personnel decisions when necessary. He helps develop high-level goals and approves the strategy to achieve success, but the day-to-day execution remains the entrepreneur's responsibility. All the venture investor can do is trade players out and bring in new talent if the growth goals are missed.

Different Economics, Different Relationships

When getting his company off the ground, the right lead angel investor is invaluable. The angel investor is a coach to the entrepreneur. He is an experienced entrepreneur or executive who knows the target market. He is a true partner because he invested his money.

As the coach, his job is to help the entrepreneur launch this new business and generate revenue. The angel is there for the entrepreneur, in the trenches, developing strategy, and getting the right people on board. The goal is to get to revenue and market acceptance.

And if the strategy or a team member fails, the angel knows he will have to invest more money to keep the business and entrepreneur afloat. The stakes for the entrepreneur and angel are high.

The venture investor is investing other people's money. He is investing in a fund. His expectation is that if one of ten investments pays off big, then he's a winner. These are the venture investor's economics. These economics make for a very different relationship with the entrepreneur. If the company is hitting its milestones, the venture investor will invest more money to keep the momentum going. If the entrepreneur and his team begin missing these critical growth milestones, the venture investor will drop them and focus on his other investments that have revenue momentum.

The Deep Personal Connection

An entrepreneur raves about his lead angel investor. There is a deep personal relationship between them. It is developed by being in the trenches while achieving the all-important milestone of product-market fit. It is produced by coaching the entrepreneur in selecting, building, and creating that first, and most important, leadership team. It is working shoulder to shoulder, crying together, and celebrating together. This is the relationship between an entrepreneur and a lead angel.

Angels don't let go. They hold on because they have so much invested in the entrepreneur and the idea. Their investment is money, but also a personal commitment. The lead angel wants the entrepreneur to succeed, to see him learn and grow, and to see him reap the rewards. This is how angels are rewarded. The entrepreneur's success is the angel's fulfillment. It is why lead angels do this work. It isn't all about the money.

Building the Ecosystem Together

If the lead angel does his job well, he builds a good reputation and makes money doing it. His reputation keeps him in the startup game as he is in demand by new first-time entrepreneurs. And he can stay in the game because he now has more money from the winners to invest.

Lastly, a lead angel expects the entrepreneur one day to jump the fence and become a lead angel himself after his company succeeds. This is the secret sauce of a thriving startup community. The community has a continuous flow of new entrepreneurs, some of whom succeed. And these entrepreneurs become lead angels, which attracts even more entrepreneurs. It is a sustainable and growing ecosystem.

We Need Those Venture Investors Too

Venture investors play a very important role. They have the money to help startup companies become unicorns. If the startup has a huge addressable market, it will need a lot of money to win it. The venture investor provides this financing after product-market fit is proven by the entrepreneur with the help of their lead angel. However, his relationship with the venture investor will be more formal than with his lead angel. A venture investor's job is as a fund manager. He simply has too many investments to become personally invested in an entrepreneur. The venture investor serves his limited partners, his LPs, as they're called.

The Bottom Line

The manager in baseball doesn't know the players like the coach in the dugout. These two jobs make the team great, but the mission of the jobs and the relationships built are very, very different.

And that is how great baseball franchises are built.

And that is how great businesses are built, too.