Execution and strategic thinking—not just charisma—are the strongest predictors of a startup’s success. A great founder cannot fix a flawed business; getting the business model right matters more than personality. 
From Private Equity to CVC: Steven N. Kaplan, One of the Galaxy’s Top Experts, Shares His Research
Interviewed March 20th, 2025
Corporate Venturing Insider recently welcomed Steven Neil Kaplan, one of the world’s foremost experts on private equity and venture capital, for an insightful discussion with Nicolas Sauvage, President of TDK Ventures. Kaplan, a longtime professor at the University of Chicago Booth School of Business, has spent decades analyzing how startups succeed, what makes a great CEO, and where Corporate Venture Capital (CVC) fits into the investment landscape.
For Kaplan, the world of venture capital, private equity, and corporate venturing is a spectrum. On one end, startups are fueled by innovation, high risk, and the ability to see and build the future. On the other, private equity focuses on optimizing existing businesses — buying companies, improving them, and scaling profits. In between lies corporate venture capital, an investment approach used by corporations to both drive financial returns and gain strategic advantages.
Kaplan’s path into venture and private equity was not straightforward. “I’ve been a finance professor at the University of Chicago at the Booth School of Business since 1988,” he shared. “I really knew nothing about venture capital and startups.” His journey into the startup world began when he took over teaching entrepreneurial finance after Harvard’s Paul Gompers left Booth. His involvement deepened when students asked him to launch a business plan competition. “I said, okay, you do the work. I’ll find you some judges and some money.” What started as a small competition in 1997 evolved into the Ed Kaplan New Venture Challenge (NVC), a program that has since backed startups like GrubHub, Braintree (Venmo), and Simple Mills, generating over $10 billion in exits.
Despite his deep expertise, Kaplan remains pragmatic about investment. “People assume investors are picking home runs, but half of venture investments lose money,” he noted. “The best predictor of raising a million dollars or more was the management team, but the best predictor of raising $10 million or more was the business.” That insight forms the foundation of his OUTSIDE/IMPACTS framework, a method used to evaluate startups and their potential success.
Kaplan’s OUTSIDE/IMPACTS Framework for Evaluating Startups
Kaplan developed a structured approach to understanding how venture capitalists evaluate startups, derived from analyzing over 70 investment memos from leading VC firms. This framework helps investors systematically assess a startup’s potential success:
OUTSIDE Framework (Key Business Aspects)
- Opportunity — Is this a strong business?
- Uncertainty — What are the key risks?
- Team — Does the team have expertise and execution skills?
- Strategy — How will they enter and dominate the market?
- Investment — Does the financial model make sense?
- Deal — Are the investment terms fair?
- Exit — How will investors get their money back?
IMPACTS Framework (Key Startup Success Drivers)
- Idea — Is it compelling?
- Market — Is the total addressable market (TAM) big enough?
- Proprietary Advantage — Why will this startup win?
- Acceptance — Will customers buy it?
- Competition — Who else is in the space?
- Timing — Why is now the right time for this startup?
- Speed — Can they execute fast enough?
“Early-stage investing is all about getting the business right,” Kaplan explained. “A great founder cannot fix a bad business.”
Private Equity vs. Venture Capital vs. Corporate VC: How They Differ
Private equity, venture capital, and corporate venture capital operate in distinct ways. Private equity firms focus on buyouts, acquiring and improving existing companies. “Over here, you have startups,” Kaplan said, “and over here, you have buyouts. Buyouts are really about taking an existing business and making it better.”
Venture capital, by contrast, is about building something new — investing in companies that don’t yet exist but should. This requires a very different mindset, one that sees where the world is going and bets on bold new ideas.
Corporate venture capital sits in the middle. CVCs often invest in startups that align with their industry expertise or future strategy. Kaplan noted that corporate investors can provide distinct advantages. “Where the corporate VCs potentially have an advantage is on acceptance — sometimes they are the startup’s first customer. They can provide strategic insights into the competitive landscape and help the startup navigate industry challenges.”
However, corporate VCs also face challenges. “The risk is that if a startup gets too tied into one corporate VC, it could limit exit opportunities,” Kaplan explained. Entrepreneurs often worry about CVCs pulling out when market conditions change. “But actually, if you look at the data, VCs and CVCs behave very similarly in downturns — both slow down, then come back. There’s no real evidence that CVCs abandon startups more than financial VCs do.”
What Makes a Great Founder or CEO?
Kaplan has spent years researching what makes an effective startup CEO. He identified four major factors:
- Talent — Strong problem-solving, decision-making, and leadership skills.
- Creativity & Strategy — The ability to see the future and position a company for long-term success.
- Charisma & Persuasiveness — Particularly important for early-stage founders who must sell their vision to investors, partners, and employees.
- Execution & Grit — The ability to turn vision into reality.
“The number one predictor of CEO success is execution,” Kaplan emphasized. “If you were telling me what I was looking for in a CEO, I’d say someone who’s creative, strategic, and executes. That’s Steve Jobs. That’s Jeff Bezos. That’s Elon Musk. They are not always nice guys, but they get the job done.”
Corporate Governance: Why Startups Need It Early
Strong corporate governance can prevent companies from imploding. Kaplan pointed out how FTX and WeWork failed due to governance breakdowns. “FTX had zero oversight. And WeWork? Investors got enamored with the founder and didn’t push back.”
He encourages founders to welcome board members who challenge them, not just act as cheerleaders. “A good board member supports you, but also holds you accountable. You need people who push back when needed.”
For founders navigating early-stage fundraising, Kaplan advises understanding venture capital deal structures. “The typical venture deal is a convertible preferred investment — VCs get paid first in a liquidation, but if the company succeeds, founders still win big.”
His parting advice? “Be strategic about who you take money from. Good investors don’t just provide capital; they open doors, help build the business, and offer long-term support.”
Final Takeaways
Steven Neil Kaplan’s insights offer a blueprint for startup success. His research emphasizes that great businesses matter more than great founders alone, execution is the key trait of successful leaders, and corporate VCs can be valuable allies — when structured correctly.
With over $10 billion in exits from the New Venture Challenge at Chicago Booth, Kaplan has seen first-hand how the right combination of business model, leadership, and governance can transform an idea into a billion-dollar success. His OUTSIDE/IMPACTS framework provides a practical way for founders, investors, and corporate VCs to assess and refine their approach.
“At the end of the day, startups must win customers, execute fast, and outcompete rivals,” Kaplan concluded. “If they do that, they have a real shot at success.”
