Founder personality could predict start-up success

October 22, 2023

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Founder personality could predict start-up success

The stats don’t lie – the overwhelming majority of start-up companies fail (about 80%). So, what makes the seemingly lucky few not only survive, but thrive?

While good fortune and circumstances can play a part, new research reveals that when it comes to start-up success, a founder’s personality – or the combined personalities of the founding team - is paramount. The Australian study, published today in Scientific Reports, shows founders of successful start-ups have personality traits that differ significantly from the rest of the population – and that these traits are more important for success than many other factors.

What the researchers say: “We find that personality traits don’t simply matter for start-ups – they are critical to elevating the chances of success,” said the study’s lead author. “A small number of astute venture capitalists have suspected this for some time, but now we have the data to demonstrate this is the case.”

For the study, the multinational team inferred the personality profiles of the founders of more than 21,000 founder-led companies from language and activity in their publicly available Twitter accounts using a machine learning algorithm. The algorithm could distinguish successful start-up founders with 82.5 per cent accuracy.

They then correlated the personality profiles to data from the largest directory on start-ups in the world, Crunchbase, to determine whether certain founder personalities and their combinations in cofounded teams relate to start-up success – if the company had been acquired, if they acquired another company, or listed on a public stock exchange.

The researchers found that successful start-up founders’ core Big Five personality traits – the widely accepted model of human personality measuring openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism – significantly differ from that of the population at large.

The facets distinguishing successful entrepreneurs include a preference for variety, novelty and starting new things (openness to adventure), like being the center of attention (lower levels of modesty) and being exuberant (high activity levels).

“The greater presence of these and other personality traits in founders are related to higher chances of success,” commented the study’s co-author.

“We can see how this plays out in many notable examples,” he continued. “The adventurousness and openness to experience of Melanie Perkins, the assertiveness and confidence of Steve Jobs, the exuberance and energy of Richard Branson, the calm under pressure Jeff Bezos, the discipline and focus of Mark Zuckerberg, and the trustworthiness of Larry Page and Sergey Brin underpin their company’s success.”

The team found that there’s not one ideal ‘founder-type’ personality. Instead, the Big Five personality traits of successful start-up founders, which we can break down further across 30 dimensions, reveal six distinct types: fighters, operators, accomplishers, leaders, engineers and developers.”

While personality is crucial many other factors still play a role in the ultimate success of founder-led companies, including luck, timing, and connections.

“Startups, especially during their earliest stages, before there's any demonstrable customer traction rely to a large extent on social proof,” the lead author explained. “In other words, trust in the founders, which can sometimes present barriers for many groups including women, people who have not worked in tech before, or attended prestigious universities.”

Melanie Perkins, the co-founder of design powerhouse Canva, faced all three of these hurdles in the early days of the company, and was turned down by more than 100 investors before securing the funding they needed to build their product. In an interview, she described herself as “determined, stubborn and adventurous.”

The researchers also undertook multifactor modelling to measure the relative significance of personality on the likelihood of success versus other firm-level variables. They discovered a founder’s personality was more predictive of success than the industry (5 times) and the age of the start-up (2 times).

They also found start-ups with diverse and specific combinations of founder types – an adventurous’ leader’, an imaginative ‘engineer’, and an extroverted ‘developer’, for example – had significantly higher odds of success.

“Firms with three or more founders are more than twice as likely to succeed than solo-founded start-ups,” the researchers concluded. “Furthermore, those with diverse combinations of types of founders have eight to ten times more chance of success than single founder organizations.”

The researchers say the findings have critical applications for entrepreneurs, investors, and policymakers and can inform the creation of more resilient start-ups capable of more significant innovation and impact.

The findings also have implications beyond founder-led companies, highlighting the benefits of personality diversity in teams. For example, many fields, such as construction, engineering and the film industry, rely on project-based, cross-functional teams that are often new ventures and share many characteristics of start-ups.

“There are lessons here for organizations of all kinds about the importance of having a diversity of personality types in teams, which can lead to stronger performance and impact,” thew researchers said.

So, what? Personality is largely genetically based—though there is no such thing as a “fixed personality” merely propensities to certain traits. An individual’s personality is influenced by context, upbringing, and social environment—amongst other factors. We can exhibit different personality traits in different contexts—especially social contexts. It maybe that successful entrepreneurs have the kind of people around them who encourage them to develop the best use of their innate traits.

Dr Bob Murray

Bob Murray, MBA, PhD (Clinical Psychology), is an internationally recognised expert in strategy, leadership, influencing, human motivation and behavioural change.

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