The relationship between a founder’s personality and the success of a startup is a topic that has been extensively researched and argued in the world of entrepreneurship. While personality traits can influence a firm’s performance, it’s critical to remember that success in the startup sector is influenced by a variety of circumstances, and no single personality feature assures success.
According to research, start-up founders have particular personality qualities that are more relevant to the success of their businesses than previously considered. The statistics are clear: the vast majority of new businesses fail. So, what causes the ostensibly fortunate few to not just survive, but thrive?
While luck and circumstances can play a role, new research shows that a founder’s personality – or the combined personalities of the founding team – is crucial to start-up success. The study, published in Scientific Reports, reveals that successful start-up founders have personality traits that differ significantly from the general population – and that these traits are more critical for success than many other factors.
“We find that personality traits don’t simply matter for start-ups – they are critical to elevating the chances of success,” says Paul X. McCarthy, lead author of the study and adjunct professor at UNSW Sydney. “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.”
Our findings clearly show 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.
Associate Professor Margaret (Peggy) Kern
Personality key to start-up success
The team, which included researchers from the Oxford Internet Institute, the University of Oxford, the University of Technology Sydney (UTS), and the University of Melbourne, used a machine learning algorithm to infer the personality profiles of the founders of over 21,000 founder-led companies from language and activity in their publicly available Twitter accounts. With 82.5 percent accuracy, the program could identify successful startup founders.
They then compared the personality profiles to data from Crunchbase, the world’s largest startup directory, to see if certain founder personalities and their combinations in cofounded teams are related to start-up success – whether the company was acquired, acquired another company, or listed on a public stock exchange.
The researchers discovered that the key Big Five personality qualities of successful start-up founders – the generally accepted model of human personality assessing openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism – differ significantly from those of the general population.
Successful entrepreneurs have a propensity for diversity, novelty, and trying new things (openness to adventure), as well as a desire to be the center of attention (lower levels of modesty) and to be joyful (high activity levels).
“The presence of these and other personality traits in founders is related to higher chances of success,” says Dr. Fabian Braesemann, co-author of the study from the Oxford Internet Institute, University of Oxford.
“We can see how this plays out in many notable examples,” Prof. McCarthy explains. “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.”
Dr. Marian-Andrei Rizoiu, a senior lecturer leading the Behavioural Data Science lab at UTS says: “We used machine learning and a variety of advanced statistical tests to reveal that there is not just one type of successful founder but indeed six types.”
“Our findings clearly show there’s not one ideal ‘founder-type’ personality,” says Associate Professor Margaret (Peggy) Kern, senior author of the study from the University of Melbourne.”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, Prof. McCarthy says 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,” adds Prof. McCarthy. “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, co-founder of design giant Canva, faced all three of these challenges in the early days of the company, and was turned down by over 100 investors before receiving the capital needed to launch their product. She defined herself in an interview as “determined, stubborn, and adventurous.”
Large, personality-diverse founding teams
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 as solo-founded start-ups,” says Dr. Fabian Stephany, co-author of the study from the University of Oxford’s Oxford Internet Institute. “Furthermore, those with diverse combinations of types of founders have eight to ten times more chance of success than single founder organisations.”
“While all start-ups are high risk, the risk becomes lower with more founders, particularly if they have distinct personality traits,” according to Prof. McCarthy. “Largely founding a start-up is a team sport and now we can see clearly that having complementary personalities in the foundation team has an outsized impact on the venture’s likelihood of success, which we’ve termed the Ensemble Theory of Success.”
According to the researchers, the findings have vital applications for entrepreneurs, investors, and regulators, and can help to create more resilient start-ups capable of greater creativity and impact.
“By understanding the impact of founder personalities on start-up success, we can make better decisions about which start-ups to support and help fledgling companies form foundation teams with the best chances of success,” said McCarthy.
When OpenAI cofounder Sam Altman managed the famed start-up accelerator Y-Combinator, he observed in a Stanford University lecture that “cofounder relationships are among the most important in the entire company.”
The findings have ramifications beyond founder-led businesses, showing the benefits of team personality variety. Many industries, such as construction, engineering, and film, rely on project-based, cross-functional teams that are frequently new ventures with many features of start-ups.
“There are lessons here for organisations of all kinds about the importance of having a diversity of personality types in teams, which can lead to stronger performance and impact,” said McCarthy.
Data-driven occupation-personality mappings can provide career advising tools, and knowledge on successful entrepreneurs’ personality qualities can help people decide whether becoming a founder is a suitable fit for them.
