New research from the Oxford Internet Institute, University of Oxford, University of Technology Sydney (UTS) and the University of Melbourne shows start-up founders have distinct personality traits, and they’re more important to the success of their companies than previously thought.
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 study, published in Nature 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.
Paul X. McCarthy, first author of the study and adjunct professor at UNSW Sydney said: “We find that personality traits don’t simply matter for start-ups – they are critical to elevating the chances of success. 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.”
Personality Key To Start-Up Success
The researchers found that the personality traits of successful start-up founders, in particular, the core ‘big five’ traits - which measure someone’s openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism – significantly differ from that of the population at large and are typically heightened in entrepreneurs compared to others.
Dr Fabian Braesemann, Departmental Research Lecturer, Oxford Internet Institute, University of Oxford and corresponding author of the study, said: “Our study also shows there isn’t a single ‘founder-type’ personality. Instead, we find that six different personality types appear in the founders of successful start-ups displaying common personality traits, which we identify as fighters, operators, accomplishers, leaders, engineers and developers.”
The other facets distinguishing successful entrepreneurs include a preference for variety, novelty and starting new things (openness to adventure), enjoying being the centre of attention (lower levels of modesty) and being exuberant (high activity levels). Adds Braesemann, “Our findings also suggest that the more prevalent these particular traits are in the personalities of start-up founders, the higher the chances are of that organisation becoming a success."
The researchers 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 entrepreneurs from employees 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 – that is, if the company had been acquired, if they acquired another company, or listed on a public stock exchange.
While personality is crucial, the researchers also cite other external factors as having an important role to play in the ultimate success of founder-led companies, including location, industry, and company age.
Large, Personality-Diverse Founding Teams Make For Greater Success
The researchers 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).
Explains Fabian Stephany, Departmental Research Lecturer, Oxford Internet Institute, University of Oxford and co-author of the study: “Firms with three or more founders are more than twice as likely to succeed than solo-founded start-ups. Furthermore, those with diverse combinations of types of founders have eight to ten times more chance of success than single founder organisations.”
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.
“While all start-ups are high risk, the risk becomes lower with more founders, particularly if they have distinct personality traits,” Prof. McCarthy says. “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.”
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. “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,” concludes McCarthy.
The implications of the research also go beyond start-ups: it adds a new dimension to understanding the drivers of team performance and success in different settings, such as sports, research, policymaking, or entrepreneurship. It is the diversity of different personality combinations in a team that influences group dynamics and long-term success.