The numbers are clear: Most new companies don’t make it. But what sets the lucky few who not only survive but thrive apart from the rest?
While luck and circumstances do play a role, a recent study from UNSW Sydney shows that when it comes to startup success, it all boils down to the personality of the founder or the team. Successful startup founders have unique personality traits that set them apart from the average person. Surprisingly, these traits matter more 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,” the researchers explain. “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.”
Entrepreneurial personality
To conduct this study, the researchers analyzed the personalities of over 21,000 founders of companies by looking at their public Twitter accounts. They used a machine learning algorithm to figure out their personalities. Surprisingly, this algorithm could correctly identify successful startup founders with an accuracy of 82.5%.
Next, they compared these personality profiles to data from Crunchbase, the world’s biggest startup directory. They wanted to see if certain personality types, either of solo founders or founding teams, were linked to the success of a startup. They checked if a company was acquired, did the acquiring, or went public on the stock exchange.
The study uncovered a striking difference in the core personality traits of successful startup founders when compared to the general population. These traits are part of the widely accepted Big Five model of personality, which includes openness to new experiences, conscientiousness, extraversion, agreeableness, and neuroticism. Successful entrepreneurs tend to have a preference for new experiences and enjoy starting fresh things, which is known as “openness to adventure.” They also display lower levels of modesty and are typically more exuberant with high levels of activity.
“The greater presence of these and other personality traits in founders are related to higher chances of success,” the researchers explain. “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.”
Other factors also matter
While the study finds that personality is important, it’s not the only factor in entrepreneurial success, with things like timing, luck, and connections also important.
“Startups, especially during their earliest stages, before there’s any demonstrable customer traction rely to a large extent on social proof,” the authors explain. “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.”
The researchers went a step further by using multifactor modeling to assess how much a founder’s personality influences the likelihood of success compared to other factors related to the company. Surprisingly, they found that a founder’s personality was a more accurate predictor of success than the industry the startup was in (by a factor of 5) and the age of the startup (by a factor of 2).
Furthermore, the study revealed that startups with a mix of different founder types, like an adventurous leader, an imaginative engineer, and an extroverted developer, had significantly better chances of succeeding. In other words, diverse combinations of these personality types in the founding team increased the odds of success.
“Firms with three or more founders are more than twice as likely to succeed than solo-founded start-ups,” the researchers explain. “Furthermore, those with diverse combinations of types of founders have eight to ten times more chance of success than single founder organizations.”
Recipe for success
“Understanding how founder personalities affect startup success allows us to make more informed decisions about which startups to support and assists budding companies in forming founding teams with the highest likelihood of success,” the researchers continue.
Moreover, these findings extend beyond companies led by founders. They shed light on the advantages of having a variety of personality types in teams. This has implications for various fields like construction, engineering, and the film industry, which rely on project-based, cross-functional teams that often resemble startups in their characteristics.
“There are valuable lessons for all kinds of organizations about the importance of fostering diversity in personality within teams, which can lead to improved performance and impact,” the authors explain.
Just as data-derived occupation-personality maps provide guidance for career choices, information about the personality traits of successful entrepreneurs can help individuals determine whether embarking on a founder’s journey might be a wise decision for them.
