Founder Personality and Entrepreneurial Outcomes
Use Twitter Profiles to Predict Personality to Predict Startup Success
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90% of Startups Fail Because of Team Issues
I’ve heard this statement in one form or another from mostly every tenured angel and VC investor when asking them about reasons for startup failure. With over 27y of firm history, our team at Earlybird has invested in hundreds of companies and we’ve conducted regular post-mortems on the failed ones, all confirming above statement: Team is the most prominent reason for failure.
Double-clicking on team as the primary reason for failure, we find everything from lack of execution to hiring mistakes. Yet, the most frequent reason for failure is team conflicts.
As a result, experienced investors spend significant time with team DD, be it by spending time together with the founders and their leadership or by referencing them across their networks. In the absence of quantitative and tangible performance data, this is particularly true in the earlier stages.
Obviously, these team DDs are rarely clear cut and it’s a lot about gut feeling. While red flags are rare, it’s incredibly important to be sensible for yellow/orange flags. How does the team interact with each other? Does one always talk and give direction? Do they disagree, and if so, how?
Being a more quantitative person by nature, getting a sense for team dynamics and trusting my gut has been one of the areas where I probably learned the most as an investor. Despite the learning curve, however, I continued to ask myself over the years whether there was a more objective approach to this problem…
Fast forward to summer 2022, I joined a panel at a research conference and learned about two interesting research streams that sparked my interest:
Prof Youyou Wu presented her groundbreaking work on how to predict big five character trades for people based on their social media profiles. Thankfully, she agreed to present this work again to our community at our 2024 Virtual Data-Driven VC Summit in May. Recordings can be accessed here via “The Lab”.
Someone referenced Prof John Gottman’s work on marriage research and the ability to predict divorce with 90% accuracy based on conflict behaviour and character trades.
Combining these two research streams, I was wondering whether it would be possible to 1. leverage social media profiles of founders to predict their big five character trades (should be straight forward as proven in Youyou Wu’s work) and then 2. test whether specific character trades (or combinations thereof) among founding teams would predict team conflicts (just like they did in John Gottman’s marriage work), and thus indirectly startup failure.
I took this idea to my team at Earlybird and we started a large-scale project with our Engineering (social media profiles to big five character trades) and our portfolio value creation teams (big five character trades to conflicts). Months after emerging into the project, I was lucky that Sebastian, one of our interns, pointed me to a recent paper