6 Personality Traits VCs Should Look For in Startup CEOs
Merrick Rosenberg, CEO of Take Flight Learning & Author of The Chameleon
Every venture capital firm develops a “differentiated” approach to evaluating startups. These approaches tend to have one problem in common: they’re not sure how to factor personality into investment decisions. Investors toss around words like “chops,” “focus,” “vision,” “obsession,” “horsepower,” “grit,” and “drive” to describe their ideal startup CEO. We can be more rigorous than that.
As a leadership trainer, author, and entrepreneur, I use personality styles to help businesses thrive. After training more than 25,000 people, I’ve noticed distinct differences between those who start companies and those who eventually run them.
When you evaluate startup CEOs – as a potential investor, partner, or customer – I recommend looking for six personality traits. These traits create the foundation and momentum for a successful startup:
Confidence goes beyond a “winning” attitude. The right CEOs aren’t merely optimistic – they have an unshakeable belief in themselves and their creation. They have already won. Indeed, they are so confident that they can take and use criticism, no matter how nicely or aggressively it is given. In other words, they have the confidence to be coachable.
If a startup founder qualifies all his ideas with “maybe,” ‘might,” “perhaps,” “hopefully,” and other hedge words, that is a red flag.
2. Team Oriented
Great startup CEOs are not lone wolves. Rather, they value people and take team building seriously. They know that their first employees are the most important people they will ever hire. So, smart CEOs find teammates with high risk tolerance and the ability to play jack of all trades. Just as importantly, good startup CEOs define the culture they wish to create, and then they hire people who already embody it.
If founders or early employees treat each other with contempt, beware.
Effective startup CEOs are chameleons. Though they have a certain personality style, they adapt to people with different personality styles. I’m sure you’ve heard the maxim, “Treat people the way you wish to be treated.” It’s good moral advice but bad business advice. An effective startup CEO treats people the way they wish to be treated. The CEO knows that an extroverted, action-oriented salesperson needs to be managed differently from a cautious, thorough engineer.
Ask CEOs how they manage their team. Do they factor in personality? Is their personality flexed or flexible?
A startup will swing between massive victories and blindsiding setbacks. Resilient startup CEOs have an edge. They do not allow the emotional turbulence to rattle their focus. They are calm when most people would be freaking out. They don’t have to rebound because in their mind, they didn’t miss the shot. The ball is still on its way to the basket, albeit via a different route.
Learn how the CEO responds to breakdowns: are they teachers or foes?
Top startup CEOs aren’t slaves to circumstance. They know there’s no such thing as “enough” capital, so they make the funding they have the right amount. They have an almost uncanny ability to achieve more with less. They’ve ascended from, “Should we buy this or not?” to “Given our strategy and vision, what should we spend money on? How can we make the best use of our resources?” Frugality is a yes-no trait. Resourcefulness is open-ended.
Try posing worst-case scenarios to startup CEOs, and see how they talk through the situation. How free can they think? How does money factor into their thinking?
6. Hands on, Hands off
Fortune 500 CEOs fight from the boardroom. Startup CEOs fight on the frontlines, at least initially. They have zero ego about what should or should not be their responsibility. But they balance working in the business and working on the business. Working in the business keeps the doors open. Working on the business creates the next iconic company.
A CEO who can’t relinquish control over day-to-day tasks will eventually tank the company. Conversely, a CEO who constantly “pivots” will drag the day-to-day operation in too many directions.
The CEO’s personality has a disproportionate impact on a startup. Unlike big companies, which wrap CEOs in bureaucracy and precedent, startups fit CEOs like a wetsuit and react to their every move. VCs can differentiate their investment approach by evaluating personality with rigor.
[Image courtesy: Pixabay.com]
About the Author
Merrick Rosenberg, CEO of Take Flight Learning and Author of The Chameleon, is a keynote speaker, entrepreneur and thought leader on the personality styles. He has worked with more than half of the Fortune 100 companies on team building, leadership development, and utilizing the DISC personality styles to build better relationships and create engaging work environments.