Running a startup brings out the best and worst in people. There are many books and articles about how to create a team and the latest way to manage an organization, but not enough about personality. A large percentage of startups fail due to inter-team conflict – not poor planning, but conflict between personalities that don't mesh. This friction is often highest among co-founders, especially in a startup.
Removing this friction is essential in the era of "human capital." Thirty years ago, people in startups focused on the actual technology, how it worked and how it could be built. A decade later, they were trying to optimize the tech and the related business models to find ways to make money. But now it's the time for human capital, a kind of last frontier that needs to be optimized by finding the right person for a specific job. This is now easier to accomplish, thanks to new ways of looking at people and personalities through data measurements.
Predicting good working relationships through personality testing
Many co-founder arrangements start based on gut instinct. The people involved are often successful, with Type A personalities and confidence in their decisions and instincts. They may initially meet at a networking gathering and impress each other with their shared enthusiasm for an idea.
Instinct can sometimes bring success, but it's tricky when co-founder partnerships are based solely on gut instinct. Enthusiasm is great, but it's short-lived if you don't align on the core items and beliefs for a successful working partnership. Two people who know each other through professional circles and get along well in social settings might seem like good matches, but their co-founder journey often ends in discord.
Of course, achieving the optimal results from personality testing requires a suitable test. My company, CoFounderWorx, offers a different take on personality testing that's specifically geared toward co-founder compatibility. It revolves around the most important indicators of successful pairings, including values, motivations and other psychological factors.
These personality traits come together to score potential co-founders, taking into account their value to the business, including how they might perform from an investor's and venture capitalist's viewpoint. Using the test can improve the success rates of a startup by identifying the people best suited as solo founders or co-founders, pairing up those who are best aligned on areas critical to co-founder success. This test is complementary to other assessments such as the MBTI, Hogan and Korn Ferry, and focuses on the top five areas critical for successful partnerships.
Strong predictors of success – or disaster
One predictor for success is simply whether the co-founders have known each other for a long time and/or worked together previously. This exposure does not mean they'll automatically be compatible to run a startup together, but it at least improves the odds of an agreeable partnership. Most partnerships only look at this factor, but there are many others that contribute to success or failure.
Some entrepreneurs might come from the corporate world and are eager to pull in other successful corporate executives as co-founders. However, personality assessments have uncovered certain traits executives tend to possess that don't mesh well with being a co-founder. For example, the "tolerance of uncertainty" covers someone's multiple risk profiles. It measures not just financial risk, but also reputational risk, a metric that matters more to people as they get older. Successful executives with a lot of time and energy invested in their careers often have much lower tolerances for risk than the average startup co-founder. Startup founders need to make decisions based on imperfect information and do things that aren't the "corporate way," especially in the company's early years. An operations executive with 20 years of experience might not have the personality needed to make the bold decisions. So, despite their successes, they aren't primed for the co-founder role.
Personality testing can uncover several red flags to help founders avoid serious problems. One metric worthy of special mention is integrity. Starting a business with someone requires a blend of skill sets and personality traits, but a shared moral compass is also essential. Testing this trait requires looking at more than just honesty – it's an examination of how that person views the world. How far are they willing to bend the rules? Will they treat staff equitably in the pursuit of growth? This is one of the hardest attributes to measure with just gut instinct, as people often show their true colors under the stress of a startup. Personality testing that can quantify integrity helps co-founders avoid one of the biggest risks: choosing someone who isn't aligned with your moral compass. It's a fundamental difference that will lead to disagreements, poor long-term planning, and usually disaster.
A tale of three founders
A common scenario is a fledgling company that has three high-powered people involved, all super Type A. The upside is that they are all very hardworking. The downside is they are also pretty controlling and demanding. They all have a high need for visibility and recognition. Such traits often translate into business success, but the issue is how they'll function as co-founders. Which one gets to be the CEO? And will the other two co-founders unconsciously resent the decision and start undermining the CEO's direction? Many of these factors are operating under the surface. If the need for recognition is too strong among the co-founders, then the focus stays on their personal accomplishments instead of the company.
Personality testing can sort out people who have too much drive and a too-dominating personality. Startups survive when those involved can talk through the big decisions and combine different viewpoints. Overly dominating people can hurt the company's progress, because they're often unwilling to see other points of view and might even avoid sound decisions that don't originate with them.
With these three co-founders, will the two who aren't CEO stay in their lane if their personalities drive them into every decision? This is challenging in a startup, as everyone needs to pitch in and tackle various tasks to move the company forward.
Bringing together co-founders should involve much more than matching up skill sets. Take a CMO and CTO: Their knowledge may be complementary, but not if they're both domineering and they don't share a moral compass. Advanced predictive personality testing should be a standard practice to help founders and venture capitalists get the most out of every co-founder matchup.