Stanford Study Shows 1 Personality Trait Can Make the Difference Between Startup Success and Failure
No surprise that outgoing people are better entrepreneurs. But why?
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If you ever wonder whether you have the personality to be a successful entrepreneur, you have come to the right place. That's because Stanford Graduate School of Business (GSB) research published in January 2016 reveals a powerful insight -- startup success depends in part on a founder's ability to create professional networks and those who have open, extroverted personalities in their networks eventually produce better ideas for startups and teams
The GSB researchers studied more than 100 entrepreneurs who attended a June 2014 boot camp in New Delhi. They found that networks of peers help entrepreneurs generate ideas, find talented cofounders, and gain the skills they need to scale businesses.
Their research also found that networks could be especially useful in attempting to boost entrepreneurship in emerging markets, where entrepreneurs don't yet know the norms of startup life. GSB research also found that matching people with specific traits -- extroversion and openness -- makes networking easier, and eventually produces better ideas.
The GSB researchers asked teams of entrepreneurs to develop startup ideas for the Indian wedding industry. And they found that the quality of the ideas got better from people, especially those open to new ideas, after they were paired with extroverted people.
In a nutshell, if you are open and extroverted, you have an edge when it comes to turning your idea into a successful business. If you are closed and introverted, you may have more difficulty unless you can find a cofounder who is the opposite -- or you can train yourself to be more open and extroverted.
My interviews with hundreds of founders have taught me that when it comes to hiring cofounders, they look for people who pass two tests: they believe they will enjoy working with him or her, and the potential cofounder has excellent skills in a field that the startup needs to succeed and which the founder lacks.
The GSB researchers found that entrepreneurs could gain different insights about potential cofounders from three kinds of interactions.
1. Direct Collaborations
Direct collaborations -- working intensively on a team together -- resulted in the most information about potential cofounders. More specifically, such collaborations revealed the strength of the interpersonal fit and the potential cofounder's talent.
Indeed such benefits of direct collaboration help explain why many of the CEOs I've interviewed started companies with people they worked with successfully in prior companies.
The benefits of direct collaboration suggests that a founder who is networking to find potential cofounders should collaborate on a project before asking them to join the startup's executive team.
2. Indirect Relations
Indirect connections -- having a shared friend or acquaintance -- yield more information about a potential cofounder's interpersonal ability, but not talent, according to the GSB researchers.
The insights that such indirect connections yield regarding a potential cofounder's interpersonal ability help explain why so many of the CEOs I interviewed like to be introduced to people through a shared connection. After all, if a trusted third party makes the introduction, the risk of a poor cultural fit is reduced.
But before hiring such a person, the founder must supplement the information about interpersonal skills by investigating the potential cofounder's talent in the specific function that the cofounder will lead.
Such talent can be tested through interviews where the candidate participates in a simulation of their job coupled with deep interviews with people who have worked in similar professional settings with the candidate.
3. Short conversations
Finally, short conversations revealed insights a potential cofounders' abilities, but not their interpersonal skills, the GSB researcher found.
It is easy to see how such conversations could come from brief networking meetings with potential cofounders. But to discern a good personality fit, the entrepreneur might invite candidates to a dinner with the executive team or to participate in a company event -- such as a softball game or white water rafting trip.
If you have an idea, you will need to work with others to turn it into a viable business. Your odds of finding the talent you need will rise -- as will the quality of your solutions to the growth challenges you'll encounter -- if you have an open and extroverted personality.