Technology startups are essential to the global economy. Yet, predicting their short & long-term outcomes remains difficult. This is particularly true in the early stages of a venture’s lifecycle when little to no performance data are available. We offer large-scale, ecologically valid evidence for the importance of a startup feature that is available from the moment of startup conception: founder personality.
Our findings suggest that while some Big 5 personality traits consistently predict startup outcomes across all stages (ie. emotional stability), others reverse their associations with entrepreneurial outcomes as the startup matures from conception to exit (ie. Conscientiousness).
By doing so, they offer novel insights into the role of founder personality in technology startups.
Technology startups play an essential role in the economy—with 7⁄10 largest companies rooted in technology, and venture capital investments totaling ~$300B annually. Yet, important startup outcomes (eg. whether a startup raises venture capital or gets acquired) remain difficult to forecast—particularly during the early stages of venture formation.
Here, we examine the impact of an essential, yet underexplored, factor that can be observed from the moment of startup creation: founder personality. We predict psychological traits from digital footprints to explore how founder personality is associated with critical startup milestones. Observing 10,541 founder-startup dyads, we provide large-scale, ecologically valid evidence that founder personality is associated with outcomes across all phases of a venture’s life (ie. from raising the earliest funding round to exiting via acquisition or initial public offering).
We find that Openness and Agreeableness are positively related to the likelihood of raising an initial round of funding (but unrelated to all subsequent conditional outcomes). Neuroticism is negatively related to all outcomes, highlighting the importance of founders’ resilience. Finally, Conscientiousness is positively related to early-stage investment, but negatively related to exit conditional on funding. While prior work has painted Conscientiousness as a major benefactor of performance, our findings highlight a potential boundary condition: The fast-moving world of technology startups affords founders with lower or moderate levels of Conscientiousness a competitive advantage when it comes to monetizing their business via acquisition or IPO.
…For the purpose of this study, we predict founders’ personality from the language extracted from their Twitter tweets in the 2 years prior to founding (see Methods for details on the predictive models).
In a second step, we link these personality profiles to the following startup outcomes across all stages of the entrepreneurial life cycle: (1) whether the startup raised funding, (2) the amount it raised in the earliest funding round, (3) the number of investors it included in the earliest funding round, and (4) whether it exited [via acquisition or initial public offering (IPO)]. The data were accessed using Crunchbase’s research application programming interface (API)19. The final dataset includes 10,541 US-based founder-startup pairs, their predicted personalities, and their startups’ outcomes (Figure 1).
…Results: Figure 2 displays the results of a series of logistic and linear regression analyses predicting startup outcomes from Big 5 personality traits and controls (see SI Appendix, Table S1 for full model output and SI Appendix, Table S2 for the variable means and zero-order correlations). To facilitate the interpretation of effects, the personality estimates were z-standardized. All analyses control for the year the company was founded, the number of founders, the gender of the founder, US state, and industry-fixed effects.
Whether a startup raised initial funding (Figure 2A, logistic regression) was positively related to Openness and Agreeableness. An increase of 1 SD in Openness and Agreeableness was associated with a 5% higher likelihood of attracting funding. For those startups that raised initial funding, the amount they raised during the startups’ earliest funding round (Figure 2B, linear regression) was statistically-significantly related to Conscientiousness and Neuroticism. An increase of 1 SD in Conscientiousness was associated with an additional $170,000 raised, while an increase of 1 SD in Neuroticism was associated with a drop of $90,000. Similarly, the number of investors included in the first round of funding (Figure 2C, linear regression) was statistically-significantly related to Conscientiousness and Neuroticism. A 1 SD increase in Conscientiousness and Neuroticism was associated with having 0.21 and 0.20 fewer investors, respectively. Finally, whether the startup exited (via acquisition or IPO; Figure 2D, logistic regression) was negatively related to Conscientiousness and Neuroticism. A 1 SD increase in Conscientiousness and Neuroticism was associated with a 15% and 16% lower likelihood of exiting, respectively. Taken together, the results suggest that founder personality plays an important role across the different phases of a new venture’s development, from initial fundraising to exit.
…Extraversion was the only personality trait that did not show any statistically-significant relationships with startup outcomes. This finding stands in contrast to prior literature which has found a weak relationship between founder extraversion and startup performance6. However, the difference might be explained by our focus on technology startups. The public depiction of technology founders as “introverted geeks” (eg. the TV series Silicon Valley) and the prominence of many successful introverted tech founders (eg. Bill Gates, Mark Zuckerberg, or Steve Jobs) might offset any positive effect extraversion typically has51. [That seems extremely unlikely, given how causally weak such stereotypes or expectations are.]