Our “Personality Test” for VCs
Investing is a team game, but each team members is also paid to have a unique point of view. This means on a VC team like ours, there are lots of differing opinions and disagreements, especially when it comes to deal conversations. And to make those conversations effective, it’s ideal to understand, explicitly, where other people are coming from. How do your teammates approach deals? What angles matter most to them as they’re exploring a deal? What do they care about?
My colleague Brandon and I wanted to help everyone on our team understand each other better — particularly when it comes to deal preferences. To make that happen, we built a “personality test.” We’re putting that in quotes because we’re not experts in psychology, personality testing, or anything of the sort.
We were pleasantly surprised with how the tool turned out, the conversation it sparked, and the effect it’s had on deal conversations and our deal evaluation process since we did the exercise. In case other teams find it useful, we wanted to share the framework and our process!
How does it work?
The quiz was a series of 26 questions. The first question was an open-ended one that prompted everyone to “List the top 3–5 things that you prioritize when considering a deal.”
The intention here is to have a subjective self-assessment to compare to the more objective results of the survey.
The next 18 questions prompted each person to pick the deal quality that they prefer, assuming all else is equal.
Why 18? We started with a list of about 100+ sentiments, statements, and truisms that often come up in team conversations. These were things like:
- Does the founder have lived experience?
- Is there a compounding advantage?
- Is this a competitive market?
After brainstorming the mega-list, we lumped the questions and statements into common themes. In our case, they fell into 5 buckets. We eliminated one bucket altogether — deal structure — because the remaining categories were downstream of whether or not a deal was actionable for us.
Ultimately, we ended up with 4 buckets:
- market dynamics (MD)
- team (T)
- product market fit (PMF)
- defensibility (D)
From there, we synthesized the whole list into 9 statements. We used the statements to pit the 4 categories against each other three times, which resulted in 18 questions. (I.e. MD v T 3x, MD vs PMF 3x, MD vs D 3x, T vs PMF 3x, T vs D 3x, PMF vs D 3x).
If you have been working at a venture fund for at least a few months, you likely know off the top of your head what themes come up most, but I encourage you to do this brainstorming process. It was fruitful exercise in itself.
With the remaining 7 questions, we asked each person to pick the theme that they believed each of the other team members prioritized most when considering a deal.
The output was a snapshot how each team members subjectively perceived their own deal preferences (Q1), a more objective reflection of what they preferred (Q2-Q19), and a picture of how their team perceived their deal preferences (Q20-Q27).
Then, we packaged the results into graphs to help us visualize as individuals and as a team. Below is an example set of outputs (so we don’t give too much of Spero’s secret sauce away).
My deal preference results:
My team’s view of my deal preference:
Our team’s aggregate results (i.e. total number of theme 1 selection across the team, etc.):
Our team members’ individual overlapping results
What did we learn?
Originally, I assumed the key takeaway would be a simple high-level understanding of what we prefer in deals. After all, the exercise was born out of our desire to surface what we cared about, thinking that would facilitate better conversation around deals.
While we did uncover this, the inverse insight is arguably more valuable.
For example, I have a clear preference for for themes 1 and 2. What this also tells us that I’m especially willing to take risk on theme 4, and somewhat on theme 3 (when compared to them 1 and 2). It’s not just that I prefer theme 1 and 2 in a deal; it’s actually that I’m more willing to take a risk on themes 3 and 4 than I am on themes 1 and 2.
This evolved into a conversation about how deals are presented. Our deal preferences are typically what drives us to get excited about a deal and bring it to the team. We’re often presenting our deal through the lens of our preferences. When we’re analyzing deals, we’re more often looking at deals through our own risk assessment lens. With these insights into what we prefer and what we’re willing to take risk on, we have been able to drive better conversations. We have also made adjustments to our deal evaluation process. We now have a better handle on how our peers examine companies and what gets them excited.
All of this is a muscle that you grow over time investing with a team, but it’s powerful to put it on paper and create an intentional space to discuss.
I will leave a version of this up here and can commit to checking for responses once per week. If you want to learn more about how you can do this with your team, please feel free to reach out to me at stephen at spero dot vc.