Autopsy Data Analysis: Personality traits and drivers of an effective Entrepreneur

From the perspective of Founders and Investors

What traits make for an effective entrepreneur? Autopsy analyzes the data and conducts research.

Written by Maryam Mazraei, Founder @ Autopsy and Aryan Ashoori, Academic Research Advisor. Thanks to Tom Britton @ SyndicateRoom Fund for his support.

What is Autopsy?
Autopsy is a data company that focuses on collecting information of firms which have failed. While there are many companies that have focused on collecting data of successful firms, the resulting survivor bias creates fundamental problems for any resultant findings. We seek to overcome this by also collecting information of firms which have failed.

Building a startup is an innately risky venture, with countless elements shaping the outcome of whether your business will sink or swim. Some say, a lot of it, frankly, boils down to sheer luck or market timing. But there does seem to be consensus on the significance of two particular factors: the character of the founding team and its ability to secure funding, particularly at the early stages of a startup.

Immediately, a conflict is visible: who is better placed to judge what qualities make up a great entrepreneur — the investor holding that life-giving checkbook, or the founders running the business?

When it comes down to identifying the exact qualities that go into forging the ultimate entrepreneur, it turns out that what investors look for in a founder and what the founders themselves deem important vary greatly.

Understanding is the only route to better decision-making, so we orchestrated a study to see how opinions differ. Running two surveys in parallel, we asked investors and founders to rank the most important qualities required to start and nurture a successful business. What we found are some striking differences.

Empirical studies

We are by far not the first to conduct a study on entrepreneur personality traits and drivers; the rich international pool of data stretches from ancient etymology to the present day. Examining such typology studies can help us understand the traits necessary to succeed in different businesses.

In the 18th century, French economist Jean-Baptiste Say defined an entrepreneur as a person who “shifts economic resources out of an area of lower into an area of higher productivity and greater yield”.

Fast forward to 2014 and the Economist divides entrepreneurship into two camps: the “innovative” (often radical and disruptive) ventures that capitalize on market gaps using novel technology, and the “replicative” ventures that base their business plans on existing models they can incrementally fine-tune.

In terms of personal qualities, Badal’s 2014 study of 2,500 entrepreneurs for Gallup found the key factors of success to include business-focus, confidence in self and others, creative thinking, appropriate delegation, determination, perseverance, independence, knowledge-seeking, art of promotion, communication through growth-oriented relationship-building and, last but not least, the quality of being a risk-taker.

Badal wasn’t the only one. Inspiration, creativity, fortitude and direct action were reported as vital entrepreneurial characteristics by Martin & Osberg (2007: pp.33–34); Bowser’s study (2013) for the US Ministry of Business Development Agency reported eight top traits of entrepreneurs to include strong leadership qualities, high self-motivation, strong ethical stance, willingness to fail, serial innovation, understanding shortcomings of knowledge, competitive spirit and understanding the value of networking. The 2012 OECD Report for the Workshop on “Skills Development for SMEs and Entrepreneurship” identified inner discipline, ability to take risk, innovative, change-oriented and persistence as key entrepreneurial skills.

Other non-skill-related factors — including age according to Erikson’s eight stages of psychological development, gender, a balanced skill set or being a “jack-of-all-trades”, macro business ecosystem factors, relevant technical and management skills, and many more — can also contribute.

Gathering data

For this article, we created a qualitative survey asking investors and entrepreneurs to rank a selection of personality traits and skills according to what they believe to be vital to entrepreneurial success. The aim of this research was to identify what qualities investors look for in founders and how these differ from what entrepreneurs consider to be important, by extension illuminating certain biases we might hold when assessing founders.

The qualities included in the survey were selected with consideration of the above studies as well as our own existing research. These were teamwork, financial literacy, research ability, multi-tasking ability, resilience to pressure, general business management skills, persistence, ambitious, honest and transparent, receptive, driven to succeed, ability to grow a team and accountability.

The survey targeted two personas: (1) founder of a business or those within a founding team either currently or in the past, and (2) investors classified as an “Angel” or as part of an institutional fund i.e. VC.

Before we touch on the results of the survey, it is important to get to know the profiles of our respondents.

To showcase a representative data sample for the founder-led survey, we kicked off by asking the respondents if they have started their own business. Out of the 33 respondents who completed the founder-led survey, 93.9% had started their own business and predominantly identified with titles such as CEO (60.6%). The remaining 6.1% stated that they had not started their own business but predominantly identified as part of the founding team (35.3%) with respective titles such as Co-founder (3%) and CMO (3%).

The majority of respondents (42.4%) were in Stage 1: Seed & Development of their business lifecycle, recognised as the phase in which a business tests its viability in the market prior to official product launch. Followed closely, 27.3% were in Stage 2: Startup, the launch phase when a business is focused on iterating its product through customer feedback, and 18.2% were in Stage 3: Growth & Establishment, usually determined by consistent monthly revenue and progressive growth in customer acquisition. Stage 4: Expansion and Stage 5: Maturity and Possible Exit were 6.1% each.

Out of the 33 respondents, 63.6% have had a startup prior to their current one and 31.3% deemed to have had a successful startup previously, i.e. exited; 53.1% admitted to experiencing a startup failure in the past.

Investor opinion

The investor survey respondents combined Angels (44.8%), crowdfunding platforms (31%) and venture capitalists (20.7%). Almost one-third of the investor respondents said they held “1 to 5” companies in their current venture portfolio, followed by “5 to 10” and “30+” companies in their portfolio, with 21.4% each.

51.7% of respondents expressed having a portfolio company which has been successful i.e. exited, 72.4% stated they had failed companies in their portfolio.

When asked if the investor audience had seen a difference in traits and drivers between successful and failed entrepreneurs, 48.3% said “Yes”, 13.8% stated “No” and 37.9% selected “Maybe”. We then allowed the respondents to write what those key differences are:

• “Network — those who can bring on the best teams often do best. The founder himself/herself is not enough.”
• “Humility amongst successful entrepreneurs.”
• “Successful entrepreneurs know their own strengths and weaknesses extremely well and take steps to mitigate the latter.”
• “Successful ones were focused on sales. Failed were more interested in invention.”
• “Ability to receive and act on advise (failed ones didn’t and alienated their staff and their investors, and didn’t listen to their customers). Inner drive (that helped push the successful ones forward when they had issues).”

The results

The leading trait expressed by both types of respondents is persistence (picked by 79.3% of investors and 63.6% of founders).

The results in the founder survey showcased inner discipline as the second most popular trait with 54.5%, resilience to pressure 51.5% and an ability to grow a team with 48.5%. Meanwhile and predictably, responses from investors yielded different results, with the most obvious takeaway being that in general, investors were likely to select more traits than founders.

The most noticeable discrepancy between the two groups was the perceived value of financial literacy; the least critical reported factor for entrepreneurs (15.2%) and in the medium range for investors (48.3%). Excluding financial literacy, the least reported drivers in both groups were perceived similarly, including low responses for being change-oriented, accountability and research ability. Inner discipline was found to be the only driver that was significantly more important to the founders, while persistence was the most important factor for both groups overall.

A matter of perspective

The reality is that there is no semantic consensus between adjective keywords used by self-reporting entrepreneurs, researchers and investors to rank success-related traits and drivers. Personal qualities are often interlinked, and ranked or multiple-choice surveys which are often used in this type of research do not employ the necessary architecture to address such issues; they often deal with traits as static qualities, when in the entrepreneurial process, personal change and natural processes result in more dynamic personas. There is also a significant chance for inaccuracy when reporting one’s own qualities, leading to value in the difference of how entrepreneurs perceive themselves, versus how investors and colleagues rate them in similar qualities.

Whichever characteristic or type of entrepreneur one may fall into, it is important to emphasize the need for more in-depth analysis on this topic and consider numerous factors such as the change of perception of an investor towards an entrepreneur and the change in a founder’s abilities over-time. We have not yet been able to identify a holy grail literature review of critical entrepreneurship skills and thus must highlight the need for more vigorous utilization of databases, academic literature and industrial insight to arrive at decisive data which can then be accompanied with wider scale surveys.

Similar to this study, most literature found on factor-based trait studies are based on either response from surveys or a collection of factors from previous studies. This leads to an inherent subjectivity in trait choices which defies scientific empiricism, and it calls for a better understanding of how traits are interlinked with each other. For example, our reported traits of ‘accountability’ and ‘financial literacy’ are both amongst the least chosen effective entrepreneurial factors and they may indicate an underlying correlation of fiscal and managerial responsibility; a correlation which should be assessed further in greater detail. Similar correlations may be found in other traits, emphasizing the need for an objective and robust set of factors that categorize different aspects of the human mindset.

Such concerns lead us to be cautious in championing any of these qualities over another at this stage of research due to the limited sample size and lack of generalizability. Nevertheless, such data allows us to make preliminary judgements about better classification of factors, and identifying basic trends to research further in future work.