The Power Law of Personality Extremes

There are a few threads to connect here so be patient…

\1. There’s no free lunch in personality characteristics. Every strength exposes its self to another kind of weakness. This could be called the no-free-lunch rule of human psychological makeup.

\2. One fund (the unicorn) in a portfolio will perform better than all other successful funds. This means you need to put big money into a unicorn startup if you want to see real returns but it’s very difficult (impossible) to identify that startup. Identifying unicorns is to VC’s what successful trading strategies are to quants. It’s their bread and butter and its worth billions if you can work out a method for doing it.

\3. In an attempt to identify the black swan, investors are investing in startups they would have previously passed over because of personality extremes in the founders. VC’s invest in founders, not startups. This is why successful founders get funded repeatedly and how they end up being serial entrepreneurs.

The takeaway: Be your self. Don’t try to be any one else. Maximize your strengths and don’t lose sleep over your weaknesses. Accept that you have limited bandwidth. Focus on the essentials.

As an aside: Another metric specifically related to founders that VC’s can use to determine startup success is the Q score. A ratio that represents how many of the founders have worked together in the past. Projects like Startup Gnome would do well to start integrating founder data into the information they gather.