Is Personality Type Matter In Venture Captial?

I’ll never forget Mitch Mumma of Intersouth telling an assembled group of newly initiated venture capitalists that a degree in psychology would probably be a stronger indicator of success in the industry than a degree in economics. One’s ability to intuit the capabilities of a team, to build trust, and manage bumps in the road are key skills for a VC, and only likely to become more so as investment opportunities become more competitive. Consider the kind of relationship building the Outside.in investment required.

It’s worth noting, then, that venture investors do occasionally bring to bear an analytical method of peering beneath the shiny personality veneer of management pitches and diligence visits when considering a new investment. At Chrysalis we use a tool called the Predictive Index (or PI), one of many options on the market, but one we’ve seen a lot of success with and something many of our portfolio companies have decided to use internally to foster more effective teamwork and as an aid in recruiting efforts. In fact, the Wall Street Journal covered our usage in a 2004 article on the topic:

David Jones Jr., chairman and managing director of Chrysalis, based in Louisville, Ky., said PI has helped his firm gain insight into the companies it considers funding. Before Chrysalis began incorporating PI, Mr. Jones said, “I felt we spent an immense amount of time on people issues, but there was no predictability.”

It was easy enough to look at a resume and see if someone had been a success, he said, but it was hard to tell whether a leadership team at a new company would work well together…

“We made an investment in a company last year where we’d gotten some resistance from the CEO,” Mr. Jones said. “He was probably the most experienced and mature CEO in our portfolio, and had run a number of companies. He went along with [PI], but I don’t think he was thrilled.”

When Chrysalis asked the CEO to bring his team together to go over the results, the CEO brought with him another investor, who immediately took out his Blackberry as if to say he had no interest in the proceedings.

“Their body language was tense,” Mr. Jones said. “The perception of the other investor was that he felt this was an utter waste of time. Within 20 minutes, the BlackBerry was on the table and everyone was leaning forward. When it was over, the CEO said, `You must have been listening in on our management meetings. This is a very accurate assessment of how we get along and what we’re like to work with.’ Now they’re incorporating PI into their business.”
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