The Short Essay On The Animal Nature Of Angel Investors And Startup Founders.
Past 20 years of my life, which I have solely devoted to two subjects — private investments and national politics — have taught me to carefully consider the nature of men while taking critical strategic decisions either in business or in governance. Although, the notion that humans have virtually no social and physiological limits is, today, so universally accepted that it has became almost an inexcusable moral flaw to suggest otherwise, I, nevertheless, choose to retain my own opinion on this important matter.
It is, however, not the purpose of this short essay to prove my multiple critics to be generally wrong. I simply take it for granted that if there exist some material evidence for the reality of certain psychological phenomena, which has not yet been socially recognized or scientifically proven, we may as well use it for our own good purposes. Rather than arguing with those who are strongly opposed to this view, I want in the following several paragraphs, which I now present to your informed judgement, to provide some initial guidance to those among my readers who, themselves, want to apply human nature’s study to business practice of their own.
Because the described investment approach is largely based on my life’s observations of investors and founders’ main psychological types and their interactions I had to come up with some kind of phenomenological definitions in order to systematize those observations and, then, to set them to work. By and large for the practical purposes I define more than ten different personality types on both investors and founders sides. It gives me about 100 different combinations to work with. Obviously, in order to address all of them I’ll need to expand this short paper to the size of a book. Instead, for the purpose of this essay I have retained only four basic types of investors and, rather agreeably, four types of founders.
Furthermore, alternatively to using quasi-scientific terminology in order to describe basic personality types I decided to name them after personages of George Orwell’s novel “Animal Farm”. It is obvious that this rather exotic choice may raise a vivid agitation among well-read and vigilant readers. I apologize to them for causing this disturbance. I admit in advance that exploiting this renowned masterpiece of political dystopia genre may be too much of bad literary taste. However, mixing politics and business is not completely unheard of practice in the contemporary society and, for this reason alone, my doing so in this unworthy piece shall be excused as well.
Angels and Founders Eight Major Personality Types
Most of private investors, which I have happened to personally know and, sometimes, to co-invest with belong to one of four distinctly different types of characters, which may be symbolically entitled as “Donkey”, “Boar”, “Goat” and “Raven”.
In the “Animal Farm” the donkey, named “Benjamin”, is described as an educated and profoundly skeptical beast, which likes to question “obvious” facts. The boar (“Napoleon”) is a dominant and larger than life character, which life’s ambition is to rule over other animals. The goat (“Murel”) is a popular, dedicated and docile creature, which is a friend with all animals. The raven (“Moses”) is a career orientated, self-serving individual, which diligently works for whoever happens to be in power.
Equally, there are four distinct founder characters’ types, which I have had multiple opportunities to be acquainted with, while tackling various private investment cases during my career as a business angel. Those four types may also be tagged as following: “Puppy”, “Sheep”, “Hen” and “Cat”.
In the “Animal Farm” “puppies” are direct actions orientated role-players. They straightforwardly haunt all running animals without really knowing why. “Sheeps” have a stubborn nature, which urges them to blindly stand for abstract, sometimes dogmatic ideals. “Hens” are hardworking, functions orientated actors, which are narrowly focused on eggs production. A “cat” is an illusive, idealistic and enigmatic soul, which, however, is endowed with an irresistible charisma.
A typical Donkey tends to be a former investment or consulting professional, which usually holds a management degree from a prestigious University and has more or less successful career history with a well-known investments fund or a reputed consulting company.
Donkey strongly believes in the magic predictive power of Excel spreadsheets and firmly knowns that there’s no such a thing as too much of data. This type likes to spend countless hours on boards’ meetings, to where he carries an expensive notebook, which contains at least fifty neatly organized desktop icons, each of which corresponds to a specific project’s financial forecast, enriched by insanely complicated mathematics and breathtakingly beautiful infographic.
Donkey knows for the fact that his financial success with startups depends upon hard work, unlimited access to information, clear-vision power of expensive electronic tools, and, of course, of Donkey’s unmatched personal intellectual abilities. Besides, this type worships his network of trusted professional contacts with which he stays in over-the-clock e-mail communication.
On a subconscious level, however, Donkey often feels himself stressed and insecure. Trying to compensate for this diffidence on a conscious level donkey often retreats into comfortable and safe atmosphere of his private office, which nostalgically reminds donkey a familiar corporate work environment. Secretly donkey worships “portfolio investments theory”, which he tries to apply to his startups investments. However, donkey often finds himself faced with the naked truth, which consists of one simple fact, that all of his educated financial sorcery may be condensed in one phrase: “spray and pray”.
Boar presents himself an opposite to Donkey’s type of character. Professionally Boar usually tends to be either a result of long upper-echelon management career or a former entrepreneur. This type usually possesses almost unlimited energy and strong, often brutal charisma, which, together with self-promulgated celebrity status, make this type almost irresistible to the majority of start-up founders.
With regards to private investments all boars usually have one common goal, which is to get into the glorious rank of “super-angels”. Entering into this prestigious category tends to be strongly associated for Boar with the success and feeling of personal fulfillment. In fact, acquiring the new prestigious social status may often be more important for Boars than gaining financially from investments.
This type so firmly believes in his own outstanding business acumen, almost paranormal ability to “read” people and divine negotiating skills that Boar has no doubts what so ever that he may always almost instantly to feel “what will work and what won’t” and to quickly find his way out from the self-imposed mess.
Usually, in about a year Boar finds himself in a possession of a dozen or so startups, only few of which present any real personal interest for newly born super-investor. In 3 years the number of startups in Boar’s hands rarely stands below 30. As a result, almost none of those companies are able to receive badly needed assistance from their investment patron. However, at this period boar already presides over his own investment fund with at least five over-paid, subservant office-types and spends most of his time on international conferences, foreign embassy receptions and private “soiree”.
Goat is of a type, which you may also call an “emotional investor”. This type usually formulates his investment preferences in sentimental phrases, like “I think I just like those guys” or “I really believe in the bright future of this technology” etc.
Goat often became quickly discouraged by under-performance of startups he has just invested into. In this case he either starts to seek his way out of the deal or gets into the state of prolonged depression, which may negatively affect the efficiency of company’s board of directors, specially, if Goat holds to a significant portion of company’s share.
On a positive side, however, this emotional type, while pondering on investment decisions, makes his mind very quickly and then, usually, lets founders run the company as they wish on an operative level. Goat also likes to visit large scale public events held in luxurious hotels or at exotic resorts where he is presented with the opportunity to express his views on various non related subjects to big crowds of company’s admirers. By doing so Goat usually appeals to high ideals and massively disregards real financial performance of a given startup. Goats tend to be people of humanitarian professions, often artists, sports or cinema celebrities.
Raven is the type of investor, which strongly, sometime almost religiously, believes in inherent powers of institutions. Those people are, typically, former bureaucrats, political functionaries or managers of big corporations. They, routinely, value the ability to make “right contacts” above almost all other human virtues and are eager to take leading positions in start-up board of directors.
They are almost indispensable for those fledgling businesses, which target markets lay within the realm of gigantic corporate entities and governmental agencies. However, the price, which start-up founders have to be ready to pay for a distinct pleasure to be presented to wielders of high powers, is as steep as slopes of a power pyramid itself.
More often than not Raven doesn’t bother to closely familiarize himself with peculiarities of products’ design or shopping habits of startup’s main groups of users. Instead, this type usually prefers to focus his energy on one thing — to gain as much control within a company as humanly possible. Surprisingly for external and unprepared observers, while pursuing his hidden objective, Raven commonly demonstrates such astonishing awareness of human vices, that most people, which gradually became involuntary involved in the process of passing startup’s power levers to Raven, do not consciously realize what’s going on until it is too late.
As a result of Raven’s corporate maneuvering most founders suddenly find themselves outside of the secret chamber, from where, henceforth, all verdicts on startup’s destiny are to be announced.
Puppy may be one of the most numerous and, at the same time, most popular among beginner private investors founders’ type. By its nature this type doesn’t like to wait until a lucrative market opportunity reveals itself to him or when a genius product idea or an unique technology design came to his mind. Rather, Puppy chooses to firmly take his destiny in his own hand and to create his own opportunities.
For an unexperienced investor this type presents itself a “god’s gift”. Puppy devotes almost all of his time and energy to two key processes: first, bringing together, “brick-by-brick” all elements of what is called “a start-up” among main-stream investors, and, second, soliciting money from everyone in his grasp and beyond.
No wonder that Puppy has more-than-average probability of success in reaching his main goal, which he usually formulates as “to became a serial entrepreneur”. Sadly enough, this type’s glorious career is, traditionally, accompanied by a number of risky and even dubious deals. In numerous occasions it leads to the situation when investors, which were initially enchanted by Puppy’s radiating energy and inspiring visions, find themselves with a lesser number of green-bucks in their pockets than at the start of this very entertaining but also very expensive journey.
Sheep, typically, experiences a congenital, emotional connection to his start-up. In many instances his feelings have long, convoluted and unrevealed lineage, including child-hood’s incidents, parents’ influences as well as subconscious phantasms. This type often stays devoted to his cause regardless worsening market situation and well-intended advises. Sheep may be the blessing as well as the curse for a private investor.
In the best case scenario, when there exist a set of positive exogenous and indigenous factors, including favorable markets and team’s members unique personal talents, stakes on Sheep’s new venture may led to unexpectedly large rewards. Nonetheless, Sheep usually struggles to adapt to new market trends, specially if it requires to abandon some of his fervently cherished ideas.
Hen’s type is often the product of life, which has been solely dedicated to the mastery of one art, the later being either various branches of experimental sciences such as biology, chemistry, physics or of industrial (more often computer) engineering.
This type’s typical life ambition is to find the way to profitably emerge himself into comfortably familiar atmosphere of mathematical equations, chemical reactions, neatly organized electric circuit diagrams or the wizardry of programming. As the direct consequences of such predisposition of his nature Hen often manages to stay emotionally non-invested in his own project.
Occasionally, Hen may consider his startup as the method to satisfy his scientific curiosity at somebody else’s expenses. Hen may quickly switch from one project to another in case he suddenly stumbles on new and exiting technical challenges. On the bright side, Hen tends to develop a set of strict, self-imposed rules and to follow professional etiquette, violating which will undermine his position within the professional community.
Additionally, Hen is prone to establish the complex relationships with money, which he sometimes chooses to publicly despise but often secretly admires or even worships as some magical form of energy, which affects people the same way as electro-magnetic forces affect atomic particles.
Cat is inclined to consider all of his enterprises as very exiting life experiences, which occasionally may (or may not) confirm Cat’s original insights. This type habitually look at his surroundings through blue, cerebral glasses, which are particularly well suited to the purpose of discriminating against minute practical nuisances constantly interfering with the smooth flow of everyday business.
Sporadically Cat may be completely blown away by the strong sensation of self-importance. His feelings of unpaid duties towards the humanity might be so overwhelming that Cat sometimes converts his startup into the form of organized religion. In the latter case, Cat often expects everyone involved with his company to achieve the state of religious favor, which, he believes, is absolutely compulsory for the startup’s ultimate success.
Cat often demonstrates such level of personal commitment that it became highly infectious to investors, which may stop to adequately asses the financial results of the business, relying solely on a miraculous force of Cat’s gospel.
Boar vs Puppy
This combination of similar by nature characters quickly gets out of hand when Boar and Puppy face each other while disagreeing on matters of day-by-day business or debating company’s strategic alternatives. Figuratively speaking, this coalition of oil and fire rarely works to the both parties’ mutual satisfaction.
Boar vs Sheep
This alliance has long-term perspectives under the condition that pro-active Boar’s nature serves as the first-stage booster for Sheep’s steady mind, specially when the latter is pondering on particularly difficult and controversial strategic decision. However, this union may also go bust because of Boar’s impatience with Sheep’s lack of flexibility.
Boar vs Hen
This consortium would be viewed as made in heavens if not for a regrettable absence of true commitment to company’s mission from part of both of those characters. This shortage of loyalty may negatively affect company’s employees and shareholders, which were initially enchanted by Hen’s detailed, highly technical presentations and persuaded by Boar’s quick meal ideas.
Boar vs Cat
This synthesis rarely works properly because both of those characters typically aim at obtaining prominent public status and tend to mix their private opinions with company’s official viewpoint. Boar’s and Cat’s continuous jockeying for position is generally detrimental for company’s business success.
Donkey vs Puppy
It may be a great fit providing that Puppy will find enough time and inclination to listen to Donkey’s advises. Donkey’s brain, predisposed to intense activity and to carefully weighing all options before taking crucial decision, will serve as a counter-balance to Puppy’s impatient and often erratic temperament.
Donkey vs Sheep
Those two characters may comfortably co-exist in purified environment of a scientific laboratory or in plastic paradise of a corporate office. However, when it comes to an unpredictable world of business it may be just too little too late when Donkey and Sheep eventually agree to take painful but necessary practical steps.
Donkey vs Hen
When those two elements are brought together we get plenty of light but almost no heat. Cold and systematic mind of donkey coupled with down-to-earth hen’s nature make start-up wheels turning slowly but steadily, leaving, however, the majority of its customers and shareholders vaguely dissatisfied. In this situation lacking are team’s genuine enthusiasm and product’s emotional appeal.
Donkey vs Cat
This particular combination of opposing characters could produce favorable effect on company’s overall performance if not for Cat’s regrettable tendency to periodically disregard Donkey’s mostly theoretical but, nevertheless, often valuable advises. Moreover, Cat may even decide to publicly harass Donkey if the later manages to show a lesser eagerness to company’s mission than routinely required from each individuals engaged with Cat’s startup.
Goat vs Puppy
This alliance favors insubordinate nature of Puppy, whose authority remains unchallenged by “free skating” Goat and whose incessant energy stays unrestrained by unwelcome scrutiny and unsolicited advises. Even so Goat may soon realize that Puppy’s charisma, which Goat at first found to be utterly irresistible, is not always sufficient to circumvent market’s formidable obstacles.
Goat vs Sheep
Goat and Sheep may easily find a common ground on which they stand admiring Sheep’s unique company. However, as the time passes by and Goat’s initial passion fades, as it usually does, both those characters may notice that it became more and more difficult for two of them to keep the same high level of mutual respect particularly when markets start to surprise everybody with sudden downturns.
Goat vs Hen
This coalition is not often formed. Hen’s technologically savvy but mostly prosaic ideas are not capable to induce emotional vibrations, which may produce “wow” effect on Goat. However, when, despite all evidences against it, this misalliance eventually happens, it causes the general state of unhappiness for two parties. Goat experiences deep disappointment with Hen’s down-to-earth manners and boring speeches, whilst an immediate disillusion came to Hen after he observes Goat’s absence of practical abilities.
Goat vs Cat
In absence of restrains posed by force of cold and impartial reason this synthesis of rough enthusiasm and intemperate ambitions may convert an initially sound idea into the epic enterprise, which is comically inflated outside of its natural proportions. Both those characters possess enough persuasion power to turn small group of wavering supporters into the stadium-size crowd of disillusioned investors.
Raven vs Puppy
By the virtue of their characters Raven and Puppy are natural born enemies. Raven loves to tease Puppy whilst Puppy does rarely miss an opportunity to wildly and vainly chase Raven. Raven’s secret and unabating strive for power does give rise to instinctive suspicion in Puppy. Sooner or later this growing antagonism will result in open confrontation, which rarely can be survived by a startup. Regrettably so, Raven is often able to lure Puppy into an investment deal by promising to him an unmitigated succor of big enchiladas.
Raven vs Sheep
Raven creates clear and present danger to Sheep’s administrative and moral monopoly in a company. Sheep often considers his startup to be an integral, sometimes indispensable part of his own personal identity. Sporadically, that makes Sheep unwilling to sacrifice his highly abstract principles to the sake of financial gains. On his side Raven gets irritated by Sheep’s purported lack of administrative and business effectivenesses. It’s only a matter of time before Raven commences to believe than him taking reigns of power will be in the best interests of startup’s shareholders.
Raven vs Hen
This alliance is agreeable to both parties. Hen’s cynical pragmatism does allow for Raven’s ascend to the top echelons of company’s hierarchy even if it significantly undermines Hen’s own administrative positions. As long as it improves startup’s bottom line Hen doesn’t mind if somebody “bosses” him time to time. Raven, on his part, feels that Hen is “the right type of guy”, who knows how to be productive and tenacious member of the “corporate family”.
Raven vs Cat
This combination of characters can work under a condition of rarely occurring favorable circumstances. Notably when Raven wholeheartedly commits himself to the company’s cause and Cat doesn’t sense a threat for his position as startup’s “spiritual leader” from ambitious and authoritative Raven. In this situation Raven and Cat might peacefully co-exist providing that Raven takes on himself official representative functions and Cat concentrates on proselytizing to large crowds of potential consumers.
At this stage I don’t want my expert readers to form a superficial opinion that my exotic system is more the result of ignorance than of necessity. At the beginning of my career I tried to apply multiple popular personality models to my investment practice but found all of them either being too abstract, for instance, Carl Jung’s Psychological Types and Myers–Briggs Indicator, which is largely based on Jung’s theory, or mainly unrelated to my professional field, as in the case of Holland Occupational Themes or RIASEC, proposed by John Holland and used by US Department of Labor. Many other psychological type’s systems, for example, Eysenck’s and HEXACO models or 16PF, are widely used in the psychotherapy but almost inapplicable to the field of business.
Obviously, I can’t pretend that my humorous methodology might posses the scientific valor of highly reputed theories, which were mentioned above. I also caution my readers to be extremely careful in applying it to their own investment practices because type’s identification process is very difficult and mostly uncertain. To mastery it requires years of practice. Besides, in this brief format of essay it’s impossible to present this methods to you with all necessary details. Nevertheless, I hope you’ve enjoyed reading this piece and will not be very brutal in judging its many shortcomings.
The author: Svyatoslav (Svyat) Sedov
Angel investor and founder of The First International Incubator for Silicon Valley Companies (FirstInternational.In) in the Bay Area, CA, USA.
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