16 Key Red Flags for Startup Investors

I recently a read a good book called The Art of Startup Fundraising written by Alejandro Cremades, a serial entrepreneur and co-founder of Onevest, a venture investing community platform.  One of the chapters in Alejandro’s book specifically talks about these 16 red flags for investors, and Alejandro was kind enough to let me share that list with you.

Read the rest of this post in The Next Web, which I guest authored this week.

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Lesson #250: Personality Testing On The Rise, But Why?

For decades, personality tests have been used by big corporations to evaluate employee candidates during their hiring process.  But, more and more, I am seeing early-stage companies using these tests to help them in their hiring process.  I am not sure who is pointing them in this direction, most likely the increased access to free online personality tests you can take, like this one.  But, just because they are there, doesn’t mean you need to use them.  They are often used as a crutch to help make decisions, instead of true leadership by hiring managers.  And, often times, the results learned about current employees, do not result in actionable changes within an organization.  Let’s dig deeper here.

What is a Personality Test?

As an example of the most used, back in 1945, Katharine Cook Briggs and her daughter Isabel Briggs Myers pioneered the Myers-Briggs Type Indicator (MBTI) personality test which sorts people into four different types of psychological classifications, based on the research of Dr. Carl Jung in the 1920’s.  For example, a person is either: (i) an Extravert or an iNtrovert; (ii) Sensing or Intuitive; (iii) a Thinker or a Feeler; and (iv) Judging or Perceiving.  You can learn more about the specific definitions for each of these classifiers at this infographic.  If you are curious about your personality type, or want to test your employees, there are several free online personality tests you can take, like this one.

What Am I?

I once took this test, and my four letter classification came back as an ENTJ.  According to the Myers Briggs website, that would describe me as: “Frank, decisive, assume leadership readily. Quickly see illogical and inefficient procedures and policies, develop and implement comprehensive systems to solve organizational problems. Enjoy long-term planning and goal setting. Usually well informed, well read, enjoy expanding their knowledge and passing it on to others. Forceful in presenting their ideas.”  I would say that is a fair summary.

The problem is, if I read any of the other 15 classifications on that page, there are elements of each of them, that also apply to me.  Trying to label employees in pre-defined buckets is a nice goal, but it isn’t really all that practical, as people behave differently in different scenarios and can live across categories.  For example, a good manager knows when to manage with an “iron fist” or “kids gloves”, depending on each situation and employee involved.

My Past Experience as a Candidate?

Several years ago, based on my personality test results, a large company that was hiring said my entrepreneurial skills were “off the charts” compared to their current employees (e.g., which they perceived as overly willing to take risks).  I didn’t get the job, despite a great personality fit with the team and a perfect skillset for the job.  I couldn’t believe this company was actually making hiring decisions based on personality type, as opposed to who had the best skills to get the job done and help the company hit its goals.  And, in this specific case, it explains why this same company is now teetering on the brink of bankruptcy, as they were not hiring any innovative “out of the box” thinkers that could help pivot them into new directions to help evolve with the times.

My Past Experience as an Employer?

I have never used personality tests in any of my hiring decisions.  To me, as a good CEO, I have my finger on the pulse on the desired culture and needs of the organization.  It is materially more important to hire a person that has the best skillsets for the job, so they can come out of the gate running and help us to achieve our business goals, than it is to have a specific personality type.  And, that strategy has served me well over the years, building several successful companies with great teams along the way.  So, don’t overthink the need for personality tests.  To me, they are a “nice-to-have”, not a “need-to-have”.  For more useful tips on how best to build your startup team and how to build a good business culture, check out these other posts on the topic.

What Are Personality Tests Good For?

Most hiring managers think personality tests are a good predictor of a candidate’s future job performance or fit within the organization.  I think that is hog wash for the reasons described above.  But, these tests do have some useful applications.  It gives managers a good sense to the varying styles of their employees, which they can use that information in training or coaching the staff, crafting a conducive work environment, and developing the team.  For example, if you see a young employee with high leadership potential, you can put them on a fast track to being a future manager.  Or, if one employee is a strong leader, pair them with someone who needs leadership development, to help develop their skills.

Concluding Thoughts

Just understand the results of a personality test are simply a data point.  They should not drive decisions!!  You need to stay flexible in your hiring practices, understanding that there are going to be different employee types in the office.  Salespeople are typically going to be your extraverts, and your web developers are going to be your introverts, as an example.  So, it is near impossible to recruit all the same types in one organization.  And, even if you could, why would you?  Different perspectives from different people can help the organization manage the business through a broader lens.  And, for goodness sakes, if you are going to make your current employees take the test, make sure the results become accountably actioned upon, otherwise you are never going to effectively lead to the organizational change you may be desiring.

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[BRACKETOLOGY] Elon Musk Voted Most Admired CEO

Over the last few weeks, CB Insights, the tech market intelligence platform, has been running a weekly poll of their subscribers, in the style of the NCAA Basketball Tournament, to determine which technology executive was most admired.  This week, the "champion" was finally announced, and it was none other than Elon Musk (Tesla and Space X), who handily beat Steve Jobs (Apple) in the final matchup.  A well-deserved winner for all the game-changing businesses Elon is involved with, from electric cars to space travel.  Anand Sanwal, the CEO of CB Insights, was kind enough to let me share the final bracket with all of you, below.

As you can see, this 64 entrepreneur field was loaded with talent, including the founders of many great technology companies, like Alibaba, Twitter, Netflix, Oracle, Airbnb, Dell, Snapchat and Paypal, to name a few.  So, it was really like splitting hairs between all the talent on this list.  What do you think?  Did the voters get this right?  Feel free to share your thoughts in the comments below.

From my perspective, back in 2011, I detailed my entrepreneurial heroes, including my rationale for each one.  That list included Steve Jobs (Apple), Bill Gates (Microsoft), Larry Page/Sergey Brin (Google), Jeff Bezos (Amazon) and Richard Branson (Virgin). All five of these guys made it to the Elite Eight in this tournament, so I very much agree with these results.  I was only missing Elon Musk, Mark Zuckerberg (Facebook) and Marc Benioff (Saleforce), all legends themselves.

The winner, Elon Musk, would have definitely made my list, if I had written my post in 2016.  But, I think I would have had Steve Jobs win this head-to-head battle based on sales results to date.  I think Elon's vision is a lot bigger than Steve's, but the proof is still in the pudding, so to say.  If he is successful in accomplishing his ambitious goals over the next decade, then I could definitely see making Elon the winner down the road.

If the above chart is hard to read, the original post can be found here on the CB Insights website.  If you are not already subscribed to the CB Insights newsletter, subscribe from their home page, as their market research by tech sector is invaluable to the venture community.  Thanks again, Anand, for letting us share this fun piece with our readers.

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Lesson #249: Executive Compensation Benchmarks for Growth-Stage Companies

I am often asked to help Red Rocket clients with recruiting related projects, and one of the questions that comes up is how much should they pay for their various executive positions.  Well, lucky for them (and you), the team at River Cities Capital Funds (RCCF), a growth stage venture capital fund based in Cincinnati, just recently surveyed 19 private growth-stage companies in the technology and healthcare sectors which clearly helps us answer that question.

My colleagues at RCCF were kind enough to let me share their survey results with all of you, below.  And, you can find the full survey results on their website, which includes trend data over time.

Not only does this chart show the base salary for each position, but it also details the typical annual bonuses, commission plans and stock option ownership for every level.  In addition to showing the overall averages (in the big numbers), it also shows the range of the data points from low to high, for each role (in the smaller numbers).  Hopefully, this will be very helpful for all your recruiting efforts.

Obviously, this level of compensation is for venture-capital backed, growth-stage companies (e.g., think $10MM to $100MM in revenues).  So, if you are earlier stage than this, the compensation will be less than what is illustrated above.  And, if you are later stage than this, the compensation will be higher than what is illustrated above.  But, in any case, this is very useful data to benchmark yourself against.

Also, worth mentioning, these salary levels assume there is a stock option plan in place.  So, if you don't currently have a stock option plan, it would be good to consider adding one.  And, if you prefer not to offer stock options, then you are going to have to offer materially higher salaries than are listed above (e.g., 25%-50% more), in order to make up for the less perceived value without the stock options.

So, the real question here is: are you paying your executives a market-rate compensation package?  If not, there are thousands of other companies that are, and you don't want to risk losing your best talent to other companies, or handicap your recruiting efforts in any way. So, right size your executive compensation packages to position your company in the best light compared to others.

11-09-21  ADDENDUM--This analysis from RCCF was updated for 2021.  Here is the newest data.

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A Secret Tactic for Quick Growth: The Roll-up

I recently wrote about how to set your strategies around mergers and acquisitions, but I wanted to go into more detail about one type of M&A strategy: the roll-up. A roll-up is when you plan to buy multiple businesses within one industry. And there are many potential ways to execute a roll-up.

Read the rest of this post in Entrepreneur, which I guest authored this month.

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7 Potential Pitfalls With Mergers and Acquisitions

I have always been a fan of considering mergers & acquisitions as a viable way to more quickly scale your business.  But, this road is not foolproof by any means.  Below are some of things that can go materially wrong with M&A, so do your research and plan accordingly to avoid these known pitfalls.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.