Angel investor Adam Quinton talks hiring, bias, and one surprising conclusion
with Adam Quinton // @adamquinton
Part three: An angel investor faces the future
Adam Quinton is a former investment banker, current Adjunct Professor at Columbia, and angel investor. We’re thrilled that he was able to sit down with our staff sociologist Liz Kofman for a discussion on hiring and bias so wide-ranging, we are publishing it in three parts!
LK: In earlier sections of this interview, we looked at the pitch as the ultimate job interview, and challenged the stereotype that women are more risk-averse than men: what if they are just more risk aware? In this final segment, we explore whether relying on pattern recognition is just too deeply ingrained to be overcome in the high-stakes world of angel investing.
AQ: You’re talking about an incredibly uncertain future when it comes to angel investing and it it is hard not to rely on those superficially comforting signposts – the things in an entrepreneur that remind you of the successful startup founders who have gone before, and of course yourself! And there’s other things that play into it as well. For example, in interviewing we look at skillsets. Having worked at Google is not a skill. It’s a stamp on your career passport. And yet there’s a tendency for investors to look at things like “did Liz work at Google?” or “did Adam go to Stanford?” and that checks the box enough to move you more quickly through the process.
The additional piece of the discussion is that I think investors often have a problem that is very equivalent to those of the recruiter who is deluged with resumes and has to sort through them very quickly. Most investors and VC funds will tell you that they at least skim through over a hundred pitch decks for every one that they invest in. So in the same way that in the recruiter context I’m looking to fill a single position but I’ve got a couple hundred resumes—and in the investor context you’re looking at hundreds but just investing in a handful each year—you’re forced to make judgments on very superficial assessment of information in front of you.That accentuates the tendency for bias to come into play because that very bias is the constructive way your brain makes your life easier by jumping to conclusions without blowing your brains out!
You talk about all the biases that investors bring to the table when they’re choosing investments, but I think there is a tendency for a lot of bias to come into play at the beginning of the process—before the “interviews” even begin. When you’re looking through all those pitches and decks before someone’s coming in from a meeting, and you’re prioritizing that one team that had an engineer from Stanford—that blink-level kind of initial assessment is where a huge amount of the gatekeeping bias, albeit mostly unconscious of course, happens.
LK: What if you did try to approach it the way we approach structured interviews and assign importance of criteria ahead of time?
AQ: Well yes, precommitment to a set of criteria, research has shown, makes a huge difference in tying you to what you want rather than just justifying after the fact what you decided that you wanted. That can clearly work well in the recruiting context where there’s explicit criteria applied to a specific role. But I keep coming back to this fundamental point that a startup is doing something that’s never been done before. So it’s hard to make that explicit list.
And this is just my own experience, but what I’ve seen is that if you go back to this thought that the key people at a startup are extremely important, often the individual doesn’t necessarily meet all of the criteria. Say you write down a list of criteria for the ideal founder, and then Liz walks in the door and Adam walks in the door and they don’t necessarily check all those boxes, but they might check one in a way that’s truly exceptional. A specific example would be the company I’m invested in where the founder is incredibly creative, but actually isn’t that strong of a business person. So other things being equal, they may not be the perfect CEO founder matched against the checklist, but they are so off the scale in another thing that really matters. And if that person is conscious of where they have a short coming and have or will bring in other people to offset it, will I really reject the exceptional person from my investment short list because they don’t match perfectly against the ideal checklist? So you can’t necessarily precommit to what 10 criteria say are most important, because someone may over perform on some that that overwhelms the lack of capability in others. And, in any event, the value of those 10 things change every time which makes the whole assessment even harder!
LK: That makes sense that you wouldn’t be able to stick to it 100% of the time, though you could at least collect the data and see overtime: have your gut instincts been correct? There’s a really high failure rate of startups. Does that maybe have to do with how much investors rely on “gut level” instincts that are the difference between who gets those millions of dollars or not?
AQ: I think if you’re working in an organization that has a big enough sample size and applies that rigor you could reach a meaningful conclusion to inform your decisions. There’s 300,000 angel investors in the US and they’re not making that many investments individually each year. They typically have some other job; it’s not what they do all day. So for those folks this is all sort of interesting hypothetically but not something most could implement robustly in practice. Me included frankly.
In contrast to that, a reasonably big VC fund with decent volume of transactions and a high volume of incoming requests in applications they attract—they can and should overtime start to identify trends. I think a great example of that is First Round on the east coast.
Their companies with a female founders materially outperformed those with just male founders.
They’ve been going for 10 years, they’re very active early stage investor and they basically did an analysis of what they had learned in 10 years across a very big sample size of 600 companies and 600 founders; they dived into the data and came up with 10 conclusions … which they very kindly made public! Interestingly number one of ten findings was that their companies with a female founders materially outperformed those with just male founders. To be exact companies with at least one female founder performed 63% better than their investments with all male founding teams. If you look at their top ten investments of all time based on value creation three of those have at least one female founder (which is way more than the average).
Liz: Research for the win! Thank you, Adam, for sharing your thoughts with us.