Vista Equity Partners have been one of the more successful private equity firms of the 21st Century, making early and accurate bets in many startups that proved to be very profitable. Its CEO, Robert Smith, the richest African-American in the world, believes that the success of the firm boils down to its ability to find the right companies to invest in. Of course, that sounds like a fairly banal truth. But Vista looks like it takes that maxim very seriously. To the extent that every founder of a company that they are toying with the idea of putting money in, needs to write the equivalent of an “entrance exam” and then get good enough results for Vista to even consider putting any money in their company.
Now, such entrance tests are fairly common for many levels of employment, especially at junior and middle management levels. Bank officer exams, for example, in an Indian context. There are even many companies who have something similar as part of their hiring process for senior executives as well. But when such a test is done for measuring your skills as an entrepreneur, it does raise eyebrows. And brings forth the obvious question — is the set of skills required of a person to head a startup so well-defined that a standardised test can be used to measure it? I can hear most entrepreneurs scream a loud no, but their skin in this game is a bit too much to expect an unbiased response to this question.
Vista’s test for entrepreneurs reportedly measures technical, social, analytical, and leadership skills. All skills that I do not doubt that every entrepreneur must have by the bucketful. And given Vista’s success, I am sure that the test does a good job of measuring and ranking entrepreneurs for these skills. There are examples of tests like this one being successfully used in other fields of human endeavour. The Mercury Seven, the first set of seven individuals who were handpicked by NASA to be sent to space, were all people who came out tops in an entrance test that was not too dissimilar. And surely, running a startup does have many parallels to being the captain of a tiny tin can in space. Similarly, quarterbacks, who are arguably the on-field CEOs of their football teams, are expected to have high scores in something called the Wonderlic Test, that measures their problem-solving and decision-making skills.
However, if this sort of an entrance exam becomes standard practice across many venture capital and private equity firms, I know exactly what will happen, especially in India. Just like you have such institutes for JEE, CAT, and other such tests, coaching centres will mushroom across the length and breadth of the country for these exams too. We Indians are excellent at gaming systems such as these, and we will have an assembly line of “entrepreneurs” who are brilliant at cracking exams such as these, but probably not at actually running a company successfully.
The author heads product at a mid-sized startup in the real estate space
