If 198 Pieces of Unsolicited, (Possibly) Ungoogleable Advice for Founders Were Not Enough

windmill

This is my third iteration of the 99 series for founders. You can find the first two here and here. The premise for this series was simple. The best, most insightful, unsuspecting lessons are hidden in the deepest, darkest corners of the internet. Hell, many more are hidden in rooms behind closed doors. The goal of this 99 series is to unveil those. Advice you’ve likely never thought about, and most likely have never heard of.

While you don’t need to read all the below at once, it’s helpful to keep the below at your fingertips for when you do need them. As always, unless the advice is not cited, all advice has been backlinked to its source, in case you want the longer, sometimes more nuanced version.

To make it easier for you, I’ve also pooled the advice in categories, depending on your needs:

  1. Fundraising (22)
  2. Governance (5)
  3. Hiring/Team/Culture (44)
  4. Product/Customers (23)
  5. Competition (1)
  6. Legal (2)
  7. Expenses (1)
  8. Secondaries (1)

P.S. Have I started the next one in the 99 series for founders? Yes, I have. Stay tuned!

Fundraising

1/ “Once you take venture capital, the venture capitalist’s business model is your business model. You’ve got to get liquid at a number that makes sense for them. High valuations are good because you take less dilution. Et Cetera. But the reality is that when you have a high valuation, that starts to eliminate your options. ” — Chris Douvos

2/ The employee option pool is easier to negotiate than asking an investor to take less ownership. The pool at the time of term sheet comes out of founder/team’s equity. If the pool becomes completely allocated post-investment, you need to go back to the board and ask for a larger pool, and everyone (you and VCs) gets diluted then.

3/ Beware of the “senior pari-passu,” which means that that investor gets paid paid back before everyone else on the preference stack AND they get equal footing with all the other investors. The thing to watch out for isn’t necessarily for the mechanics of the term itself, but the fact that if you let one investor have that in this round, every subsequent round, investors then will ask for that as well.

4/ Repeat founders often ask for co-sale right immunity (usually 15%) when putting together term sheets. Co-sale rights are usually provisions investors add in to prevent you, the founder, from liquidating before a liquidity event. The rights dictate the when you want to sell your equity, the investor has first dibs to buy your equity AND if not, they can also sell their equity alongside you. Because there are additional provisions, most buyers may not want to put in all the work to diligence just to have an existing investor buy your equity. And also, if your existing investors are also selling, it sends a negative signal to potential buyers.

5/ If any corporates own more than 19.5% of a company, they have to write you off as a subsidiary of the corporate and report your losses as their losses. So they’re less valuation sensitive and care less for ownership.

6/ You’re likely not the only one in market with your solution. If a competitor raises a massive round, that’s market validation. And not a reason to change your pitch. You should only change your pitch if your customers are opting for your competitor, but not if VCs are talking about your competitor. If VCs ask about your well-funded competitor, say “My customers don’t bring this up with me. But rather they bring up incumbents and this is why we’re tackling this space in full force.”

7/ “Once you have $500k+ raised, spend 2/3 of your time on funds, 1/3 on small checks.” — Ash Rust

8/ Beware of SAFE overhangs. You probably don’t want to raise more than 25% on SAFEs in comparison to the next priced round. — Martin Tobias

9/ Don’t say “The market is so large, there are room for many winners.” To a VC, that’s code for “This founder is getting their ass handed to them by competition.” — Harry Stebbings

10/ If a large number of your employee base do not have the experience of being in a startup, “make a choice about how/when/if to be transparent about the things that are happening (good and bad) and the level of startup experience within the group will be a critical factor in whether the decision to be transparent turns out to be a good one.” — Javier Soltero

11/ To fundraise, even if your last X number of months sucked, you need to show just three months of great growth prior to the fundraise. — Jason Lemkin

12/ Rough benchmarks for enterprise revenue growth for things to be interesting to VCs (— Jason Lemkin):

  • Before $1M ARR, growing 10%-15% a month
  • Around $1M ARR, growing 8%-10% a month or so
  • Around $10M ARR, ideally doubling

13/ “An investor is an employee you can’t fire.” — Vinod Khosla

14/ “Things that break the rules have a bigger threshold to overcome to grab the reader’s attention, but once they do, they tend to have a stronger, and more dedicated following. Blandness tends to get fewer dedicated followers.” — Brandon Sanderson on creative writing, but applies just as well to pitches

15/ “Great worldbuilding with bad characters and a bad plot is an encyclopedia. Great characters and a great plot with bad worldbuilding is still often an excellent book. […] The fact that time turners break the entire universe of Harry Potter wide open does not prevent that from being the strongest book in the entire series.” — Brandon Sanderson on story plots, but also applies to markets and founding teams. Replace worldbuilding with market. Replace characters with team, and plot with product-market fit or founder-market fit.

16/ In all great stories, the protagonist (in the case of a pitch, you) is proactive, capable, and relatable. Your pitch needs to show all three, but at the minimum two out of the three. — Brandon Sanderson

17/ “Data rooms are where fund-raising processes go to die.” Prioritize in-person and live conversations. When your investor asks you for documents, ask for 15 minutes on their calendar so you can “best prepare” the information they want. If they aren’t willing to give you that 15 minutes, you’ve lost the deal already. — Mark Suster

18/ “Second conversation with a serious investor is usually around what are you trying to prove and who are you trying to prove that to.” — Fund III GP

19/ “Set your own agenda or someone else will.” — Melinda Gates

20/ “The ‘raise very little’ strategy only works if you’re in a market that most people believe (incorrectly) is tiny or unimportant. If other people are paying attention, you have to beat the next guy.” — Parker Conrad

21/ Beware of stacking SAFEs. And be sure to model out that you as the founder(s), won’t dip below 50% ownership before the Series A. This is a more common problem than most founders think. Inspired by Itamar Novick.

22/ “Before you send a single email or take your first call, you should have a fully-researched pipeline CRM with a minimum number of qualified target investors.” — Chris Neumann

  • Pre-Seed: 100 – 150 qualified target investors (a mix of angel investors and VCs)
  • Seed: 80 – 100 qualified target investors (mostly VCs)
  • Series A: 60 – 80 qualified target investors (all VCs)
  • Series B: 40 – 60 qualified target investors (all VCs)

Governance

23/ Find your independent board member before shit hits the fan (usually when your investor representation and you the founders disagree). Because by the time you find an independent board member when things go south, your investor will recommend someone who’ll most likely take their side. Board members recommended by VCs usually have long standing relationships with investors and are likely to sit or have sat on other boards with that investor previously. And because they have a longer standing relationship with that VC, they will likely side with the VC when there’s a disagreement.

24/ “Board members can’t make companies but they can destroy companies.” — Brian Chesky

25/ Ask your prospective investors how long they plan to be at their firm. The worst thing that can happen is you bring on a board member and they switch firms after a year, then you’re left with a someone you didn’t pick. It’s probably also a good idea to let the investor have their board seat, contingent on them working at that firm. — Joseph Floyd

26/ Consider incorporating the company in Nevada or Texas, as Delaware courts are becoming more judiciously activist. Especially consider this if you are either politically exposed or you want more leeway and protection as a founder. — Elad Gil

27/ “When you build with other people’s money, you don’t just owe them outcomes—you owe them truth. And selling your cash to a zombie isn’t a strategy. It’s a story you tell yourself to avoid facing the music.” — Lloyed Lobo

Hiring/Team/Culture

28/ “If you raise a lot of money, do a hiring freeze and don’t hire anybody for 90 days. Money’s not going to solve your problems. You are going to solve them.” — Ryan Petersen

29/ “If you had to hire everyone based only on you knowing how good they are at a certain video game, what video game would you pick?” — Patrick O’Shaughnessy. People’s choices can be quite revealing. You can likely ask the same question for any activity/sport/topic of choice.

30/ “I hate surprises. Can you tell me something that might go wrong now so that I’m not surprised when it happens?” — Simon Sinek. A great question on how to ask weaknesses without candidates giving you a non-answer.

31/ Beware of candidates who can’t stick to a job for at least 18 months. — Jason Lemkin.

32/ Beware of candidates who love what’s on their resume. You want to be sure you’d hire them even if they didn’t have those logos/titles. — Jason Lemkin.

33/ Beware of candidates who don’t have good reasons to leave their last job. Or any job for that matter. Also watch out for candidates that leave because of salary. — Jason Lemkin.

34/ As soon as you raise capital, you should move out of a coworking space. Because as long as you are there, you cannot shape your company’s culture when the culture of the rest of the coworking space is more prevalent. — A VC who was the first institutional check into 5+ unicorns

35/ “First time founders brag about how many employees they have. Second time founders brag about how few employees they have.” — Dan Siroker.

36/ 20 years of experience is more impressive than 20 one-year experiences for deeply technical problems.

37/ 20 one-year experiences is more impressive than 20 years of experience for cultural (consumer) problems.

38/ Great founders don’t delegate understanding. Senior execs aren’t hired until founders themselves prove out the playbook.

39/ Inspired by Marc Randolph. Set boundaries around your work. Ask yourself, do you want to be starting your 7th startup and their 7th wife/husband? If not, be uncompromising with boundaries around work and life. Usually, I see most founders not have that versus most tech employees, who set boundaries almost in the opposite direction.

40/ “My two rules of thumb for CEOs (and all leaders) are:

  • ‘if you feel like a broken record, you’re probably doing something right’ and 
  • ‘always craft your comms for the person who just started this week.'” — Molly Graham

41/ At Starbucks, no matter what seniority you are, every employee has lowercase titles. And it isn’t a typo.

42/ If you don’t know how to hire a 10/10 CTO looks like, find a world-class CTO then have them help you interview CTO candidates. It’s important to nail this right in the beginning no matter how long that takes. — Jason Lemkin

43/ “People duck as a natural reflex when something is hurled at them. Similarly, the excellence reflex is a natural reaction to fix something that isn’t right, or to improve something that could be better. The excellence reflex is rooted in instinct and upbringing, and then constantly honed through awareness, caring, and practice. The overarching concern to do the right thing well is something we can’t train for. Either it’s there or it isn’t. So we need to train how to hire for it.” — Danny Meyer

44/ Prioritize references over interviewing when hiring. “Executives have more experience bullshitting you than you have experience detecting their bullshit. So it’s like an asymmetric game where you’re a white belt fighting a black belt and they’re just going to punch you in the face repeatedly.” — Brian Chesky

45/ At the end of a candidate interview process, try to convince them out of joining the company. If you only paint them the rosy picture of joining, even if they join, they’ll joined disillusioned and with expectations that this job will be a country club, which it shouldn’t be.

46/ One of the best job ads out there by Ernest Shackleton, a 19th/20th century Antarctic explorer: “Men wanted for hazardous journey, small wages, bitter cold, long months of complete darkness, constant danger, safe return doubtful, honor and recognition in case of success.”

47/ “The health of an organization is the relationship between engineering and marketing. Or in enterprise, the relationship between engineering and sales.” — Brian Chesky

48/ “Great leadership is presence, not absence.” — Brian Chesky

49/ “I want the guy who understands his limitations instead of the guy who doesn’t. On the other hand, I’ve learned something terribly important in life. I learned that from Howard Owens. And you know what he used to say? Never underestimate the man who overestimates himself.” — Charlie Munger

50/ “If you pay great people internally, you can push back on the external fees. If you don’t pay great people internally, then you’re a price taker.” — Ashby Monk

51/ “Expect 60% of your VPs to work out — and that’s if you do it right.” — Dev Ittycheria

52/ Be generous with startup equity for your first 10 employees, “as much as leaving 30% of the pool to non-founders.” Be willing to give your early engineers 3-5% of equity, as opposed to only 50-100 basis points. — Vinod Khosla

53/ “A company becomes the people it hires. […] Experience has shown me that successful startups seldom follow their original plans. The early team not only determines how the usual risks are handled but also evolves the plans to better utilize their opportunities and to address and redefine their risks continuously.” — Vinod Khosla

54/ “I often tell pensions you should pay people at the 49th percentile. So, just a bit less than average. So that the people going and working there also share the mission. They love the mission ‘cause that actually is, in my experience, the magic of the culture in these organizations that you don’t want to lose.” — Ashby Monk

55/ “Innovation everywhere, but especially in the land of pensions, endowments, and foundations, is a function of courage and crisis.” — Ashby Monk

56/ “You stay obstinate about your vision; you stay really flexible about your tactics. […] Nobody ever got to Mount Everest by charting a straight path to the peak.” — Vinod Khosla

57/ Questions to ask a candidate by Graham Duncan:

  • What criteria would you use to hire someone to do this job if you were in my seat?
  • How would your spouse or sibling describe you with ten adjectives?
  • I think we’re aligned in wanting this to be a good fit, you don’t want us to counsel you out in six months and neither do we. Let’s take the perspective of ourselves in six months and it didn’t work.  What’s your best guess of what was going on that made it not work?
  • What are the names of your last five managers, and how would they each rate your overall performance on a 1-100?
  • What are you most torn about right now in your professional life?
  • How did you prepare for this interview?
  • How do you feel this interview is going?

58/ Empower your entire team to be owners in the success of your company. “Take ownership and don’t give your project a chance to fail. Dumping your bottleneck on someone and then just walking away until it’s done is lazy and it gives room for error and I want you to have a mindset that God himself couldn’t stop you from making this video on time. Check. In. Daily. Leave. No. Room. For. Error.” — Jimmy Donaldson “Mr. Beast”

59/ “CEOs are pinch hitters. We should be working on the things that nobody else can or nobody else is.” — Jensen Huang

60/ It’s only after you’ve seen excellence first hand do you no longer need to outsource the recognition of excellence to others (brands, titles, other references).

61/ “When you’re speaking with backchannel references, you know that some of these are also mentors to the candidate, and accordingly will have influence. They’ll likely call the candidate right after your call anyway to tell them how you’re thinking about them. So ask the pointed questions you need to, but then take 10 mins at the end to also tell this person what you’re building, why it could be a special company, the momentum you have in the market and why you’re particularly excited about the candidate for this role. Get the reference excited about this opportunity for the candidate.” — Nakul Mandan

62/ “Every meeting with a great candidate is a buy-and-sell meeting, and you want to build their excitement about you to its peak right before you make the offer. Making the offer too early—before they’re fully sold—can be just as bad as losing momentum by moving too slow on someone you know you want.” — Samantha Price

63/ On co-founders being in the same boat with no Plan B… “We actually wrote this in the shareholder’s agreement and it lived there all the way until the IPO. If one of us took another job or a side hustle or took any income from any other source, we should have to give up our shares. We wanted to be fully committed. If we’re going to fail, we’re not going to fail for lack of effort.” — Olivier Bernhard

64/ “You have made a mis-hire if your Customer Success leader doesn’t understand the pains, needs, and desires of your customers as well as you do within 90 days.” — John Gleeson

65/ Ask a candidate to explain a technical challenge and to talk through how they’d approach it. Then ask them to think through how they’d do it again – but in half the time.” — Keller Rinaudo Cliffton / Sarah Guo

66/ “Your org chart either accelerates or impedes your velocity. Conway’s Law inevitably shapes output—teams structured for pace will produce systems designed for pace.” — Sarah Guo

67/ “Just look at ARR per Employee. It’s the canary in the unicorn coal mine.” — Lloyed Lobo

68/ While your co-founders should excel in areas you lack and love growing further on that wavelength, they must also at some point in their career want to grow in the area you excel in. Otherwise, they’ll never truly appreciate the work you do. And unspoken expectations lead to quiet resentments.

69/ “I find most meetings are best scheduled for 15-20 minutes, or 2 hours.  The default of 1 hour is usually wrong, and leads to a lot of wasted time.” — Sam Altman

70/ “Strategy is choosing what not to do.” — Peter Rahal

71/ When hiring talent, ask yourself: Are this candidate’s best days ahead of her or behind her?

72/ The best way to slow a project down is to add more people to it.

73/ “Never delegate understanding.” — Charles and Ray Eames

74/ There’s this great line in a book I was recently gifted by a founder. “There is only one boss — the customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.”

75/ A community or 1000 true fans built without big brands and logos is far more impressive than a community built by leveraging someone else’s brands.

76/ If your value prop is unique, you should be a price setter not a price taker, meaning your gross margins should be really good.
A compelling value prop is a comment on high operating margins. You shouldn’t need to spend a lot on sales and marketing. So the metrics to highlight would be good new ARR/S&M, LTV:CAC ratios, payback periods, or percent of organic to paid growth. — Pat Grady

77/ “If we don’t create the thing that kills Facebook, someone else will.” — Mark Zuckerberg, via a red book titled Facebook Was Not Originally Created to Be a Company, given to every employee pre-IPO

78/ The best sales people are often those who communicate the most with the engineers and product team. They tend to understand the product the best. Rule of thumb should be 80% inside, 20% outside. — Former founder with a 9-figure exit

79/ “Concentration of force is the first principal strategy. Spreading yourself too thin means not concentrating resources on the sales you could win because you are spreading time on lower quality prospects. Doing 90% of what it takes to win doesn’t result in 90% of the revenue, it results in zero. You must pick the battles you can win and win the battles you pick.” — Rick Page

80/ “One of our clients said this about a large defense contractor with multiple subsidiaries: ‘having business at one business unit not only doesn’t help me at the next one, it actually hurt me. They hate each other so much that if one business unit is for me, the other ones are against me. But they are all united in one value: they hate corporate. So the potential for working my way to the corporate offices and coming down as their worldwide standard is impossible in an account like this.” — Rick Page

81/ “Pain doesn’t come from the business problem, it comes from the political embarrassment of the business problem. If the pain or lost opportunity is not visible, then it’s not embarrassing and it will not drive business buying activity to a close.” — Rick Page

82/ “Mr. Prospect, we’ve announced a 6% price increase. We’d hate to see you buy the same proposal later at a higher price, so we really need to get this business in by the end of the quarter to secure this price. — Not only is this technique predictable, but after months of building value for your solution, you have now commoditized yourself. You have turned it from value to price on order to close business at the end of the quarter. Once you have offered a discount, you have announced what kind of vendor you are and the only question now is the price. Let the games begin.” — Rick Page

83/ “You must refocus off the imagined political benefit of a lower price, and on the longer term benefits of the overall project. ‘Mr. Prospect, how are you measured and what you will be remembered for three years from now won’t be the price, it will be the success of the project. If this goes well, the cost will be a detail. If the project goes poorly, no one will say ‘well at least we got a bargain.”” — Rick Page

84/ “Try not to take no from a person who can’t say yes.” — Rick Page

85/ Stacking the bricks, a Steve Jobs’ concept. If you have a pile of bricks and lay them on the ground, then no one will notice the ground. If you stack them up vertically, you create a tower; and everyone will notice the tower. Consider this when you have product features, launches and fixes.

86/ As of Q4 2024, it takes about 70 days to close a $100K contract for enterprise customers. Use that as your benchmark. If you’re faster, brag about it. If you’re slower than that, figure out how to close faster. — Gong State of Revenue Growth 2025 report

87/ Beware of “annual curiosity revenue.” “AI companies with quick early ARR growth can lead to false positives as many are seeing massive churn rates.” — Samir Kaji

88/ Your job is to get to innovation retention before your incumbents get to innovation.

89/ If you didn’t help create the proposal with your customer, you’ve already lost.

90/ People don’t change when they’ve made a mistake. People change when there’s a public embarrassment of them making a mistake.

91/ Know your customers intimately. Go visit your customers as often as you can. In fact, get as many passes / office keys to their offices as possible, and spend time with them.

92/ “Every other week, we have a customer join for the first 30 minutes of our management team meeting: they share their candid feedback, and ~40 leaders from across Stripe listen. Even though we already have a lot of customer feedback mechanisms, it somehow always spurs new thoughts and investigations.” — Patrick Collison

93/ “I see a lot of b2b startups moving to multiyear pricing from monthly or annual. I think this is usually a bad idea. It hides customer delight issues. It lengthens sales cycles. Overall, it just reduces the signal startups need.” — Brian Halligan

94/ Customers will still highly rate your customer service even if they didn’t get what they wanted if you show you care. That you care for their plight, and you really try to help them get what they want. — Simon Sinek

Competition

95/ “When you get outreach from multiple VC associates out of nowhere, your competitor is out raising and they’re just doing their homework.” — Siqi Chen

96/ “If you’re selling the business, tell as few people as possible and do everything you can to make sure past employees or former business associates do not find out.” Beware of moths who can start lawsuits. — Sammy Abdullah

97/ When you’re working with boutique investment banks, to protect yourself in case the banker sues when you choose to go with a different buyer… “Make sure the banker contract says they only get paid on intros they make directly and have a 6 month tail. Terminate any banker agreement as soon as they’re no longer working and the process is over; do not let these agreements linger.” — Sammy Abdullah

98/ “Never buy a SaaS product owned by private equity unless you have to. Main exception: if founder is still CEO. Why: Impossible to cancel, Price increases out of the blue, Lose any real customer success, Innovation slows down or even ends, Support usually terrible” — Jason Lemkin

99/ If you’re planning to sell founder secondaries, beware of signaling risk. Sometimes, you do have a major life event that needs capital (i.e. buying a home, having a baby, hospital bills, etc.). If you are to sell, don’t sell until the Series B. “And even then I’d suggest titrating up… 2% at A, 5% at B, 10% at >=C.” — Hari Raghavan

Photo by Jonny Gios on Unsplash


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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

Referencing Excellence

magnifying glass, excellence

Recently, I’ve had a lot of conversations with LPs and GPs on excellence. Can someone who has never seen and experienced excellence capable of recognizing it? The context here is that we’re seeing a lot of emerging managers come out of the woodwork. Many of which don’t come from the same classically celebrated institutions that the world is used to seeing. And even if they were, they were in a much later vintage. For instance, a Google employee who joined in 2024 is very different from a Google employee in 2003.

And there seem to be two schools of thought:

  1. No. Only someone who is fortunate enough to be around excellent people in an excellent environment can recognize excellence in others. Because they know just how much one needs to do to get there. Excellence recognizes excellence. So there’s this defaulting to logos and brands that are known concentrations of excellence. Unicorns. Top institutions. Olympians. Delta Force. Green Beret. Three Michelin-starred restaurants.
  2. Yes. But someone must constantly stretch their own definition of excellence and reset their standards each time they experience something more than their most excellent. The rose growing in concrete. The rate of iteration and growth matters for more. Or as Aram Verdiyan once put it to me, “distance travelled.”

Quite possibly, a chicken and egg problem. Do excellent environments come first or people who are born excellent and subsequently create the environment around themselves?

It’s a question many investors try to answer. The lowest hanging fruit is the outsourcing of excellence recognition to know excellent institutions and known excellent investors. The ex-Sequoia spinout. Ex-KKR. Ex-Palantir. First engineer at Uber. Or hell, they’re backed by Benchmark. Or anchored by PRINCO.

It’s lazy thinking. The same is true for VC investors and LP investors. As emerging manager LPs (and pre-seed investors), we’re paid to do the work. Not paid to have others do the work for us. We’re paid to understand the first principles of excellent environments. To dig where no others are willing to dig.

To use an extreme example, a basketball court can make Kobe Bryant an A-player, but Thomas Keller look like a C-player. Similarly, a kitchen will make Thomas Keller an A-player, but Ariana Huffington a C-player. Environments matter.

When assessing environments and doing references, that’s something that you need to be aware of. What does the underlying environment need to have to make the person you’re diligencing an A-player? Is the game they have willingly chosen to play and knowledgeable enough to play have the optimal environment that will allow them to be an A-player? Is the institution they’re building themselves conducive to elicit the A out of the individual?

Ideally, is there evidence prior to the founding of their own firm that has allowed this player to shine? Why or why not?

Did they have a manager that pushed them to excel? Was there a culture that allowed them to shine? Were they given the trust and resources to thrive?

And so, that leads us to references. I want to preface with two comments first.

One, as an investor, you will NEVER get to 100% conviction on an investment. It’s one of the few superlatives I ever use. Yes, you will never. Unless you are the person themselves, you will never understand 100% about a person. And naturally, you will never get to 100% conviction because there will always be an asymmetry of information.

Two, so… your goal should not be to get to total symmetry of information, nor 100% conviction. Instead, your goal is to understand enough about an opportunity so that you can sufficiently de-risk the portfolio. What that means is that when you meet a fund manager (or a founder, for that matter) across 1-2 meetings, you write down all the risk factors you can think of about the investment. You can call it elephants in the room, or red or yellow flags. Tomato. Tomahto.

Then, rank them all. Yes, every single one. From most important to least important. Then, somewhere on that list — and yes, this is deeply subjective — you draw a line. A line that defines your comfort level with an investment. The minimum number of risks you can tolerate before making an investment decision. For some, say those investing in early stage venture or in Fund I or II managers, that minimum number will be pretty high. For others, those whose job is to stay rich, not get rich, that minimum tolerance will be quite low. And that’s okay.

There’s a great line my partner once told me. You like, because; you love, despite. In many ways, the art of investing in a risky asset class is understanding your tolerance. What are you willing to love, despite?

The purpose of diligence, thereinafter, is to de-risk as many of your outstanding questions till you are ready to pull the trigger.

In regards to references, before you go further in this blogpost, I would highly recommend Graham Duncan’s essay “What’s going on here, with this human?” My buddy, Sam, also a brilliant investor, was the person who first shared it with me. And I’m a firm believer that this essay should be in everyone’s reference starter pack. Whether you’re an LP diligencing GPs. Or a VC doing references on founders. Or a hiring manager looking to hire your next team member.

Okay, let’s get numbers out of the way. Depending on the volume of investments you have to make, the numbers will vary. The general consensus is that one or two is too little, especially if it’s a senior hire or a major investment. Kelli Fontaine’s 40 reference calls may also be on the more extreme side of things. Anecdotally, it seems most investors I know make between five and ten reference calls. Again, not a hard nor fast rule.

That said, there is often no incentive for someone to tell a stranger bad things about someone who supported them for a long time. It’s why most LPs fail to get honest references because they haven’t established rapport and trust with a founder over time. Oftentimes, even in the moment. So, the general rule of thumb is that you need to keep making reference calls until you get a dissenting opinion. Sometimes, that’s the third call. Other times, is the 23rd call. If you’ve done all the reference calls, and you still haven’t heard from others why you shouldn’t invest, then you haven’t done enough (or done it right).

A self-proclaimed coffee snob once told me the best coffee shops are rated three out of five stars. “Barely any 2-4 stars. But a lot of 5-stars and a lot of 1-stars. The latter complaining about the baristas or owner being mean.” I’m not sure it’s the best analogy, but the way I think about references is I’m trying to get to the ultimate 3-star review. One that can highlight all the things that make that person great, but also understand the risks, the in’s and out’s, of working with said person.

For me, great references require trust and delivery.

  1. Establishing trust and rapport. What you share with me will never find its way back to the person I am calling about.
  2. Is the reference themselves legit? Is this person the best in the world at what they do?
  3. How well does this reference know said person? Have they seen this person at both their highs and lows? At their best and at their worst.
  4. The finer details, the possible risks, and how have they mitigated them in the past.

I will also note that off-list references are usually much more powerful than on-list references. Especially if they don’t know you’re doing diligence on the person you’re doing diligence on. But on-list references are useful to understand who the GP keeps around themselves. After all, you are the average of the people you hang out with most. As the one doing the reference checks, I try to get to a quick answer of whether I think the reference themselves is world-class or not.

While I don’t necessarily have a template or a default list of questions I ask every reference, I do have a few that I love revisiting to set the stage.

Also, the paradox of sharing the questions I ask is simply that I may never be able to use these questions again in the future. That said, references are defined by the follow-up questions. Rarely, if ever, on the initial question. There’s only so much you can glean from the pre-rehearsed version.

So, in good faith, here are a few:

  • If I told you this person was [X], how surprised would you be? Now there are two scenarios with what I say in [X]. The first is I pick a career that is the obvious “next step” if I were to only look at the resume. Oftentimes, if a person’s been an engineer their entire life, the next step would be being an engineering executive, rather than starting a fund. So, I often discount those who wouldn’t find it surprising. Those that say it is surprising, I ask why. The second scenario is where I pick a job that based on what I know about the GP in conversations is one I think best suits their skillset (that’s not running their own fund), and see how people react. The rationale as to why it’s surprising or not, again, is what’s interesting, not the initial “surprising/not surprising” answer itself.
  • If you were invited to this person’s wedding, which table do you think you’d be sitting at?
  • Have you ever met their spouse? How would you describe their spouse?
  • Who’s the best person in the world at X? Pick a strength that you think the person you’re doing a reference on has. See what the reference says. Ask why the person they thought of first is the best person in the world at it. If the reference doesn’t mention the GP I’m diligencing, then I stop to consider why.
  • What are three adjectives you would use to describe your sibling? I’ve written about my rationale for this question before, so I won’t elaborate too much here. Simply, that when most people describe someone else, they describe the other person comparatively to themselves. If I say Sarah is smart, I believe Sarah is smarter than I am. Or… if I say Billy is curious, I believe Billy is more curious than I am.
  • If I said that this person joined a new company, knowing nothing about this new company, what would your first reaction be?
    • Congratulate this person on joining!
    • Do a quick Google or LinkedIn search about the company.
    • As an angel, consider investing in the company (again, knowing nothing else)
  • How would you rate this person with regards to X, out of 10? What would get this person to a 10? Out of curiosity, who’s a 10 in your mind?
  • If you were to hire someone under this person, what qualities would you look for?
  • If you were to reach out to this person, what do you typically reach out about?
  • I hate surprises. Is there something I should know now about this person so that I won’t be surprised later?

    Photo by Shane Aldendorff on Unsplash


    Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!


    The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

    DGQ 24: Guessing a number between 1 and 100

    lock, numbers

    Eight years back, at least at the time of publishing this blogpost, Steve Ballmer, former CEO of Microsoft, shared one of his favorite interview questions.

    “I’m thinking of a number between 1 and 100. You can guess. After each guess, I’ll tell you whether high or low. You get it the first guess, I give you five bucks. [Second guess], four bucks. Three. Two. One. Zero. You pay me a buck. You pay me two; you pay me three… And the question is, do you want to play or not? What’s your answer?”

    While he didn’t go too much in depth on all the answers he’s gotten to it over the years, I imagine different people would have given different proposals on how the game might be played. Of course, the classic engineer is likely to approach it was as an expected value problem.

    Most people will lose money. There are far more numbers to guess on which one loses than wins. The question really comes down to… do you know the odds of the game you play?

    I find it interesting as an investor to hypothetically ask to founders and/or GPs. That said, I never did. But equally so, I usually spend the first conversation with an entrepreneur (whether the product be software or a fund model) trying to understand a person’s motivations. And, if they understand the rules of the game.

    Those who don’t understand the rules will often jump head first in, and take care of the consequences later. Asking for forgiveness than for permission. An attitude that is more excusable in a startup founder than a fund manager.

    Those who do understand will take a more measured approach. It’s interesting how little some people understand the game they’re playing. Be it in a two-year financial projection that encapsulates all their assumptions, or a portfolio construction model to understand the enterprise value to return the fund 3X.

    For the former, it’s less so of how accurate a financial projection slide is. Hell, your guess is as good as mine. But I always ask founders to unpack it to understand how they’re thinking about the future as a function of their reality today.

    For the latter, it’s to understand the true power of the power law, no pun intended. For instance, if you have a $10M fund, writing 20 checks of $500K for 5% ownership. Obviously, I’m assuming a bunch of things for the sake of keeping the math simple. No fees, no recycling, no reserves, and so on. You need to return $50M to 5X your fund. Accounting for 80% dilution, you’ll own 1% on exit. So you need $5B in enterprise value. Given the power law, one of out of the 20 companies should get to at least $3-4B in exit value.

    Then again, those who understand the game too well will never take the risk necessary for serendipity to stick.

    There’s an interesting blogpost an LP shared with me for my blogpost on evergreen content that VCs and LPs consume. A piece written by the legendary Graham Duncan. “The Playing Field.” A piece I highly recommend reading, even if to shape your own thinking about how the game you play evolves over time. In it, a line worth underscoring.

    “[I]t’s the way you learn to play the cards you’ve been dealt, rather than the hand itself, that determines the worth of your participation in the game.”

    Photo by Towfiqu barbhuiya on Unsplash


    The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.


    Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!


    The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.