Team Talks II: Founder reference calls
How do great investors run founder reference calls?
Team Talks launched last year as an intimate discussion series on founder analysis at the earliest stages of investing.
Our second session, over breakfast at Form HQ, laid the foundation for this edition, focusing on one of the lesser discussed elements of team diligence: founder reference calls.
Most VCs do reference calls. From my conversations, few feel like they do them very well. I’ve read everything I could find on the topic and spoken to dozens of investors. Here are some of the more interesting – and less commonly discussed – ideas that have shaped how I (and maybe you) will approach founder reference calls. At the end of the piece, I’ll share our overall approach, technique, and the killer questions we ask to cut through the niceties.
Let’s get into it.
Triangulation
a16z describe reference calls as a triangulation process – compounding knowledge to sharpen insights between conversations. One example of this is asking referees to retell specific stories a founder has already shared with you. This not only verifies events, but also reveals how closely the founder’s self-image aligns with how others experience them.
Lightspeed prioritise targeting a range of relationships (peer, direct report, manager) to get perspectives from different viewpoints. They also recommend having more than one investor join each call, for a similar reason. Taking the call with another person can surface different interpretations and avoid missed nuance. Crucially, comparing perspectives early increases the chances of running a better second (and third, etc) reference call, instead of repeating the same script between calls.
Network
It’s not just about what’s said during a reference – Mythos Ventures argue that the quality of the referee is a signal in and of itself. Preferential attachment theory, also known as the Matthew Effect, suggests that success disproportionately accrues to those already in successful networks. That is to say, your view of the person providing a reference may be a useful reflection on the founder themself.
To backchannel or not to backchannel?
Not all references are created equal. Founders tend to prep and provide 1-2 curated referees, so a couple of off-book references can have a multiplier effect on an investor’s context, insight and conviction. But how should funds think about sourcing their own “off book” references: Essential? Intrusive?
Investors take different approaches here - my preferred one is to inform the founder at the beginning of the process that your diligence includes reaching out to mutual connections. We now include this in our how we invest page, which we share with founders ahead of a first meeting. It seems the safest and most appropriate approach, and the clarity builds trust.
“I actually now accept LinkedIn connection requests based on whether I know the person well enough to ask them for a reference.”
Roy Bahat, Bloomberg Beta – an approach I now mirror.
When to start
This is where my view most diverged from others. I’d prefer to start contacting mutuals for informal references as soon as a startup progresses past a first call. If it’s true that belief in the founder is the most important part of an investor’s conviction, then finding out as much as possible, as early as possible, strikes me as the most effective route to good decision-making. I also think it decreases the likelihood of skipping or soft-balling references in the frenzy of securing access to a deal if it becomes competitive and time is tight.
Others disagreed for a few reasons: too arduous; too intrusive; you should rely on your own view of the founder at the beginning. Doing references earlier in the process does increase the likelihood of “wasted” time, which I’m personally comfortable with (put it down as an investment in honing the skill and broadening my network).
That said, I do find founder reference calls most effective when you can build trust with the referee, one component of which is how far through the process you are with the founder. This gives them confidence you’re already building conviction, and can increase the likelihood of them sharing honest feedback.
Most funds I spoke with only do reference calls at the end of the process, as part of confirmatory diligence. Fred Wilson of USV advocates for starting them around halfway through the process, which seems an appropriate balance.
Background checks
Still vanishingly rare. Will agentic tools make such services more accessible, bringing them more into frame of mind for investors? I doubt it at the early stages; our diligence includes a DBS check, and even this seems unusual enough among investors.
Walking away
Most investors considered it highly unlikely that they would walk away from an investment on the back of a reference call – given many only undertake them post-commitment. We are similarly inclined when it comes to official, “on-book” references, but many off-book references have influenced our decision to invest - in particular when a new, serious issue is raised about the team.
Though these don’t always mean we walk away, it strikes me as the outcome of a process well-run when references create friction or shift the trajectory of conviction.
Don’t be afraid to double click
Sitting comfortably with silence, not overtalking, feeling confident to repeat or rephrase a question if you didn’t get what you need – these seem to be the skills of great reference takers.
There are a few great resources on what to ask during a founder ref. call (and a Reading List below). Here’s an overview of the questions we ask on founder reference calls. Green ticks ✅ were part of our process before, New 🆕 are additions from this review of how the best funds conduct theirs.
Introduce ourselves and assure them that the call is fully confidential, and that we are building our own conviction, so the contents of this call alone won’t derail our decision to invest ✅
How long have you known the founder and what’s the nature of your relationship? ✅
Where do you think the founder spikes? ✅
Addition if need to double down: Can you share an experience where the founder really blew your mind? 🆕
Addition if need to double down: What was an experience where you saw the candidate grow? 🆕
Where do you think the founder was underweight when you worked with / knew them? ✅
Additions if need to double down:
We received feedback from another referee that… ✅
Do you recall any feedback from a performance review? 🆕
12 months from now I call you and say the founder quit or was removed from their position. What would you expect the reason to have been? 🆕
If I were hiring a partner for them, what skills would I want that person to have to complement them? 🆕
The founder mentioned one of the things they struggled with is […]. Do you recall any times this caused any minor issues? 🆕
What do you think excites or motivates them? ✅
Can you describe the founder’s leadership style? ✅
Do you think your opinion of them varies in any way from their opinion of themself? ✅
What kind of support does a founder like them need? ✅
Are there any ethical or behaviour issues we should be aware of? ✅
Is there anything I should have asked or that you expected us to discuss? ✅
Addition: How did the founder communicate when things weren’t going well? 🆕
Addition: Can you tell me about a time the founder didn’t give up? 🆕
Addition: What happens when things go wrong – what type of role does the founder play? 🆕
Likewise, here’s our new and updated overall approach to founder reference calls:
Message mutuals for offbook references, around halfway through the process. ✅
Addition: Inform founders that as part of our process, we reach out to mutual connections to source our own personal references, excluding customers. 🆕
Record calls with consent. ✅
Take founder reference calls solo, to create greater intimacy, trust, and ability to get to the heart of the matter. ✅
Addition: Share first reference call transcript & recording with the rest of the team before jumping on second call, to account for new perspectives and inform second call questions. 🆕
Use the above list of questions as a “menu”, picking and choosing according to the founder and startup. ✅
Addition: Aim to target different founder relationships (peer, direct report, manager, personal) 🆕
Well done for making it to the end. I hope you’re leaving with some killer questions and an improved technique. What are your best questions for getting the truth out of a referee? Looking forward to seeing you for Team Talks III.
Credits and Reading List:
Ted Wang, Cowboy Ventures, “Founder Reference calls: Unlocking the buried treasure”
Signature Block, "How to Do Founder Reference Checks"
Inc., “VC Fred Wilson: Some Thoughts On Checking References”
Rana Taj, “Backdoor Diligence: How to Reference Call with People VCs Actually Trust.”
Chris Hladczuk, LinkedIn
TechCrunch, “How to Conduct Reference Calls that Actually Matter.”
a16z, “The Hiring Process”
First Round, “25 Questions for Reference Calls”
LSVP, “Reference Call Tips”