Asking Startups Weird Questions in Diligence Calls
I was talking to a friend who works at a different VC firm than mine, and he brought up the fact that they will sometimes ask founders weird questions during diligence calls.
These questions can range from somewhat mundane (just simply unusual during a diligence call) to very strange trick questions that seem like a trick question for quant roles at hedge funds.
In terms of mundane questions, some of these would be like "what is your favorite book" or "what seemingly mundane thing do you think can cause a company to fail?" These type of questions, while atypical, do seem to give some useful color to the management team and can probably help you understand how they think.
However, there are other questions they will ask that to me seem rude. An example would be like "when would it be morally wrong to describe a glass as half-full instead of half empty?"
This seems incredibly rude and disrespectful to me; however, I do understand why the firm might think these questions are useful. My friend specifically said that the goal is to truly understand how the management team thinks and to break past any egregiously fake facade they are presenting.
What do you guys think? Do you think even the mundane questions I mentioned are rude?
I know that some GPs ask these kinds of questions to - as your friend noted - gauge a founder's "true character" and determine their ability to think on their feet. However, I think there is a time and place for this: 1) only the potential board partner should be asking these questions, I think these questions coming from anyone else (associate, principal, etc.) would be pretty insulting, 2) this assessment should be done only after the GP has built a relationship with the founder - asking these questions on a first call would be arrogant and unnecessary, and 3) the GP should be able to explain exactly what they're looking for with each of these questions and why this is the only way to assess those characteristics.
That being said, I've always strongly believed that these "weird" questions are more about the GP's ego than anything else. I doubt there is any meaningful correlation between a founder's ability to respond favorably to these kinds of assessments vs. the founder's ability to build a successful company.
I'm at what some might consider a top tier growth shop and I think I'd be laughed out of the room if I ever suggested something like this, even for a GP to ask. End of day you care about the founder's background and their ability to scale that specific business. 'Character' is assessed in how they've answered critical, business-related questions and engage with you - and of course, references / backchanneling. I could see this line of questioning being helpful for a super green, first-time founder who you don't have much context around are making a somewhat blind seed bet on.... but else it should be on you as an investor to build the muscle/reps to evaluate a founder holistically and come to the right call.
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