TL;DR: Blogs, social media, and public endorsements are all noisy, and often false, signals about a person’s real reputation in the market. The only way to get the truth is to “ask the users,” and in a way that allows them to speak the truth without negative repercussions.
I’m going to keep this post as simple as possible, because the message, though extremely important and often lost on people, is quite simple.
Should you join a particular accelerator?
Ask the users – the companies that have already gone through it.
Should you accept money from a particular fund or investor?
Ask the users – the portfolio companies that have already taken money from them and gone through ups and downs.
Should you work with a particular mentor / advisor?
Ask the users – the companies they’ve already advised.
Should you use a particular law firm, accountant, or other service provider?
Ask the users – their existing clients, particularly the ones who’ve gone through a major transaction.
One of the most dramatic, impactful things that the internet (and services like LinkedIn, AngelList, FB, Twitter) has done is made it 10x easier to connect with other people to get direct, unfiltered, off the record feedback on their experiences in working with others. It has made BS a whole lot harder, and ultimately improved behavior across the board. But that brings up some important points worth keeping in mind as you “ask the users”:
A. As much as the web has made finding direct feedback easier, it’s also magnified the opportunities for untruthful marketing.
Blogging and social media are great ways to get a feel for a person’s persona – or at a minimum the persona they want to display publicly, which itself is a valuable, albeit noisy, signal. However, never underestimate the capacity for sophisticated players to whitewash their online reputations. What you see on a blog, on Medium, or on Twitter is marketing, and it’s only with due diligence that you verify it’s accuracy.
And yes, that speaks for this blog and my own social media presence as well.
B. Do not assume that a public-facing endorsement is reflective of that person’s true opinion.
Reality check: people use public endorsements as currency. A VC will make their investment, or assistance on some project, contingent on the expectation that founders say a few glowing things about them on Twitter. A lawyer will agree to discount a fee if they can get a great LinkedIn recommendation. An accelerator will make an intro if the founders will write a great Medium post.
Public endorsements, though valuable as a signal, are fraught with ulterior motives. In short, they can be, and often are, bought. I know plenty of people who, for some quid-pro-quo arrangement, have given public endorsements for market players whom they would NEVER recommend privately. Do not take a favorable public comment as reason to avoid doing private, off the record diligence.
C. Ignore the opinions of sycophants.
Every ecosystem is full of people who will sing the praises of anyone influential simply because that influential person could get them business. It may be too far to call some of them spineless, but ultimately they lack the personal brand independence to speak accurately about other peoples’ behavior. No one is perfect, and if someone’s review of a particular player feels totally over-polished, it’s probably because they’re not telling you the truth.
You want feedback from serious, honest people who are willing to speak their mind (but see below). Not a bunch of random cheerleaders.
D. Talk privately, and don’t reveal whom you’ve spoken to.
No one who has an active, ongoing relationship with someone wants to damage that relationship, even if they’re not entirely happy with it. Doing so is irrational. If I’m in an accelerator, I still depend on that accelerator’s support, so don’t expect me to go on the record for badmouthing them. The same goes if I’m in a particular VC’s portfolio, or working with a particular law or accounting firm.
This is why it’s extremely important to do “blind” diligence; meaning if you are diligencing X by asking Y, you absolutely do not want X knowing that you asked Y. If a VC tells you to ask a specific company about their experience in working with them, then they know exactly whom to punish if you end up walking. If you go through their portfolio and personally decide whom to ask, you remove that ability, and therefore dramatically increase the likelihood that you’ll get honest answers.
And it should go without saying: phone calls or in-person meetings. Don’t expect honesty in a forward-able e-mail.
E. Focus on patterns, not a single review.
Even the best restaurants have the occasional negative review because they either were having a bad day, they simply weren’t a good fit for the particular patron, or – and let’s be honest here – sometimes the user is a pain in the ass. The customer is always right? Nope, sometimes the customer is a moron.
Don’t assume that you’ve got the full picture from simply asking one person. Ask a few, and the line drawn from the dots will matter much more than the individual data points.
F. If you can’t diligence, you need a right of exit.
The stakes are highest for relationships that you really can’t extricate yourself from. A serious investor is the clearest example. Never take money from a VC without performing diligence.
However, for other service providers – take an advisor/mentor for example – there are other mechanisms to de-risk things. If they’re getting equity (which they often are), a “cliff” on their vesting schedule is the best one; typically 3 or 6 months. That should be enough time to understand the reality of working with them, and make corrections if it’s a terrible experience. Solid contracts help here, with clear, painless rights of termination.
However, a word of caution – all the contracts and lawyers in the world will not protect you from the enormous cost and time suck of working with sociopaths. Even if you don’t have the time or ability to diligence their “users,” you should at a bare minimum vet them personally with interviews, questions, and other ways to get a general feel for their personality and values. If you have good instincts for judging people – and if you’re a CEO I hope you do – you will be able to filter out most assholes.
Also published on Medium.