5 Things Investors aren’t asking you but should…

I’ve been incredibly lucky to lead a very interesting life. Over the last 3 decades I’ve lived in 11 countries, across 4 continents, picked up a couple of languages and worked in 6 different industries.

On the work side, I’ve also been lucky to work in both early and late stage startups, blue chip companies including Google and Pepsi and, briefly in venture capital.

More importantly, I’ve pitched investors and, recently as a member of the investment committee at a successful Latin American VC fund, been pitched by a number of companies and one thing has always stumped me: How little attention investors pay attention to leadership skills, the founders vision and the type of company culture they want to build.

Why does this matter if I get the money anyway you might ask?

Because raising money and being featured on TechCrunch isn’t the end game. Building a successful company that serves customers, employees and investors (note I put investors last) is the end game and the goal is to do this as long as possible and impact as many people as possible.

As someone who’s been in startups since 2001 and has coached startup leaders in leadership and marketing since 2008, I’ve seen most of the problems that kill companies and have been fortunate to help steer my clients away from the cliff’s edge and back onto the path of growth and success numerous times.

But there are 5 basic questions that if investors really bothered to ask, would probably significantly reduce the number of problems many of my clients have by taking the right steps to mitigate them.

Question #1 — What’s your purpose?

Sounds lofty, grandiose and obvious but it’s not. Many founders confuse this with vision or goals. Purpose isn’t about market share, becoming a unicorn or establishing market dominance.

Purpose is about “Why” you chose to pursue this business and “Why” the company exists.

For example, at my last company our purpose was “To help companies creates cultures of meaning and purpose.” That was why we existed. That’s what drove us, motivated us and made us proud. That was big reason people wanted to join us even when they were making much more money elsewhere or had much bigger jobs.

Why does this matter? Because when your company has a clear and powerful purpose it’s easier to sell your product / service, your employees are more excited and engaged and you’re able to better stand out from the competition.

People were always amazed how LEAP was able to grow so quickly, get such high profile clients and attract and retain great talent. A big part of it was because people were inspired by what we did.

Question #2 — What are your values?

Sounds very touchy feely but it matters. I remember once we were in a heated meeting at Google. We had to make a decision on a particular problem. At one point I made a suggestion and one my team members looked at me quizzically and said:

“No, we just can’t do that Patrick. It’s just not Googley.”

Values aren’t just nice to have. Companies with strong values hire people based on these values and a big part of some of their toughest decisions are driven by an unwavering commitment to their values.

At LEAP one core value was growth mindset. When we interviewed people, even if they were good, we would stop the process if they’re weren’t pushing themselves to grow and be uncomfortable. That was just part of who we were.

When a startup lacks clear values they end up hiring the wrong people and making bad decisions. Smart investors get this and the best companies document their values fanatically and have programs to reinforce them constantly (Google, Netflix, Patagonia, Airbnb, Bridgewater are examples)

Question #3 — How often do you give feedback and how?

A statistic I saw the other day stated that 40% of employees aren’t getting regular feedback. Yet another stat showed that employees, particularly younger employees, feel less engaged and valued when they are not getting feedback on a regular basis.

But not one of the CEO’s I’ve coached ever knew what an actual feedback process looked like, how often to give feedback and in which manner to give it.

Feedback is the life blood of growth and improvement so when you’re not giving feedback to your co-founder, people and team you’re not only denying them the opportunity to grow but you’re also ensuring they fly blind: Not really knowing what they’re doing well or badly.

A simple framework for giving feedback is Zenger Folkmann’s FUEL model. I’m not going to go into it here and there are plenty of posts on it but when you actually invest the time in giving proper feedback and are willing to receive it, your culture radically changes. The best example I can think of is Netflix and Ray Dalio’s legendary hedge fund, Bridgewater Associates (Ray’s book “Principles” is in my list of highly recommended books for entrepreneurs to read).

I have never heard an investor ask a founder how often they give feedback and what their process is and know even fewer who actually truly understand the process of giving and receiving feedback themselves.

Question #4 — What is your NPS?

Sounds basic and obvious but in nearly every meeting I’ve been in investors are asking about revenue, growth, ARR, churn and every other SaaS metric under the sun.

But hardly anyone asks about Net Promoter Score. Seriously… ?

I have another post on this but the short and sweat is that Net Promoter Score is your customers willingness to positively promote your company to others. It’s measured on a 10 point scale, with 10 being highest. A 9–10 means people really like your product and promote it actively. A 7–8 is neutral and 1–6 means “Houston, we have a problem.”

This HAS to be one of your most important KPI’s that tie back to your OKRs and if it’s not you’re not doing your job as CEO, assuming you have product — market fit. I’ve never seen an investor ask for it.

Question #5 — What’s been your biggest failure and what did you learn from it?

There are various variations of this question but the point is to see if A) the founder is self aware enough to know their biggest failures and B) to see what they actually learned from it.

The most amazing leaders and founders I’ve met and coached all had one thing in common, they were all incredibly humble and self aware (I guess that’s two things).

As an investor that’s part of the DNA you want in a founder. Smart, hard working, visionary is a given but if your founder hasn’t made mistakes or really learned from them, he or she will make mistakes with your money and you really don’t want that.

As a founder you have to know that it’s like baseball: To succeed you’re going to need to have multiple tries at bat. You’re going to swing and miss. You’re going to swing and than get tagged out at 1st, 2nd or 3rd base. The important thing is to keep swinging and learn what you did wrong and get better.

As the great Rocky Balboa once said “It ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward; how much you can take and keep moving forward. That’s how winning is done!”

For the investors out there, try some of these questions at your next pitch and see what you learn about the founders who are pitching you. For founders, even if nobody asks these questions, ask yourself what would be possible if you really dug deep to find out the answers. The result might surprise you and you might even build a better company as a result.

For more great content about leadership, startups and startup culture follow me on Linkedin, Instagram and check out my website.

“Embrace change.”

Patrick.