The following are same ways you can test for the credibility of potential founders:
- Real Positions: If a founder puts positions on their deck like COO, CEO, CTO make sure that the founder explains exactly what each person will be directly responsible for. I’ve seen multiple situations where a founder lists people on their deck who do virtually nothing. It comes off as dishonest, especially when you cross-reference their position with their LinkedIn position.
- Skin in the Game: What is the exact dollar amount the founders invested? If they have liquid assets why aren’t they putting a significant percentage of their funds in a company?
- Personal Guarantee: While this might be a controversial ask, it helps to understand their level of confidence. In some cases, such as for hard money loans, this should be a requirement.
- Jurisdiction: It adds significant credibility to be based in the US and have significant US assets.
- Ability to Explain a Strategy Specifically and Clearly: If the founder can’t explain their strategy in detail, they may not understand the problem or have the skillset to solve it. In eCommerce there are a few buzzwords that people consistently use that tip me off that they don’t understand how to grow their company.
- Peer-Review from Several Sources/Experts: Get help compiling questions/due diligence from others/experts to get a better understanding of the risk/reward of the company.
- Addictions: Does the founder have any alcoholic, gambling, or drug-abuse issues?
- Realism: If a time frame for milestones or the amount of funds asked for are unrealistic, it shows potential issues with the founder’s judgement.
- Funding Vehicle: For example, an ICO from a BVI company may have a worse reputation than a SAFE agreement or a public company, which does quarterly disclosures.
- Professional Communication: If the founder can write professional updates, it helps add credibility.
- Social Media Presence: You may question the founder’s judgement if they post inappropriate content on social media.
- Ability to Cope with Stress: Ask the founder about the most difficult business challenges they encountered and how they solved them.
- Excuses: I’d rather hear about how someone plans to grow and solve an issue than someone who spends too much time explaining their setbacks (this is just a personal preference). “Dont criticize, condemn or complain” – Dale Carnegie.
- Focus on pro-forma vs actual performance numbers: I want to see both. However, if pro-forma is listed I want the strategy to be explained clearly so that the pro-forma is not complete nonsense.
- Time Management: The “I’m too busy” excuse isn’t impressive or make you seem to be in demand. If you’re good at managing time, you can focus on the important things.
To get a successful mentor, there are two important components:
- Persuading mentors to mentor you (finding a mutually beneficial proposition)
- Directly contacting the person you want to mentor you (LinkedIn, Email Introductions twitter etc). I’ve caught the attention some of the world’s most successful entrepreneurs on Twitter (Donald Trump), LinkedIn, forums (Some business partners), Facebook, and even through a proprietary messaging app (Mark Cuban) they invested in.
- Getting a referral from a mutual acquaintance
- Alumni networks (I found this surprisingly useful because you can send a direct email to person)
- Emailing team members at their company and asking for a direct introduction
Persuading Someone to Become Your Mentor:
- Ask their criteria (sometimes you can pay them, but, in the case of billionaires, their time is so valuable that you can’t afford to pay them)
- Offer them equity in a potentially high growth company
- Have strong references (Personally, I require the mentee to create a list of successful, credible references)
- Offer to assist them in other ways (eg. Help them find connections or service providers)
Further, it may make sense to read books written by your favorite mentor rather learn directly from them.