Customer Interviews (a VC point of view)
I think that getting better at interviewing will make me a better investor and I have been working on it for about a year.
I think that getting better at interviewing will make me a better investor and I have been working on it for about a year.
The work continues, but there are some things I have learned so far — from my own experience and from working a stone’s throw from the First Round Review editorial team — that might be helpful to other people. If you spend your days meeting people and trying to get to ground truth as quickly as possible in order to assess talent, the potential for a partnership or a sale, this stuff might be valuable.
I think of every meeting I have with a founder as a customer interview. These interviews are a search for a partnership — both of us are exploring an opportunity. My primary goal is to make sure the founder understands the First Round product and has the opportunity to evaluate me and what it would be like to work with me as a partner. I want the founder to find the experience worthwhile and enjoyable; ideally they attribute a positive engagement to First Round (and I am still sending my survey to gather founder feedback).
My second goal is to gather the most striking insights, colorful examples and get to the core motivation and vision for the business in 45min to an hour. I need to learn about the founders, their strengths and weaknesses and how these apply to the company they are building and the dynamics of the market they are attacking.
Of course, to do this, I need to guide the content, tone, pace and chemistry of the conversation. This takes preparation.
A founder’s time is valuable, don’t waste it.
In order to make the most of the time I get to spend with founders, I do my best to get to the core topics/investment drivers as quickly as I can. I find that providing context on what I already believe to be true about their business, the research that I have done on them and their team as well as the areas where I really want to learn more over the course of the interview is extremely helpful.
I don’t want my time with founders to be just asking question after question — but I also want to make sure I learn as much as I can as quickly as possible. I find that introducing leading statements can be very effective. Of course, everyone hated the kid in the classroom whose questions were really statements. He didn’t care about the answer he’d get — he just wanted to show how much he knew. However, if there’s truly a question attached to a statement, it can be a great tool, especially at the beginning of an interview. Here are the two basic variations that I use:
Statement-then-related question. “I know the market for student loans is massive and that you are offering an alternative credit model to evaluate borrowers. How did you select the specific set of alternative inputs?” This accelerates by deepening the conversation, by acknowledging information (without discussing it) and zeroing in on a specific aspect where you want elaboration. This saves time and is about controlling the depth of conversation.
Statement-then-unrelated question. “I know the market for student loans is massive and that you are offering an alternative credit model to evaluate borrowers. How have you developed your customer acquisition strategy in this crowded space?” This accelerates by redirecting the conversation, by acknowledging a topic and advancing quickly to another one. This saves time and is about controlling the pace of conversation.
Both formats have a signaling as well as a functional use. They demonstrate to the founder that I have similar knowledge (giving comfort), have done my research (giving respect) and have a specific interest (showing focus).
I find statement-then-questions are most effective in the first 5–10 minutes of an interview, when it is used as a tool to move deeper into the conversation more quickly, or as a way to pivot the conversation to a new topic without losing the comfort and honesty that has been established in the previous topic. If “statements” are used throughout the interview, it means I haven’t established a rhythm or I am talking too much. Likely both.
Specifics have high fidelity
Even if we are walking through a deck or other prepared materials, it can be challenging to get to concrete examples to back up ideas or to explain strategic decisions that have been made in a way that indicates the way a founder works — and, keeping in mind the need to move quickly from interview to next steps, I have found that these specific examples are the most valuable data points in later discussions with my partners about a founder and the opportunity to invest in their company.
There are tactics to get to the meat of the interview, but mostly it takes repetition. I often use a three-tiered approach to getting the depth and specificity of answers I am looking for:
Ask a direct question. (The first answer tends to be broad.)
Ask: how do you/did you do that? (Probe for an actual example that shows, not tells.)
Ask: Can you share another example of what you just said in practice? As a story or anecdote? (This moves the founder from a pitch to a first person story of how they approached a specific challenge or decision that they had to make about their company)
Asking the question in different ways should work, but when it doesn’t deliver the examples/answers I am hoping to find, there are a few questions that I’ve found helpful:
What surprised you? I’ve found this helps people shed their polished answers and relate on a human level, especially if they’ve moved beyond that challenge or surprise.
What is happening in your industry that you take a different approach to? This can reveal original or counterintuitive thinking by asking what the interviewee may think/do differently than is common practice. “Industry” hits a nice sweet spot, and allows them to open up in a concrete way. “Company” can give them pause as it might be too early to have much depth given the stage we make our initial investments. On the other end, just asking what they do differently can get too general and miss an opportunity to get to know them better.
When did you first/last realize that..? Asking for supporting examples is difficult for interviewees and they can feel on the spot. However, probing for the first or most recent experience are milestones that people more easily recall. “Firsts” uncover original intent, motivation, passion. The most recent example brings a level of detail that’s relevant and relatable.
Make space for your conversation partner with role reversal.
People often say interviews are conversations, but they’re not exactly. Rarely is there the equal back and forth of regular dialogue. (The interviewer should be listening as much as possible!) At times, interviewees can feel as if they are fielding questions in a rapid fire way, so asking role-reversing questions can reinstate some of that comfort and familiarity. Allowing the interviewee to define the direction of the conversation can’t be done freely throughout the interview, but it can be very effective if used sparingly and/or asked at the end. It not only helps make sure everything is covered, but also provides space for the founder to ask about our product or my working style directly. Many of these answers clarify a founder’s focus and reveal counterintuitive things about the business or core advantages of a given team that weigh heavily in investment decisions. Here are a few role-reversal questions I like:
What question do you wish I’d asked? This question or “Is there anything else you’d like me to know?” are two favorite ways to end interviews. Asking the question that a founder wishes I had asked can reveal an entirely new category of discussion, so I try to leave time for this (or accept that I will be late to my next thing in some cases.) However, if a founder has a question/category to cover, I benefit because I learn it’s a priority for them if they felt it vital enough to bring up after an hour long interview.
What are the unanswered questions for your company? In nearly every case the subject is more of an expert than the interviewer (and when we talk about what I do as a VC, it is always the case). Asking for unanswered questions gets founders painting a picture of what’s on the frontier without feeling the pressure to give airtight/fully formed answers. Most importantly, it’ll show the depth of their understanding and how broadly thoughtful they have been in the pursuit of the opportunity. In the best case scenario, they show how far out into the future they are currently dreaming and also illustrate clarity of what must go right in the near term for them to have an opportunity to win. In the worst case scenario, their “unanswered” questions may actually be ones that have answers that they don’t yet know about or have not fully thought through. They may also reveal a lack of focus on critical near term challenges and this speaks to their operating style. Both outcomes are good information for an interviewer to understand.
What’s the best question to start with? or “You ask the first question.” I use this sparingly because it’s at the start of the interview, but, if I do it’s for three reasons: 1) The person is nervous. It allows them to hit a homer in t-ball rather than off a pitch. They can ask their own question, answer it and get momentum. Then we are off to the races. 2) They know too much (aka way, way more than me). A founder who is deeply technical, academic or has extensive industry experience can take some time to really get to the heart of the matter/speak in plain English (that I can comprehend). Asking them to pose and answer their own first question can help dissolve any pretense, jargon or technical talk. 3) The person has a chance to get creative. This is my favorite. People rarely ask the first question that I would have asked. You get some great nuggets and threads to follow.
Turning interviews into decisions.
Because interviews are part of our decision process, there is a technique that I use in my conversation with a founder that makes sharing the information I gather (and my conclusions) easier: I ask questions in the same rough order of the narrative that my partners would want to follow so I can get them up to speed on the opportunity as quickly as possible. I also try to come to every interview prepared to push for depth in specific areas that I believe will drive an investment decision. It is critical to always keep the point of the meeting in mind. Founders want decisions, not maybes and I try to organize the conversations in an order that will map directly toward the investment decision process at First Round.
Special thanks to Shaun Young for his help and guidance on this post — and his ongoing coaching on how to prepare for and deliver a great interview.