I was watching Y-Combinator’s Startup School video series and found Mark Andreessen’s talk to have some valuable tips for founders. A skill that is rarely discussed is the skill of reference checking. Mark has a very helpful disquisition about why and how founders should check references.
There are two major situations in which founders need to check references: hiring employees and considering taking an investment from an angel or VC firm.
Mark starts off at 14:25 of the video talking about how to ascertain “if an investor is good.” “There are five key ways: references, references, references, references, and references.” Sort of like the three most important factors in buying a house are “location, location and location.”
There are two types of references: front door references, which are the references an investor or employee provides to the founder and back door references, which is where the real value is; references from people who have worked with the investor or employee before. You need to find the latter through your network. Being able to reference check through your personal connections is a rarely touted, but important skill in building your personal network. Places like Silicon Valley are highly networked, so finding backdoor references should not be difficult.
Regarding investors you can check with other investors on how they evaluate the firm you are considering. You can also check VC firms by talking to angel groups or accelerators like Y-Combinator, who are feeders to the VCs and work closely with them.
Checking front door references is all in the “little tells.” If someone is good the reference should be really enthusiastic, anything less means you there are issues. If your questions are answered with silences that’s another red flag. Many people don’t like to say negative things about other people, so beware of lukewarm positives, like “well, they are really punctual!”
Mark emphasizes that reference checking is an incredibly useful skill which you can learn with investors and then when you have funding and start hiring you’ll be in a good position to make sure you are recruiting not only the best and brightest, but those who will fit best in your firm.
Here’s a few other tips from my experience in hiring dozens and dozens of staff, from inside and field sales people (who are the toughest, since they know how to sell themselves if they are any good), to software engineers, admins, CEOs, CFOs to Board members.
- Don’t delegate reference checking! Founders need to do their own reference checking. It may not seem glamorous and you probably would rather spend your time building or selling your product, but it’s important that you do this yourself. You need first-hand information, you need to build your reference checking skills, and finally it’s a good way to build your network. I’ve gotten introduced to some great entrepreneurs via front door reference checking.
- Watch out for confirmation bias, which is the tendency to search for and interpret information that confirms your pre-existing beliefs. This is especially prevalent when you check the references of someone you really want to hire – you only want o hear good things about them.
- Have a consistent set of questions for every reference check, both front door and back door, and take notes! Wait to evaluate the candidate until you have completed your reference checking process.
- Good questions to ask include: would you hire this person again? would you recommend we hire this person based on what you know of them and what you know of our company? How does this person react when things go wrong? What’s the biggest accomplishment this person was responsible for? If you were his or her manager what areas would you work with them to develop?
- Find specific things in your candidate’s resume to check. As the saying goes, “Success has a thousand fathers, failure is an orphan.” Dig into accomplishments list on the resume to find out what role the candidate really played.
Here’s a good list of questions from Entrepreneur. And don’t forget the last one, it’s last but not least!
9. Is there anything else I should know about this candidate? By asking this, hiring managers can find out specific details about a candidate not addressed in previous questions.
For example, even if a previous question didn’t inquire about punctuality, the reference might now be prompted to offer an observation about a candidate’s late arrival to work.