For the past 8 years, we’ve screened an average of 5 companies per week for our programme and we’ve boiled it down to one test.
Admittedly, I’ve made too many bad decisions and no longer interview companies myself.* Nopadon (my business partner) does all the interviewing. He asks seven questions, but he’s looking for one thing:
Did any of the applicants get defensive during the interview? Nobody has all the answers, but are they willing to figure them out? Occasionally, a prospect on the call will start justifying and defending the status quo, and that's a non-starter for us. But why?
Of all the factors we could consider, why is defensiveness such a strong predictor of failure? Successful companies have built up lots of “standard operating procedures” which means the status-quo basically works. But in a startup, you need to write your own playbook, which means success depends on the pace and quality of learning. And you simply cannot learn if you view new information as a threat.
Defensiveness has a charming cousin
I used to think defensiveness was easy to spot - people would act threatened, an undertone of panic. But Nopadon was surprised to discover that defensiveness has a charming cousin. Some people are so confident and pleasant, they might seem less threatened than glib. For example, they might say, “Oh yes, I know that looks terrible but don’t worry, we've got it all sorted out, it's just not live yet.” This sounds harmless, and it might be if it happens once. But if we get to the end of the call and they still haven’t acknowledged a single risk or uncertainty in the business… they’re delusional.
In the past, I've made exceptions to that rule and it inevitably ends in tears.
Simple next step
If you ever need to make a decision about a person or a company - whether to work there, invest, hire, or even take them on as a client, ask about the things that are not working, and watch their reaction. I hope this test helps you avoid some land mines.
* If you're curious about my bad decisions, I fail when I'm too optimistic. I tend to view people and teams as I imagine they could be, rather than as they are. Years ago, I once accepted a team who was so difficult, they caused one of our best coaches to resign. That was the last straw for me and Nopadon, so now he does all the screening. I wanted to mention this because it seems disingenuous to write an email against defensiveness without acknowledging one of my own shortcomings.