In Defense of Candidness

It’s challenging to be candid when you have an unpleasant message to deliver. It’s so tempting to lie or to misdirect.

Sometimes lying is easier, like when you want to reject a job candidate without taking the time to give them meaningful feedback. So, you just tell them, “sorry, it’s not a good fit.”

Sometimes lying feels like the best way to preserve a relationship, like when your boss asks you how he could be a better manager. You’re afraid to get on his bad side, so you lie and tell him, “I can’t think of a single thing that you could do better.” 

Finally, there are occasions where you think lying might help you financially. You may be worried that your startup’s revenues are weak, so instead of admitting that you only made $700 over the last three months ($100 -> $200 -> $400), you tell an investor that “growth is amazing and revenues are doubling every month!”

The problem with lying is that it’s rarely constructive. Neither the job candidate nor the manager will know how to improve their skills, and the investor won’t trust you when she picks up on your dishonesty.

For a while now, I’ve been making an effort to be constructively candid. By ‘constructively candid’ I mean that I will be honest, but I’ll try not to be mean. I won’t tell a job candidate that his skills are lacking, but I might point out a few places where I felt like he struggled, then recommend a book that covers those topics. Similarly, I won’t tell a founder that her idea leaves something to be desired, but I might suggest some areas of concern that other investors will likely share.

Initially being candid was a challenge, but it has become much easier over time. Most people I know think that being truthful makes tough situations worse or burns bridges. In my experience, the opposite is true. Here are three scenarios where being more candid worked out for me:

Declining party invitations (“The more I get to know people, the more I like books.”)

Like many engineers, I’m an introvert. I like people, but I can only be social in moderation. For many years, whenever someone would invite me to a party, I’d evade by saying I was busy or wasn’t sure about my schedule. This year, I decided to try being honest:

Me: I don’t really like events where I don’t know anyone/most people. So I really appreciate the invite and that you thought of me, but it’s not really my kind of thing. However, I really enjoyed chatting with you earlier this month and would be happy to grab coffee 1:1 with you whenever you like (maybe next month?)

Other person: No worries. I sympathize with that sentiment… I’m lucky to have an extremely outgoing wife who can handle the small talk while I go hide in the kitchen if things go on too long. And for what it’s worth, I do these things so I DON’T have to meet people at massive conferences where my energy drains in minutes.

In this case, and others, being honest led to bonding over being antisocial rather than offending friends.

Giving feedback (“No wireless. Less space than a Nomad. Lame.”)

The nature of being a seed stage investor is that I end up passing on almost every startup I see as I search for outliers. Passing is hard. I spent a few hours talking to someone, listened to them share their goals and plans and ambitions, and now I have to tell them that the investment opportunity isn’t quite what my fund and I are looking for.

When I got into investing, one of the first things I learned was that you always want to “preserve option value.” What that means is that even if you don’t want to invest in a startup at this time, you should be polite and vague and leave the door open to investing the startup (or the entrepreneur) at a later date. You should never say anything negative or controversial because that could jeopardize your opportunity to invest in the future.

This advice didn’t sit well with me. If I can see holes in someone’s pitch or business plan, it’s a shame that I’m supposed to keep them to myself. So, I slowly began sending pass emails that would mention some of my concerns. It turned out that getting detailed feedback from an investor is a rare thing, and entrepreneurs really appreciate it. Here’s a snippet from one of my recent emails:

Thanks for meeting up with me on Wednesday – I really enjoyed talking with you about your startup. I talked with my partners yesterday and we’ve decided to pass at this time. 

Things that we liked: 

• I thought that your technical strategy made a lot of sense.

• It’s great that you already have growing revenues.

• We’re impressed with what you’ve done with just two people.

Areas of concern:

• We don’t feel like we have a clear understanding of the potential market. This looks likes an awesome lifestyle business, and it might be more than that, but we’re not really sure. There’s definitely potential here for something big, but you should try to make it a clear part of your story/pitch deck, etc. Getting from $3k/month to $30k/month seems doable, but what could you do to get to $3m/month or even $30m/month in 5-10 years?

• We’d love to see more planning around growing your customer base. A sales/biz dev person might be the way to go, but it might not be cost effective given how much you’re charging. So the question is, what kind of stuff could you do to get thousands or tens of thousands of customers paying $25-$100/month?

Almost every founder replies positively to feedback like this, and over time, many of these founders have referred their friends to work with my fund. Offering candid feedback, even when it wasn’t all kittens and rainbows, didn’t burn bridges – it actually strengthened relationships and improved my fund’s deal flow.

Being honest about where I can help – and where I cannot (“Quidquid latine dictum sit, altum videtur.”)

One of my goals as an investor is to do whatever I can to help portfolio companies succeed. Until last month, I would email founders that I work with and say something like, “Hey - I want to check in and see how things are going. Is there anything I can help with this month?”

This worked well enough, and founders would ask me for specific things about 40% of the time. I wasn’t thrilled with this because I felt useless 60% of the time, and because I was frequently asked to help with things that I don’t know much about.

Last month, I decided to experiment with being more explicit about where I can help. I made a list of things I’m good at and, just as importantly, things I’m not good at. For example, I’m very good at algorithm design but not great at selecting software infrastructure (I’ve done a lot of the former but not much of the latter). I wasn’t sure how people would react. Would they be happy to get an explicit list of things I could help with, or would they be disappointed when they realized I wasn’t good at some of the things their companies really needed? Was I being too candid when I enumerated my weaknesses?

It’s been one month, and I’ve sent my list to about a dozen different people. Feedback on this approach has been very positive, and the results have been amazing: everyone I’ve talked to has asked for help, and I’ve only been asked to do the things that I am good at.

In each of these cases, there’s an assumption that it’s better to be polite and brief, but in my experience, that assumption is wrong. Being more open with feedback has led to many benefits for me: I’m invited to fewer and fewer parties, I have good relationships with entrepreneurs that my fund didn’t invest in, and I’m more helpful for my portfolio companies. I do think there are times where polite dishonesty is a good idea (“of course that outfit doesn’t make you look fat”), but those times are much less common than I used to believe.