Naval: Some angels insist on checking references of founders. This can work if you know what you’re doing, but reference checking is an art that most people haven’t mastered.
Founding a startup is an act of creativity. If you think of the great writers, philosophers and artists throughout history, honest references would tell you they’re all crazy.
Founders are non-fungible; they’re irreplaceable. A founder who’s great for one business may be terrible for another. The founder who can build Craigslist—community-oriented, extremely patient and almost anti-capitalistic—won’t work for a financial startup that’s racing to raise and deploy lots of capital while pitching banks and regulators. So, it’s the right founder for the right job.
References tend to be generic. They don’t work as well for assessing founders as they do for hiring employees, where you’re looking for someone to scale processes that already work.
I passed on Twilio because of a reference
I passed on Twilio in the seed round because of a reference—big mistake. The reference came from somebody I trusted who had good intentions. It was probably even accurate, but that was beside the point. I should have gone with my gut feeling that Jeff Lawson was the right founder for the job.
I also passed on Ethereum very early because of a reference from a VC who was active in the space. The reference dissuaded me in a way that it shouldn’t have—though I clued into that one later.
References can devolve into checklists
References from VCs are among the worst type. For every deal a VC does, other VCs passed on that very same deal. Sequoia does a lot of deals that Andreessen has passed on, and vice versa. This goes up and down the chain.
The best deals aren’t always chased by the best VCs. In this market, everyone has their own unique point of view, and the good players have very independent points of view.
References can devolve into checklists: “I better check the box that I’ve done all these references.” Or, if you do listen, your point of view becomes a smeared average, diluted by what other people think.