One serious way to help mitigate fraud as a VC:
Always
Talk
To
The
CTO
Yes, CTOs can mislead, too
But they tend to be worse at it. And often are brutally direct.
Every VC talks to the CEO.
So few talk to the CTO.
I always talk to the CTO as my second call, for at least an hour
I do want mainly to get a sense of how they build software, and how they think about the business
But if I’ve seen any flags … I ask them
I ask them about the flag, Columbo-style
You often learn a lot
I am amazed how many CTOs tell me their VCs never even talked to them before investing
I guess if you’ve never built software itself, you might not see point
But boy, what a missed opportunity
Great CEO, OK CTO, decent outcome
But
Great CEO, Amazing CTO, can never be stopped
I’ve lost a little money as an investor
And I’ve made some investments that had mediocre outcomes
But I’ve never had anything buy a Good or Better outcome with the combo of a Great CEO and an Amazing CTO
It’s a force multiplier
And … a fraud identifier
Still, the reality is we all used to do more diligence
Not sure at the earlier stages, we’ll ever do as much as we used to
Maybe