I think the way VCs tend to deal with this in biotech is by employing scientific advisors to judge the viability of a technology and the quality of results. They build semi-trusting relationships with each other, so that a VC-ally who’s asking you to invest in a promising biotech they’re already invested in becomes trustworthy, despite the apparent conflict of interest, because they’re hoping to do repeat business with you in the future. Excessive exaggerations put companies at risk of losing their credibility or even of legal action (i.e. Theranos). These aspects seem to put some limits on the exaggerations and lies that take place in the startup world.
My sense is that Tyler Cowen and Daniel Gross are trying to deal with this problem in the context of hiring in their newish book “Talent.” They look for job-specific objective metrics (i.e. IQ for a high intelligence-requiring job, but not for jobs that don’t demand high intelligence since that would be wasting resources on an overqualified person). They also look for surprising questions that shift the conversational dynamic during an interview to one that is more authentic, and harder for the candidate to BS their way through. Lately, Tyler is trying “what is a commonplace opinion that you absolutely agree with?”, since he feels people are overprepared for “what is a commonplace opinion that you know to be false?”
Another way to frame your question is that it’s fundamentally about how to extract accurate, valuable investing information, at lower cost, in a competitive context, when the relevant information is often highly nonstandard the founders are often doing what they’re doing for the first time, and their ability to attract new funding is life and death for their company. When you put it that way, it’s clear that it makes perfect sense that this is so difficult!
I think the way VCs tend to deal with this in biotech is by employing scientific advisors to judge the viability of a technology and the quality of results. They build semi-trusting relationships with each other, so that a VC-ally who’s asking you to invest in a promising biotech they’re already invested in becomes trustworthy, despite the apparent conflict of interest, because they’re hoping to do repeat business with you in the future. Excessive exaggerations put companies at risk of losing their credibility or even of legal action (i.e. Theranos). These aspects seem to put some limits on the exaggerations and lies that take place in the startup world.
My sense is that Tyler Cowen and Daniel Gross are trying to deal with this problem in the context of hiring in their newish book “Talent.” They look for job-specific objective metrics (i.e. IQ for a high intelligence-requiring job, but not for jobs that don’t demand high intelligence since that would be wasting resources on an overqualified person). They also look for surprising questions that shift the conversational dynamic during an interview to one that is more authentic, and harder for the candidate to BS their way through. Lately, Tyler is trying “what is a commonplace opinion that you absolutely agree with?”, since he feels people are overprepared for “what is a commonplace opinion that you know to be false?”
Another way to frame your question is that it’s fundamentally about how to extract accurate, valuable investing information, at lower cost, in a competitive context, when the relevant information is often highly nonstandard the founders are often doing what they’re doing for the first time, and their ability to attract new funding is life and death for their company. When you put it that way, it’s clear that it makes perfect sense that this is so difficult!