How Private Equity Investors Read Founders Before The Market Does
Businessman working on laptop with PRIVATE EQUITY inscription, new business concept
getty
While other private equity investors scrutinize spreadsheets, Sam Thompson at Progress Partners identifies behavioral patterns predicting startup failure with measured accuracy. His due-diligence process reveals founder capacity through their reactions to pressure.
“It’s human factors that really are the deciding factor between success and failure,” Thompson told me via Zoom, as did other investors interviewed in part two of this series on attracting investors using the same skillset CMOs use to attract customers. Thompson learned this through painful experiences watching portfolio companies implode from management dysfunction. “When there became issues between management and the board, people factors definitely became a clear piece of it all.”
For Warren “Bunny” Weissthe psychological profile he seeks in his investments for WestWave Capital combines intellectual curiosity with behavioral adaptability. “If you find people that are intellectually curious, that’s a common trait among successful people that want to continue to question everything, there’s a better chance they can modify their behavior.”
He looks for founders demonstrating self-awareness early, acknowledging what they don’t know and building teams to offset weaknesses. Most importantly, Weiss gauges whether founders can survive the emotional toll of building companies. “A lot of people don’t have the capability to be introspective enough to spend time in understanding what they did wrong. They just want to blame other people.”
After hundreds of investments and countless founder interactions, each investor I interviewed has a signature approach to reading human potential. Like master craftsmen, they’ve refined their instincts into repeatable methodologies to spot winners before the market does. Thompson’s strategic exit planning, Weiss’s execution intensity, Gregg Smith’s passion validation, and Jon Langbert’s anti-due-diligence philosophy represent four distinct arts of investor psychology, each a different lens for understanding how the best founders think, behave, and ultimately raise money.
The Four Arts Of Private Equity Investors
Warren “Bunny” Weiss, Founder and Partner, WestWave Capital
WestWave Capital
Warren “Bunny” Weiss And The Art of Violent Execution
“Entrepreneurs have to have an incredible vision, but a more violent execution strategy,” Weiss said. Being “impatiently patient” drives progress without reckless haste. That means finding “the first hundred customers that all like the color blue” rather than chasing multiple markets with conflicting needs. He’s seen too many startups collapse by trying to be everything to everyone. “If we sell a blue one, a green one, and a pink one, they have different needs… you’ll find yourself spread way too thin.”
Weiss’s “Basic Venture 101” framework requires a large market, a defensible product, 70% margins, and a great CEO. “There’s no great company without a great CEO. None.” And for him, vision without execution is just dreaming, which is why the CEO is crucial.
Sam Thompson and The Art of The Strategic Exit
Thompson plans exits from day one, orchestrating relationships between portfolio companies and acquirers like a chess grandmaster planning 20 moves ahead. “As investors, we’re always thinking about who could be the buyer. Always.” He balances time and return with portfolio level thinking distinguishing strategic investors from deal chasers.
He continuously reshuffles his portfolio into three buckets, each with its own management strategy: winners, too early to tell, and problem children. And rather than waiting for offers, Thompson makes his companies indispensable to likely acquirers.
“Better deals are always done by companies who know the companies they’re buying.” An earlier 2–3x exit can beat waiting years for an uncertain multiple. “We can return money to our investors, we can reinvest some of that capital.”
Gregg Smith and The Art Of Validating Passion
“Many, many people can have passion. I mean the passion can be unfounded, right?” Gregg Smith of Evolution VC Partners posited. “So passion is one arrow in the quiver, if you will, or one slice of the pie.”
Investing his own capital across 300+ companies, Smith has developed a sophisticated filter for distinguishing genuine conviction from entrepreneurial enthusiasm, using evidence in execution as his benchmark. This nuanced view separates him from investors who mistake emotional intensity for business acumen.
With Blank Beauty’s CEO, Charles Brandon, Smith admired not just the founder’s robotics passion but “what he built, and his passion and his knowledge and how he went about building it and creating the team.” This combination of skill, drive, and team-building indicated well-founded passion. He found that same conviction in Harvard-trained physician, Dr. Carolyn Treasure, who left Harvard’s MBA program midstream to build Peachy, her “all-you-can-eat” Botox venture. Her decision fused medical expertise with entrepreneurial courage, something matching Smith’s “evidence in execution” standard.
Jon Langbert And The Art Of Avoiding Due Diligence
“I don’t want to do due diligence,” angel investor Jon Langbert insisted. “I can do it, but I don’t want to… that’s not how I want to spend my retirement.”
His anti–due diligence philosophy reflects an emotional discipline and portfolio balance sustained by his stoic philosophy. After settling at a $5,000 maximum check size after years of calibration and setting a cap to his “wacky investments” of 10% of his portfolio, he simply accepts what will be will be.
“I’m taking your word for it,” Langbert said about founder claims. “When you tell me that you have three purchase orders, I’m not looking at the copies and calling customers to verify it.”
Some founders are invariably lying, and he’s only hearing “the story the founder wants me to hear.” But his small check size prices in this risk. And his light-touch style accelerates deal flow – roughly one investment per week in the past four years.
“Sometimes they don’t want my small checks, they want larger checks,” Langbert noted. “But what I find, if I add value through mentoring, they always take the check, even if it’s one-tenth their minimum.”
The Private Equity Readiness Paradox: When “Too Early” Meets “Too Polished”
Jon Langbert, Angel Investor, Mentor
Jon Langbert
“If it’s a polished pitch, it’s because they came through Y Combinator or Techstars, and chances are they’re a little bit now past where I’m going to be able to help them,” Langbert explained. “They’ve already been through their pitch scrub, they already know how to present, they’re already overvalued. A lot of these Y Combinator companies are coming out at $15, $20, $25 million. They’re still pre-launch. They don’t even have their MVP up, and they’re at $20 million.”
So Langbert finds companies before the accelerators get them, when the pitch is rough and he “has to dig through to get to the underlying idea.” But unpolished doesn’t mean unteachable.
“Now, if the pitch is terrible because the founder is an idiot and the idea is good, I’m going to pass on that,” Langbert said bluntly. “Some founders, they just don’t listen. They talk and talk and talk, and you give them a suggestion, they don’t get it.”
Smith has refined his ability to distinguish substance from presentation polish. “I get a lot of bullshit things sent over to me,” he acknowledged. His evaluation focuses on cumulative knowledge and founder competence instead of pitch perfection. He looks for founders with deep understanding of their market, realistic assessment of challenges, and genuine problem-solving capability. None of these can be coached by accelerators.
Weiss operates on an even more unforgiving timeline than most investors when evaluating founder readiness. If a startup doesn’t capture his attention within the first few minutes, “they’re done,” he stated. “If the presentation fails early, many investors in my business will just sit there and zone out and do something else.”
He applies what he calls the “grandmother test” to every founder evaluation, demanding explanations simple enough for family dinner conversation. “If you were with Grandma on the elevator, and you go from floor 1 to floor 2, if they don’t get it, they’re not going to get it on floor 34 by talking more.”
Private Equity Investors Don’t Fund Decks
“One of the things I learned about interviewing people is to focus on results, not job titles, not what their resume or LinkedIn says,” Weiss said. “Tell me the most important things you accomplished. You can learn a lot quicker about the person’s capability if you talk about actual real things, not resume builders or LinkedIn builder kind of things.”
His collegiate criminology studies taught him open-ended questions reveal character. “In sales, you have to have good IQ, but you have to have better EQ,” Weiss noted, adding “the average CEO of a Fortune 500 company had a C+ average in college because they had to develop their emotional intelligence skills.”
He divides investments into two categories: “Better, faster, cheaper—that’s about 90% of all investing. Then there’s Brave New World, something we’ve not seen before, like an iPad or ATM machine.” Brave New World deals make market sizing difficult, but Weiss says market size rarely kills a deal—founder quality does.
“The qualities and traits of founders have to be that they don’t quit, that they’re willing to try things differently, they’re open to new things, willing to be criticized, willing to be measured,” he said. “The ones that are closed off and try to do it all themselves rarely are successful.”
He continued, “If they’re not willing or open to senior leadership that’s been there, done that before, we’ll generally pass. Most entrepreneurs don’t have the skill sets—they’ve never run a company before. Some are Zuckerbergs of the world, but those are rare.”
Langbert agreed. “It’s never about the presentation.”
He looks for three traits: the ability to listen, wisdom to know what they don’t know, and judgment to focus on what matters. “Smart people know how much they don’t know, and stupid people just don’t know how much they don’t know. I try and stay away from the stupid people.”
He also passes on concepts he can’t understand (“If you’ve got your own LLM, I’m not investing—I’ll never understand it”) and concepts with no defensibility. “If it’s a me-too business, there’s no moat, there’s no IP, or it’s fictitious, you know, ‘we’re going to have this marketplace, and once it’s up and running, you know, we’ll have scale,’ that’s not enough.”
Thompson’s evaluation framework centers on sustainable competitive advantage within his thesis. When analyzing TalkShopLive, he discovered only 10–20% of revenue came from live streaming; the rest came from post-event social commerce.
“The live is a great, sort of bright, shiny object,” Thompson noted. “It definitely gets the most loyal fans and connects to an audience that you want to reach quickly and able to sell through.” But the real business was in the long tail of social selling after the live event ended.
The Emotional Code of Private Equity
Sam Thompson, founding partner, Progress Ventures
Sam Thompson
Successful fundraising is ultimately an exercise in emotional intelligence – the same force that drives the luxury consumer’s passionate pursuit of luxury. For CMOs, understanding these patterns unlocks how private equity investors think about the organization you’ve helped built and what they measure beyond the spreadsheet.
Thompson will watch how you respond to pressure. Langbert will test whether you focus on what you can control. Weiss will assess your intellectual honesty and capacity to adapt. Smith will gauge your coachability and the durability of your passion. As in marketing, emotion is the ultimate differentiator. Numbers may open the door to private equity opportunities, but human behavior closes the deal.
