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📰 Today's topic: The phone call that should happen before you write the check

A few of us were hashing out a late-stage deal last week when someone said: "I've got a friend who works there. Can I just call him?"

Yes. Please. Call him.

The hard part isn't finding deals or even writing the check. It's knowing whether the price makes any sense. And the fastest way to get a real read isn't a pitch deck or a headline. It's someone who works at the company.

One of our partners did exactly this before a big AI deal. He called a friend on the inside, someone he considers one of the smartest people he knows, and basically asked: this valuation feels high to me, am I crazy? The answer came back calm. Good team, fair price, feels good about it. That five-minute call did more than five hours of reading would have.

You don't need a fund or a fancy network to do this. Writing a $5k check? You've got just as much reason to pick up the phone as someone writing $5M. Maybe more, since $5k might be a real slice of your portfolio.

So who do you call?

• Someone working there now, ideally close to the product or the numbers

• A former employee who left on good terms

• A customer who pays for the thing

Now the part that makes people nervous. What can you ask?

Skip anything that smells like inside information. You're not fishing for revenue or some unannounced raise. You want color. Try: "What's on the roadmap you're excited about that you think people are sleeping on?" Or: "What do people miss because they don't see how it connects back to the rest of the business?"

The trick is to stay on stuff that's already public, or close to it. If they hesitate, change the subject. A good question is one they could answer at a dinner party without getting fired.

(One more reason this works: in a community our size, odds are someone you already know works at the company you're eyeing. You just have to ask around.)

The whole game in early investing is asymmetry. What do you know that the next person doesn't? Usually it isn't a spreadsheet. It's a conversation.

So next time a deal hits your inbox and the price makes you squint, don't just stare at the deck.

– Brian from Angel Squad

📕 Startup term you should know

Ever heard of Cash Burn Rate?

It's how fast a company is spending its cash usually tracked month by month. Gross burn is everything going out the door. Net burn is what you're spending minus what you're bringing in. Together, they tell you how much runway a startup has left before it's out of money.

My insider scoop: Reid Hoffman says startups should always keep 18+ months of runway because fundraising while desperate never ends well. For investors, gross burn shows you the cost structure, net burn shows you the path to profit. And if spending is spiking but growth isn't keeping up? That's your red flag. 🚩

Overheard in SF…probably

“Our minimum viable product is just a landing page with an email signup, but it's validated because 12 people signed up.”