5 Red Flags I Listen for Before I’d Ever Invest in a Startup

For a startup to be investible, the founders have to prove they’re focused on one important thing.

Photo by أخٌ‌في‌الله on Unsplash

Recently, I’ve been helping a friend evaluate startups for potential angel investments.

Yes, a friend. Personally, I’m not interested in becoming an investor, but, thanks to a decade of teaching entrepreneurship, and a decade before that building companies, I’m particularly curious about how investors validate startups. Helping my friend is a good compromise because it’s an opportunity to gain some investor perspective without taking any of the risk.

What I’ve learned from “playing investor” is that most people assume investors are evaluating products, markets, or technologies. And those things obviously matter to some degree, but, when real money is on the line, the only thing that feels like it matters is whether a founder is good at acquiring customers.

After all, almost every problem in a startup eventually reduces to customer acquisition. You can have brilliant technology, an enormous market, and a compelling vision. None of it matters if you can’t consistently convince people to buy.

In fact, because customer acquisition is so important, I’ve begun experimenting with a new strategy for vetting very early stage companies. When my buddy wants me to check out a company for him, instead of asking to see a pitch deck that’s almost certainly going to be filled with made-up assumptions, I’ve started asking if I can sit in on one of the startup’s sales calls.

Simply put, listening to sales calls is the best possible strategy for figuring out whether a startup is going to be successful. To explain why, here are the most common red flags I witness when listening to sales calls and what they reveal about the startup.

1. They Start Explaining Before They Start Learning

The first red flag usually appears within the opening few minutes. A prospective customer asks a simple question along the lines of: “So what exactly do you guys do?”

Immediately the founder launches into a presentation. Five minutes later, I’ve learned everything about the product, the features, the technology, the roadmap, the vision, the integrations, and the pricing model. The problem is I haven’t learned anything about whether the customer actually needs any of it.

This is one of the most common mistakes founders make because, on the surface, it feels completely reasonable. After all, the customer asked what the company does. Of course you’re supposed to answer!

But experienced founders understand that sales conversations aren’t really about explaining products. They’re about understanding problems. The product only becomes relevant once you’ve figured out whether a meaningful problem exists in the first place.

The founders who worry me are the ones who seem relieved when they get permission to start talking. The strongest founders are usually the ones trying to get the customer talking instead.

2. They’re Talking More Than the Customer

This is closely related to the first point, but it’s important enough to stand on its own.

Whenever I sit in on a sales call, I find myself mentally tracking who’s consuming most of the airtime. And, almost without exception, the less experienced the founder, the more they talk.

I understand why this happens.

Founders spend years becoming experts in their products. They know every feature, every use case, every technical detail, and every reason someone should buy. And when they get nervous, they default to the thing they know best: explaining.

The problem is that explaining isn’t the same thing as learning.

The customer is the one who knows where the pain points are. The customer knows what they’ve already tried, what alternatives they’re considering, what budget they have, what internal politics they’re dealing with, and what would actually motivate them to make a decision.

Every minute the founder spends talking is a minute they aren’t learning any of that.

And startups don’t fail because founders know too little about their products. They fail because founders know too little about their customers.

3. They Rush to Fill Silence

One of the strangest things about sales is how uncomfortable silence makes people.

A customer pauses for three seconds and suddenly the founder feels compelled to rescue the conversation.

They add another feature.

Then another explanation.

Then another example.

Then another benefit.

Meanwhile, the customer was probably just thinking.

I realize this probably seems like a small thing, but I’ve started to view it as a proxy for something much larger. Founders who can’t tolerate silence often struggle with uncertainty in general. They want immediate feedback, immediate validation, and immediate momentum. The moment they stop receiving it, they feel compelled to do something.

But remember, customers don’t make decisions while you’re talking. They make decisions while they’re thinking. And thinking is usually quiet.

4. They Treat Objections Like Problems

At some point in almost every sales conversation, the customer pushes back. Maybe the product seems expensive, or they’re not convinced it’s a priority, or they don’t think it fits their organization.

Whatever the objection happens to be, I immediately stop paying attention to the objection itself and start paying attention to the founder’s response.

The founders who concern me are the ones who instantly move into defense mode. Before the customer has even finished explaining the concern, the founder is already constructing a rebuttal.

But objections are incredibly valuable. In fact, they’re some of the purest market feedback you’ll ever receive.

When a customer says, “I’m not sure this would work for us,” that’s not an attack. It’s information. And the most useful response is curiosity. Being curious means, even if the customer doesn’t buy, the founder still leaves the conversation knowing more than they knew when they entered it, and that’s real value.

5. The Call Ends Without Momentum

The final thing I listen for in a founder sales call happens right at the end. Or, more accurately, it happens when nothing happens.

The call wraps up, everyone thanks each other for their time, the customer says they’ll think about it, the founder says they’ll follow up, and then everybody hangs up.

And that’s it.

No defined next step, no commitment, no timeline, and no specific action. Instead, all that’s left are vague intentions floating into the universe.

What’s fascinating is that founders often leave these calls feeling optimistic because the conversation was pleasant, the customer seemed interested, and nobody said no.

But businesses aren’t built on pleasant conversations. They’re built on forward motion.

A sales process should create momentum. Every interaction should make the next interaction more likely. But when founders allow calls to end without clarity around what happens next, they’re often mistaking activity for progress.

And that’s a habit that extends far beyond sales, which tells me a lot about that founder. Heck, it’s the entire reason I like sitting in on customer calls. They’re one of the few places where founders can’t hide behind a polished narrative. Customers don’t care about startup mythology, they don’t care about pitch competitions, accelerators, or investor decks. They care about whether their problems are understood and whether those problems can be solved. Which means a sales call reveals something far more important than whether a product is good.

It reveals whether a founder knows how to learn. And if there’s one thing I’ve learned from spending years around entrepreneurship, it’s that the founders who keep learning are usually the ones who survive long enough to succeed.

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