5 Quiet Questions To Help Strategic Investors Decide Quickly And Well

Forbes

3 days ago

Shayne Fitz-Coy is the Co-Founder of Sabot Family Companies, a long-term investment company founded in 2016 in Stanford, California.
A few years ago, a banker who I consider a friend pitched me a debt deal with a "guaranteed" 15% return. I thought about it for a minute and then said no.
Eighteen months later, I did the same deal—for 15 cents on the dollar. It was awkward getting together for dinner later, but it was a good reminder that clarity and conviction matter more than prediction.
After two decades and more than a thousand pitches, I've learned that saying no is a discipline.
Business school teaches valuation but not restraint. For me, restraint came from watching a close VC friend ignore his gut. The founder was evasive, the model was unfocused and the pressure was high to get into the deal. But the loss shouldn't be his lesson. The lesson was how easily it could've been avoided.
I try to pass early when something feels off. Here's what I listen for in the first five minutes.
1. Do I Trust This Person?
This starts before the pitch.
• Do they take responsibility?
• Are they kind to my assistant?
• Do they listen, or do they just talk?
• Are they on time and prepared?
Strategic growth capital often means a long-term seat at the table. If I wouldn't want to share 10 years of board meetings and retreats with someone, that's enough for me to know to say no.
Character flaws don't fade with success; they often expand. Life is too short to work with jerks.
2. Can They Explain What They Do—Simply?
I ask for one sentence. If I get five, I start looking for the exits.
The best businesses know what they do without hedging or overreach. They don't bury you in jargon that seems like AI hokum.
Red flags that emerge immediately:
• Multiple unrelated product lines.
• Buzzword-heavy explanations.
• "Everything to everyone" positioning.
• Complex business models requiring lengthy explanations and backstory.
I once passed on a software company with solid margins, as I learned they were also building a hardware device platform, a courses business, a social network and something else I can't recall. Too many threads, not enough weave. I think they do software and pool cleaning services in the Southeast now.
I'm drawn to vertical SaaS in narrow niches or local service models with real cash flow and modest growth. If that sounds dull, good. Some of the best businesses are.
3. Do They Know What Drives The Business?
I don't ask for revenue. I ask:
• How many months of cash do you have?
• What's your renewal rate?
• What would you do with unlimited capital?
If they don't know CAC or LTV, I probably can't help. And if I hear "guaranteed return," I move on. If it were guaranteed, they'd borrow from a neighborhood bank.
The language around returns tells me everything. That "guaranteed" 15% deal I mentioned before? It wasn't filed with the SEC. It smelled like a junk bond dressed up as a sweetheart deal.
4. Is This A 'Too Hard' Problem?
Charlie Munger had a pile for that on his desk. I do too—mentally.
Here's what lands there for me:
• Creative accounting.
• Regulatory moats.
• Replicable models.
• Business plans that take 10 minutes to explain.
I once passed on a company that later tripled. Someone else made that call. I didn't lose sleep. Another founder reclassified expenses to inflate margins. The company tripled in value. Someone else made that money. I slept fine. My 98% rejection rate has produced zero portfolio failures.
As I tell my students: It's better to miss a good deal than to do a bad one. I operate on the philosophy that capital preservation trumps capital appreciation every time.
5. Would I Be Proud To Say Yes?
This one's quiet. But it matters.
• Can this founder handle setbacks with grace?
• Is the business model resilient?
• Does this opportunity make sense on its own terms?
• Will I be comfortable explaining this investment to my other portfolio companies?
If the answer is no to any of the above, I thank them and pass, often with a note:
Hi [First Name],
Thanks for walking me through what you're building. I learned a lot. It's not the right fit for me, but I admire what you're aiming for.
Wishing you all the best,
Shayne
The Case For Patience
Most pitches I passed on years ago, I'd still pass on today. The outcome changed. The decision was right. You have to distinguish between decision quality and outcome luck.
Patient capital doesn't mean holding longer. It means waiting better. Trust the quiet questions. They're easy to miss, but in my experience, they rarely mislead.
Master these five questions, and you could find yourself making better decisions faster and sleeping better at night.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?