Large institutions don’t back a manager on a pitch alone. They make calls first.

In The Operator Question, Tanya Muro gives two examples. The University of Utah’s endowment requires reference checks with past investors before backing a new manager. CalPERS, the large California pension fund, talks to former employees, past lenders and brokers.

Everyday investors almost never do this. Tanya’s point is that they can, and it doesn’t take much.

The simple version

Ask the company for three people who invested in its finished deals. And ask that one of them be from the deal that did the worst.

Then call them. Skip the question about returns. Ask about the hard part:

What was it like when things got difficult?

You want to know how the company communicated, how quickly it shared bad news, and whether investors felt informed or left in the dark. That is something a pitch deck can’t show you and an offering document won’t say.

Notice what you get

The response to your request is information on its own.

If you only get names from the best deals, notice that.
If you get no names at all, notice that too.

A company that is confident in how it treated investors during a bad stretch will usually be glad to connect you.

This ties directly to the five traits Tanya uses to judge an operator. Several of them, like communication and how a company handles tough times, are things past investors can tell you better than anyone else.

Would you make the call?

This post is based on a one-minute video on Tanya Muro’s YouTube channel. For education only, not financial advice.