During due diligence, the most revealing portfolio company reference checks involve asking CEOs leading questions. Frame inquiries to suggest the private equity sponsor is taking undue credit for successes. This tactic encourages frankness and uncovers the true dynamics of value creation and deal sourcing.

In biotech, CEO insider buys are common and not very predictive. The real signal comes from the rest of the management team, especially the CFO. CFOs are typically more bearish and financially disciplined, so their decision to buy company stock is a particularly strong vote of confidence.

To predict the future health of a partnership, intentionally have difficult conversations before any investment is made. If you can't productively disagree or discuss serious problems before you're formally linked, it's highly unlikely you'll be able to do so when the stakes are higher post-investment.

Formal cultural diligence can be staged. A more authentic assessment comes from informal settings. Observing how a target CEO and their team treat service staff reveals their true character and provides a powerful, unfiltered indicator of cultural compatibility or potential red flags for integration.

The difference between a true partner and an employee is whether you seek their counsel on complex problems. If you consistently go to them for advice when you're unsure, they're a partner. If you only give them direction, they are not a "thought partner," which is a red flag for a C-level executive role.

Directly ask your manager, "When you talk about my performance in leadership meetings, what are the main points you emphasize?" An honest manager will answer directly, while a manipulative one will likely deflect or become defensive, revealing their lack of transparency.

Employees should test their managers by asking how they make decisions. A manager who cannot articulate their decision-making framework is a significant warning sign, suggesting a lack of clarity and potential organizational chaos. This serves as a powerful "reverse interview" technique for assessing leadership.

To elicit candid answers from fund managers, the most effective technique is not the question itself but the silence that follows. Resisting the psychological urge to fill the space forces the manager to sit with the question, often leading to less rehearsed and more truthful responses.

Proactively asking a potential investor how they navigate disagreements reveals their philosophy on board governance and CEO autonomy. Investor Alex Nihanky of Scale notes the CEO is the "runner" and the tie should go to them, but not all investors share this view. This question helps founders vet investor fit before a conflict arises.