Truly Great Questions: Level 2
Last time, our Truly Great Questions: Level 1 gave a quick way to size up any business. Now, Level 2 takes it further. These are the questions we ask to identify long-term winners and include how we think about markets, moats, and long-term value. Does a company have the potential to be Truly Great? Let’s find out.
The 5 Questions We Use to Size Up Long-Term Winners
Whether you’re a founder planning to scale or an investor looking for staying power in a business, here are the five questions we use to gauge a business’s long-term potential:
How large, durable, and attractive is the market, and where do you stand competitively?
Why is this team uniquely qualified to build a truly great company now?
Does the business have (or can it develop) a strong moat that keeps it a priority for customers 5–10 years from now?
How will you scale while improving quality and staying ahead of competitors?
Why is the current valuation or price an attractive entry point for an investor, and what’s the margin of safety?
Why These Questions Matter
These questions are the heavy hitters we lean on to separate good business from the truly great. I’ve seen them make or break deals. We use them to dig into what makes a business defensible, scalable, and worth considering to invest in. Here’s the breakdown:
1. How large, durable, and attractive is the market, and where do you stand competitively?
Is the market growing, stable, or at risk of disruption?
Who are the main competitors, and how are you positioned to win?
Are there regulatory, economic, or cultural trends that significantly impact the market, positively or negatively?
2. Why is this team uniquely qualified to build a truly great company now?
What relevant track record or domain expertise does leadership have, and what evidence shows they can execute against ambitious timelines
How do they attract, motivate, and retain top talent?
Are they demonstrating an ownership mindset (capital efficiency, free cash flow focus, personal skin in the game)?
3. Does the business have, or can it develop, a strong moat that keeps it a priority for customers 5–10 years from now?
What is the biggest threat or disruptor to your model, and how do you mitigate it?
What’s your competitive advantage, and can it become or remain a defensible moat?
If you disappeared tomorrow, what would customers do and how quickly could a competitor fill the gap?
4. How will you scale while improving quality and staying ahead of competitors?
Which new products, markets or partnerships are you considering, and how is your product or technology evolving to stay ahead of competitors?
Which metrics and unit economics are you tracking to ensure healthy growth?
How do you balance investment in R&D or market expansion vs. near-term profitability?
5. Why is the current valuation or price an attractive entry point for an investor, and what’s the margin of safety?
What’s the valuation versus the company’s future potential?
What assumptions justify this price?
What are the current and future capital needs (equity, debt, resource allocation)?
The Takeaway
Level 1 is the foundation; Level 2 is the long game. These questions have steered us well, as founders, investors, and advisors. They’re not easy to answer, but it’s worth putting in the work to better understand your business and how long term investors might think about it.