Square Peg’s Paul Bassat debunked the value of anonymous feedback – just before founders ranked local VCs anonymously

- February 23, 2023 3 MIN READ
Paul Bassat (centre) with the Square Peg Melbourne team in 2020.
Square Peg has ditched anonymous feedback during its reviews, with cofounder Paul Bassat to saying it creates an “all care and no responsibility”mindset.

Bassat took to LinkedIn to post about the company’s revised review process, a few days before a new ranking list of Australian and New Zealand VCs based on anonymous feedback from founders who’d received VC funding left Square Peg out of the top 10.

While Blackbird was top of the “founder friendly” VC rankings, Square Peg came in at 11, with the country’s other major fund, Airtree, at 25.

The list ranked the top 25 VCs from among 150, based on feedbacks from more than 700 founders, left anonymously.

Behind Blackbird, EVP, OIF, Gen X newcomer Afterwork and New Zealand fund Global from Day One were the top 5. The list is already a controversial talking point in the startup and investment sectors, with many high profile funds failing to make the cut, amid a cautious welcome from some VCs about their inclusion, praising the “transparency” the VC leaderboard provides.

Astral Ventures cofounders Joe Patrick and Albert Patajo created the list in a bid “to be a source of truth showing the best VCs in the eyes of founders” and address the “rumour and hearsay” founders hear about VCs.

An Elo-based algorithm was used to rank the funds in a way they said removes bias towards larger, more active VCs.

Before it appeared, Bassat outlined how the VC had rejigged its review process explaining how the new half-yearly review, saying the usefulness of the feedback he personally received “was as good as any” he’d received in his career.

“The transparency, utility and thoughtfulness of the feedback from the entire team to our colleagues was a much higher quality than in previous reviews and this is incredibly useful,” Bassat wrote.

He went on to outline “why we did a better job this half” identifying two key areas that could be seen as countering the underlying principles behind the Astral VC rankings.

Square Peg removed anonymity from its reviews, as well as a rating scale, in favour of text-based answers.

Bassat said that provided “some incredibly interesting learnings”, including contradicting the idea that being anonymous leads to more truthful responses.

“There is an argument that anonymity encourages candour and enables people to provide more honest feedback but our learning is that the opposite is true,” he wrote.

“Anonymity can create a mindset of ‘all care and no responsibility’. On the other hand, in an organisation where colleagues really care about each other, direct (non anonymous) feedback requires the person providing the feedback to be thoughtful and transparent.”

No ratings

Ditching a rating allowed them to concentrate of what was said instead.

“The problem with a rating scale is that it can lead to a combination of herding and grade inflation and removing this noise from the process seems to have been a real positive,” Bassat wrote.

“Without a rating scale, the focus shifts from the ratings to the specific content of the feedback.”

The other change Square Peg made to his review process was to ask “‘less questions and better questions”.

Identifying the right handful of questions and having the discipline to ignore others, “requires real thoughtfulness”, Bassat said.

“Perhaps the biggest learning from my career (and it applies to any sort of process) is that asking the right question is the single most important driver of success,” he said.

You can read his full post here.