One of the questions that came up was a very good one. It was about how to find the right VC firm. How do I know the VC is the person they say they are? For an entrepreneur, a bad investor can be so damaging psychologically, they are unable to execute.
Here is how I answered it.
Don’t ask the VC about themselves. Don’t ask them what kind of an investor they are. Don’t ask other investors about them. They will always put their best foot forward. After all, without the entrepreneur, they can’t make money so they need to be in your deal as much as you need them.
Instead, ask the entrepreneurs. Ask the people that started the companies they invested in. They should have a tombstone of investments on their website. If not, there should be data somewhere on the internet that shows who they invested in and at what stage.
Dig deeper by finding the entrepreneurs of the companies that failed. Find out what the investor was like when the company was going down. What did they do to help? What did they do that hurt? How was their language, attitude, and demeanor? Did they cause problems with other investors? \
Don’t be afraid. This is your company you are dealing with. This is your future. Diligence your investors as much as they are doing diligence on you. Don’t be sneaky, be transparent. Tell them you are talking to entrepreneurs.
It’s always easy to play nice in the sandbox when things are going well. When you are losing money, you tend to see all the character flaws come out.