Research Your Potential VCs

Investors may be funding your venture, but that doesn't mean you shouldn't be doing your homework on them. Here are three things you should find out before you partner up.
2 min read
Opinions expressed by Entrepreneur contributors are their own.

The relationship between entrepreneurs and venture capitalists often seems almost mystical, one in which business owners feel compelled to yield without question to the wisdom-and wallets-of financiers. But in truth, you should evaluate potential investors as you do any other professional service provider, says Stever Robbins, owner of Cambridge, Massachusetts-based VentureCoach.com Inc., which coaches executives on, among other things, how to pitch to investors.

When you're evaluating investors, says Robbins, talk to other companies they've funded to find out the following:

  • Are the VCs helpful and easy to work with?
  • What kind of responses do they give when the company runs into problems? Are they cooperative or adversarial?
  • When the entrepreneurs need the venture capitalists' help, do they get the attention of a partner or just an associate?

In addition, Robbins suggests obtaining a referral to one of a venture firm's former portfolio companies that didn't work out. "First, you want to know if the VC is willing to disclose its imperfections," says Robbins. "Then ask the departed company how the venture company dealt with the firm when it ran into trouble." The answers to these questions should give you a more complete picture of who and what you might have to deal with if you decide to work together.

More from Entrepreneur
Our Franchise Advisors will guide you through the entire franchising process, for FREE!
  1. Book a one-on-one session with a Franchise Advisor
  2. Take a survey about your needs & goals
  3. Find your ideal franchise
  4. Learn about that franchise
  5. Meet the franchisor
  6. Receive the best business resources
Discover the franchise that’s right for you by answering some quick questions about
  • Which industry you’re interested in
  • Why you want to buy a franchise
  • What your financial needs are
  • Where you’re located
  • And more
Whether you want to learn something new, be more productive, or make more money, the Entrepreneur Store has something for everyone:
  • Software
  • Gadgets
  • Online Courses
  • Travel Essentials
  • Housewares
  • Fitness & Health Devices
  • And More

Latest on Entrepreneur