Interviewing Venture Capitalists

The other day I had a conversation with a CEO who was strapping on his kneepads and polishing up his tin cup to hit the fundraising circuit.

He is not a complete novitiate, but neither could he write the book on the subject. He was a good student, smarter than a Shih Tzu — which is pretty damn smart.

I made bold to say to him, “Remember you are interviewing the venture capitalist just as much as they are assessing you.”

The most important element of fundraising is to ensure you enter into a transaction with a “good” venture capitalist which requires you to interview them.

Here is Dante’s view of the venture capital world.

So what questions do I ask, Big Red Car?

Ahh, I love a convo that goes right to the quick of a matter. Here are the topics I suggest you touch upon. Bit of “stream of consciousness” thing, Work with it.

 1. What is the founding tale of your fund? How has it evolved over the years? Who are the principals and what is their role today? What happens if the principals get run over by a car or die from COVID?

 2. Industry focus, size, age, and success rate? Average size of investment? Current age of the fund and how does that bear on this potential investment? Will time and timing be an issue?

 3. Do you have an investment thesis? Industry focus? Changed over the years? More than one investment in the same space? Conflicts?

 4. Do you like to lead or follow? Do you have a stable of relationships with whom you like to work?

 5. Do you provide follow on funding? Take your prorata piece of future fundings? How many have you actually done? Passed on? Why?

 6. Do you like to take a board seat? What do you see as the role of an effective board member? [Ask them their views on diversity and take a hard look at their firm photo to see if their words match their deeds. What will they require of you?]

 7. What is the average length of an investment? Do you ever rotate the board member during that term? How do you feel about limiting board seats to three years?

 8. What things in a company should require board approval? What reports do you require as a board member?

 9. Do you make competitive investments within this fund or others? How do you do that?

 10. What is your view on a “consent of a majority of the shareholders in lieu of a board meeting” type approval?

 11. How much litigation have you engaged in in the last one, five, and ten years. Outcomes? Get specific on this.

 12. What kind of exits have you had from successful investments?

 13. How many CEOs make it to the five-year plateau? How many CEOs have you had a hand in firing in the last one and five years?

 14. How do you appraise CEO performance? Does the company pay for a CEO coach for me?

 15. Do I get a written Employment Agreement with all of this spelled out? If not, why not?

Now, that’s a lot of info. Be careful and smooth about how you acquire it. Take your time.

References, Big Red Car?

Yes, of course. I want you to get the scoop from big successes and flop sweat failures.

Be prepared for some horror stories. Every VC has a few.

Bottom line it, Big Red Car

In life you do not get what you EXPECT; you get what you INSPECT. Hold a magnifying glass up to your potential venture capital pals.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car.