- A smart entrepreneur’s guide to choosing the right VC
- Choosing an investor is like choosing a spouse (but with less romance)
- Not much difference between angel investors and VCs anymore
- What to do if your startup is suffering founderitis
- How risk and failure drive entrepreneurial success
- Beware of the revolving-door venture capitalist
- Getting an investor to move from “not now” to “yes”
- Talk to your venture capitalist before you crash and burn
- Entrepreneurs need to know when to call it quits
Not all venture capitalists are created equal. How to choose the right VC for your business growth
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Raising capital is often a tough haul, requiring endless pitching, gruelling due diligence, and an enormous commitment of time and money. But once in a while, a company comes along and grabs the attention – and imagination – of venture capitalists (VCs) in record time.
Maybe the company stayed in stealth mode, quietly assembling a rock-star team, signing a few marquee customers, and then unveiling their progress on a big stage. Or perhaps they’ve developed technology so game-changing that there’s already more business than they can handle. Whatever the reason, something is clicking, and VCs are taking notice.
When that happens, the race is on. Each VC learns of the deal at roughly the same time, and it’s full steam ahead. They stay up late reviewing documents, wake up thinking about the deal, and spend their morning routines pondering management gaps, competition, and market approach. By the time their coffee is poured, they’re strategizing how to structure the deal and move faster than the competition.
For the entrepreneurs, this flurry of activity can be intoxicating. Dumb entrepreneurs let the attention inflate their egos, potentially crushing their companies in the process. Smart entrepreneurs, however, channel their inner Spock, staying calm and logical as they face one of the most critical decisions of their journey: choosing the right VC. The choice isn’t just about money – it’s about finding a partner whose expertise, alignment, and support can help steer the company toward success.
Most VCs will tell you they bring more than just cash to the table – they’ll highlight their networks, their ability to help you recruit key team members, and their knack for introducing you to customers. That’s great in theory, but how do you know if it’s true? Start by looking at their portfolio, which you’ll typically find on their website.
Pay attention to how many companies they’re managing compared to the number of partners in the fund. If a partner is responsible for more than six or seven portfolio companies, they’re likely stretched too thin to provide meaningful support. In that case, they’re just money. Talk to the entrepreneurs behind those portfolio companies. Did the VC actually help when things went sideways, or were they merely cheerleaders? Do they understand the space you’re working in?
Philosophy matters too. If a VC is chasing trends, stay clear – they’re more likely to jump ship when the hype fades. On the other hand, some VCs are founder-focused and willing to ride out the storms, while others might push for leadership changes at the first sign of trouble. If the deal involves multiple VCs, ask if they’ve worked together before. Misaligned VCs can turn board meetings into battlegrounds, especially when fund timelines differ. A newer fund may have the patience to build the company, but an older one might demand a quicker exit.
Even the VC team itself is worth scrutiny. How long have they worked together? A new fund with an untested team could spell trouble, while a seasoned group on their second or third fund likely knows how to navigate challenges. Look at their track record. Have they delivered strong returns for their investors? Success breeds competence – and confidence.
Ultimately, your interests must align with your VC’s interests. If they’re backing you, they need to understand your industry, believe in your vision, and be prepared to support you through thick and thin. This is especially critical in today’s competitive market, where venture funding dynamics have shifted. Rising interest rates, inflation, and increased scrutiny on profitability mean the “growth at all costs” era is over. VCs are becoming more selective, and founders need to do the same.
The stakes are high. Entrepreneurs who don’t do their homework risk joining the ranks of those who complain about their VCs. Sure, some complaints are valid, but others are like blaming a car for breaking down after buying it without a test drive. Not all VCs are created equal, and it’s your responsibility to find the right fit.
Go forth, ask the hard questions, and remember: the right VC can be the difference between scaling your company to new heights or watching it stall on the runway. Choose wisely, and prosper.
Warren Bergen is the author of Swagger & Sweat, A Start-up Capital Boot Camp.
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