I’ve been using this slightly chauvinistic metaphor a fair bit recently, so please forgive me
It’s always interesting to me to watch how entrepreneurs evaluate VC investors. If you are in the luxurious position to be able to choose your investors, I really recommend going through the extra couple days of work that that would entail. In a world of highly competitive financings, entrepreneurs are sometimes presented with the “opportunity” to “get a deal done” quickly. What they don’t realize is that on the VC’s side, they are being encouraged by their partners to “lock it up” quickly, which, when you put it that way, actually doesn’t sound too great at all.
Some investors are what I’d call bad girlfriends but great wives. They may be hard to get a hold of initially, tough to schedule with, deliberate with their process, ask really blunt and hard questions, etc. This can be off-putting, and I don’t advocate for this, but I think the entrepreneur should keep in mind that pre-investment behavior is not always indicative of post investment behavior. I know some investors that are pretty tough on entrepreneurs as they go through the fundraising process, but go to enormous lengths for the entrepreneurs after an investment as been made.
Conversely, there are other investors that are sweethearts in the dating phase, but not great after the investment. I’ve seen this myself – some investors are very charming and easy to work with during the fundraising stage, but don’t contribute much after the investment is made. Entrepreneurs quickly realize that the friendliness of the investor during the partner meeting doesn’t really mean squat when you can’t get him or her to hustle for you.
Ideally, you want an investor who is both a good girlfriend and a good wife. Some of the best do behave this way. But you can always catch a great investor in an “off” period. Much of VC is about managing your time so that you can be as helpful as possible to the entrepreneurs that you are in business with. So sometimes that means some annoying encounters early on. Also, at the seed stage, some investors might do very little due diligence and be very easy to deal with to get a very small check that they view as a option for the future. On the flip side, an investor that takes a seed investment very seriously and will devote their full efforts towards a company will probably be more methodical and rigorous in the evaluation process. One of these hypothetical investors may be considered a better girlfriend, but who will be the better wife?
All this can be addressed with a little bit of VC due diligence. Some specific thoughts:
1. Call some of the entrepreneurs that this VC has backed before. Most VC’s will say “feel free to talk to any of the CEO’s of my portfolio companies”. Take them up on it. You don’t need to go overboard – find a cross section of a) CEO’s that seem similar to you or lead a company that is in a similar stage as yours b) The CEO of a company that is not doing so well or where the person was replaced.
2. Use LinkedIN to accomplish #1 if asking directly might be challenging (which may be a negative signal in and of itself). I find that raving fans love talking about people that they are enthusiastic about, so don’t feel like you are disturbing them of it’s out of place to ask. Also, no answer is a datapoint (although take it with a grain of salt in case your email bounced or the entrepreneur is crazily busy). For the sake of all entrepreneurs and investors, only do this is you are very very serious and the VC has indicated very strong interest in investing in your company.
3. Ask for specifics. “What did they do specifically to add value in x, y, z situations” (when x, y, or z are the most critical areas that you need help). ”How did this investor behave during your follow on round of financing?”. If the entrepreneur has a couple investors, ask “what does investor X bring that investor Y did not?”.