An entrepreneur’s relationship with their VC is like a marriage. And while I’d never suggest checking a potential spouse’s “references,” when your company is on the brink of a serious investment, it most certainly does need to check the VC’s references.
Mark Suster contends that skipping a reference check can make an unhappy marriage even worse:
“And worse still, your VC will have certain controls in the company that don’t make it simply a matter of a “wasted opportunity.” They’ll likely be influential in future financings, in major economic decisions, in executive hiring / firing, annual business plans & ultimately in M&A discussions.”
There are 3 steps to checking a VC’s references:
- Get a list from them
- Don’t stop at that list
- Focus on the companies who went through rough times
For tips on how to implement this strategy, read the rest of the post on Both Sides of the Table.