Evaluating Venture Capital Funds as a Founder

The 8 Part Test Before Taking a VC Term Sheet: #1. Talk to as many founders they’ve invested in as you can. Do reference checks. You may hear 1 or 2 rough stories, bear that in mind. In fact, expect that. Don’t expect 100% support, at least not for folks at big funds that write big checks and serve on boards. But talk to as many as you can, at least a few. And listen. And ask how supportive they were vs. the others. You will hear advice from a lot of folks to talk to founders that failed, to see how the VCs supported them. I think that’s fine. But the flaw in that advice is that failures are messy. You get more value IMHO talking to founders that built something that got to some scale at least. #2. Ask how many investments they write second and third checks into. VCs that don’t write second checks are less valuable. Their financial contributions will be mostly over after the initial check. At least know the answer here. All things being equal, it’s better to take money from a VC that often writes second and third checks. You probably will need one. #3. See how pushy they are around control. If they insist on a board seat for < 10% ownership, that’s a flag. If they want control disproportionate to the cap table, that’s a flag. #4. Ask if they’ll still be there in 10 years, at the same fund. Just ask.  If you don’t get a clear answer, they may not be. It’s definitely a bummer if a VC doesn’t stay at the firm that invested in you. Ask. And realize that if they don’t run the place, and/or aren’t a “managing general partner” or something similar — there’s a decent chance they aren’t at the firm as long as you’re at the helm as CEO. #5. Ask what’s the toughest founder-VC experience they’ve been through, and what they learned from it. They are always frictions. See what they’ve learned from it. #6. Ask about some of their stories of bringing in outside CEOs to run their startups. See how it happened, and why, and how they think about it. Bringing in an outside CEO at the growth stage is a complex topic, with complex answers. Good to know how they think about it. Personally, I’ve never done it. I’m Team Founder or bust. #7. Ask what their worst investment was, and why. They know. Let them talk about it for a while. Don’t interrupt or stop them :). You’ll learn a lot. #8. Ask what CEO they’ve invested in that they respect the most. This is what they’ll be looking for from you.  If you don’t like what you hear, it may not be a great fit. If you have options.

Founders: before you pitch a VC, make them pitch you. The best founders I’ve worked with never just take the meeting. They ask sharp questions — because they expect capital. They’re deciding who earns a spot on the cap table. Here are 5 questions I’d ask before pitching any fund — and what their answers actually mean: 1️⃣ “What’s your value add — beyond capital?” This flips the script. Great founders want more than a check — they want leverage. Ask for specifics: → What intros have they made this month? → Who actually supports the portfolio — and how often? → Can they name a founder they actually helped post-investment? 2️⃣ “What does your diligence process look like?” Founders waste weeks chasing ghost processes. Don’t. Make them lay it out: → How many calls? → What docs do they expect? → Who gives final sign-off? Once they commit to a process — hold them to it. 3️⃣ “How many new deals are you targeting this quarter?” This tells you if they’re actually investing or just “taking meetings.” If the number is 1 or 2, and your round isn’t urgent for them… That’s a signal. (Especially if you're early and they’re deploying late in the fund.) 4️⃣ “How do you usually work with founders post-check?” You want alignment — not surprises. → Do they do monthly calls? → Are they active on hiring, GTM, or board management? → Or are they just a name in the investor update? Neither is wrong. But you deserve to know. 5️⃣ “How do decisions get made at your fund?” You’re mapping power — not just enthusiasm. If they say “I love this” but can’t bring it through IC without another partner on board, that’s key context. Bottom line: Fundraising isn’t just about pitching well. It’s about qualifying your partners. Ask better questions. Get better investors. #VentureCapital #VC #Startups

I only cared about getting the highest valuation when I raised my pre-seed. This is a mistake that 95% of underrepresented founders make. Here are three things besides valuation to consider when evaluating a term sheet 👇 Valuation matters, sure. But you're missing the bigger picture if it’s all you focus on. Most founders get caught up chasing the highest valuation, and in turn, they take money from whoever has the largest number on the term sheet. However, the term sheet is packed with other clauses that can seriously impact your future as a founder. So before you pop the champagne over a significant number, here are three things you should consider: 1. Board Composition and Control: This is about who’s calling the shots. Giving up a board seat too early could mean losing some control over the company you built. Giving up a seat around Series A is normal, but doing it too soon can limit your input in the early stages when it matters most. 2. Liquidation Preferences: This is a big one. Liquidation preferences dictate how proceeds are distributed if your company gets acquired or goes public. Even if you raise at a high valuation, liquidation preferences could mean your investors get paid first—and you end up with less than expected. 3. Anti-Dilution Provisions: Anti-dilution clauses protect your investors, not you. If you raise another round at a lower valuation (a “down round”), they keep their equity share while you get diluted. This means your ownership stake shrinks even as you work to grow the company. My point? Yes, valuation is essential. But you might get burned down the line if only focused on that number. Make sure you’re looking at the whole term sheet—board control, liquidation preferences, and anti-dilution clauses could end up being just as important (if not more) than your valuation. Fundraising is more than just getting the highest offer; it’s about protecting yourself and the business you’ve worked hard to build. #startups #fundraising #venturecapital