I’ve been on both sides of the table, but here are the hard questions I’d ask my deal lead at a firm from which I’m considering taking venture investment:
1. Is this a core investment or something in which you have interest but would walk away from if things get difficult?
2. Does this investment fit with your firm’s thesis or primarily you own worldview? If you are expending significant relationship capital to get this done, how will this impact us if things get challenging?
3. On how many boards do you sit? Do you really have enough time to impact the outcome of this investment through your involvement and engagement?
4. Is there a culture of providing bridge capital to a series of objective milestones to get to a better point to raise our next round of financing?
5. Do you have the necessary external relationships to help us build the syndicate for our next round of financing? Will you be supportive even if we choose another firm and not your own to be the next round lead?
6. What are your return expectations? If we want to sell for a 5x and not a 20x return on your capital, are you going to stand in the way of us achieving our personal goals relative to you reaching your professional goals?
7. Do you turn into an asshole under pressure? Since we’re likely to be under pressure several times in the foreseeable future, can you effectively manage the tension in a constructive way?
There are certainly more questions to ask, but the responses to these will give you a good sense of who you’re dealing with. Working with a VC is not unlike marriage: it is a relationship that contemplates long-term commitment, is sure to involve myriad struggles and uncertainty and is very hard and painful to exit. So those questions that are seemingly uncool or uncomfortable to as your potential VC? ASK THEM ANYWAY.