What are the Questions Entrepreneurs Should Be Asking VCs?

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.

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About Roger Ehrenberg 94 Articles

Roger is an active early-stage investor, having seeded or invested in over 20 companies in asset management, financial technology and digital media since 2004. Prior to his venture days Roger spent 18 years on Wall Street in M&A, Derivatives and proprietary trading.

Throughout his career he has held numerous executive positions, including:

President and CEO of DB Advisors LLC, a wholly-owned subsidiary of Deutsche Bank AG. His 130-person team managed over $6 billion in capital through a twenty-strategy hedge fund platform with offices in New York, London and Hong Kong.

Managing Director and Co-head of Deutsche Bank’s Global Strategic Equity Transactions Group. In 2000, his team won Institutional Investor magazine’s “Derivatives Deal of the Year” award.

As an Investment Banker and Managing Director at Citibank, he held a variety of roles and responsibilities in the Global Derivatives, Capital Markets, Mergers & Acquisitions and Capital Structuring groups.

Roger sits on the Boards of BlogTalkRadio; Buddy Media; Clear Asset Management; Global Bay Mobile Technologies and Monitor110. He is currently Managing Partner of IA Capital Partners, LLC.

He holds an MBA in Finance, Accounting and Management from Columbia Business School and a BBA in Finance, Economics and Organizational Psychology from the University of Michigan.

Visit: Information Arbitrage

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