Tali Aben (my partner) wrote a great piece called Who's due diligencing whom?, and I just I have to echo her message. She claims that every entrepreneur should do due diligence about his/her potential investors, in order to make sure that there is a fit. It is common for VCs to Due Diligence companies before investment. But is must be a 2-way process. If you are an entrepreneur looking for money, here are 3 questions you should ask in regards to your potential investors:
- What do their current (and past CEOs) think about them? Will they work with that partner again?
- How does the partner act in times of trouble? (There will always be problems…)
- Do they do the minimum required (Come to board meetings, be responsive and available when needed).
In addition, I would recommend having an open conversation with your future board member as it relates to future work. Early expectation setting can build a great foundation for the future.
I would like to point out one more issue. Not all entrepreneurs can be picky about their investors. Sometimes, there is just one option, and it's better to have some money than no money. However, this does not mean there is no need to invest time to learn more about the future partners (investors). It's not just about making a decision. It's about reducing uncertainty.
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