VC’s will diligence the heck out of you. But you should be diligencing them too. Here’s how to do it…

Don’t ask the VC for references. He can just cherry pick the founders in his portfolio that are the most likely to say something nice about him.

Instead, go to his portfolio on the firm’s website or on Crunchbase. Pick a few companies and contact the founders yourself.

Don’t pick companies that are a big success. Instead, pick obscure ones that haven’t caught on. And if you can find a few that failed, even better!

It’s easier for everyone to get along when a startup is crushing it. It’s when things aren’t going well that tempers are likely to flare.

Once you’ve found perhaps 5 startups, send the founders a short message:

“Hi Mike! I see that Jim at ABC Ventures led your seed round. I’m considering having him lead mine. Do you have 5 min to discuss your experience working w/ Jim?”

Founders like helping other founders. If you ask politely and make it clear it won’t take long, you should be able to get plenty of references.

No reputable investor will mind you diligencing them. In fact, they’ll respect you for being smart and thoughtful.

I hope every founder I’m planning to invest in talks to other founders I’ve worked with!

I’m pretty sure they’ll hear something positive. That will improve my odds of getting into the deal.

I recommend getting references for anyone you let onto your cap table. But at a minimum, you have to diligence your lead investor.

As a founder, you’re extremely busy. It would be easy to let references slide, especially if someone is dangling $1 million over your head.

Don’t. Getting rid of an investor is practically impossible.

You could be stuck with this guy for 10 years or more. You want to make sure he’s someone you can work with without tearing your hair out.

A few minutes of diligence now could save you untold painful hours in the near future! Do yourself a favor: get those references.

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