A venture capitalist's career security directly impacts the founder relationship. VCs with a proven track record (like Sequoia's Andrew Reed) act as supportive partners. In contrast, junior or less successful VCs often transfer pressure from their own partnerships onto the founder, creating a stressful and counterproductive dynamic.
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In a non-control deal, an investor cannot fire management. Therefore, the primary diligence focus must shift from the business itself to the founder's character and the potential for a strong partnership, as this relationship is the ultimate determinant of success.
With high partner turnover at large venture firms, a key diligence question for founders is whether the specific partner joining their board is likely to remain at that firm. A partner's departure can be highly disruptive, making their stability more important than firm brand.
David Cohen of Techstars advises founders to request references from a VC's failed investments. This reveals how an investor behaves during difficult times, providing a more honest assessment of their character and support level than speaking only with successful founders.
Alfred Lin's framework for board members is to be supportive 'shock absorbers' during hardships, helping founders pick up the pieces. When the company is succeeding, they become 'sparring partners' to challenge founders, prevent complacency, and push the business to the next level.
Founders should press VCs on how they specifically envision working together. A strong investor can articulate a nuanced plan tailored to the team's unique needs and the founder's working style, moving beyond a generic menu of services to show true alignment and understanding of the business's goals.
When fundraising, the most critical choice isn't the VC fund's brand but the specific partner who will join the board. Sophisticated founders vet the individual's strengths, weaknesses, and working style, as that person has a more direct impact on the company than the firm's logo on a term sheet.
VCs with operator backgrounds can provide a unique type of support, acting as a "favorite uncle." They are a safe sounding board for sensitive, human-centric challenges like layoffs, where founders may hesitate to speak with board members who are solely focused on growth metrics.
IVP's Samesh Dash observes that young VCs, driven by insecurity, often overcompensate by talking too much and offering premature advice. Maturing as an investor means shifting from talking to active listening, asking fewer but more pointed questions, and understanding a founder's immediate context before offering input.
Competing to be a founder's "first call" is a crowded, zero-sum game. A more effective strategy is to be the "second call"—the specialist a founder turns to for a specific, difficult problem after consulting their lead investor. This positioning is more scalable, collaborative, and allows for differentiated value-add.
Proactively asking a potential investor how they navigate disagreements reveals their philosophy on board governance and CEO autonomy. Investor Alex Nihanky of Scale notes the CEO is the "runner" and the tie should go to them, but not all investors share this view. This question helps founders vet investor fit before a conflict arises.
