Doing Diligence … on Your Venture Firm

From a story in The Wall Street Transcript (in support of its upcoming “Back in Black” conference), just some of the things about which entrepreneurs should be doing diligence when looking at prospective sources of venture capital:

  • The level of oversight of the VC;
  • Milestones;
  • Change of control provisions;
  • The life-cycle of the VC firm;
  • Whether the VC is in the process of raising another fund;
  • How much capital is reserved for new deals versus reserved for follow-on investments;
  • How financial provisions will dilute ownership upon exist;
  • The chemistry that exists among the funds that are investing in the company; and
  • The degree of influence that the individual VC championing the deal has with his firm

It’s a good list, and one most first-time entrepreneurs overlook in their eagerness to get funded.


  1. Nigel deGruyther says:

    Back when I was doing this, I recommended to potential investee companies that they conduct due diligence on us as we were doing due diligence on them. Of the investee companies that I subsequently followed up with, none conducted any due diligence. It is possible that those in whom investments were not completed did conduct due diligence and did not like their findings…