4 Indicators That A VC Is Right For Your Startup

4 Indicators that a VC is Right for Your Startupby Brady Bohrmann, Partner at Avalon Ventures

About Brady Bohrmann

Brady has over 20 years of experience as a venture capitalist and operating executive in both information technology and biotech. His focus is on early-stage investments and backing talented entrepreneurs.

Throughout his venture capital career, he has worked with over 75 companies. He currently is a director or observer of many Avalon portfolio companies, including Backupify, Chart.io, Cloudant, Inc., Conjur, Indix, Juliet Marine Systems, Kaltura, Kinvey, Memrise, Nanigans, Pingup, Redbooth, Selectable Media, Simulmedia, The Happy Cloud, Twinstrata and Vook.

Today there are more funding options for early stage startups than ever before.

In the first three quarters of 2014, $33 billion was invested in U.S. startups by venture firms alone, surpassing the $29.8 billion invested in all of 2013.

This increase in venture funding is mainly due to the emergence of non-traditional investors such as hedge funds and mutual funds.

How to Determine Which VC is Right For Your Startup

1. They have good references from startups and other VCs

• What do previous or current companies they’ve invested in say?

• Do other VCs commend them for their collaboration?

• Have they made historically successful investments?

• What is their track record?

• Where is the firm in terms of overall performance?

• What stage is the VC fund in? Do they have reserves?

References

It’s important to get a reference before you ask for a meeting with a venture capitalist.

From this, you’ll be able to tell pretty quickly if a VC has a history of being fully committed and supportive of their portfolio companies, or bull-headed, arrogant or difficult to work with.

References

While it’s important to note that different VCs have different styles, very little gets done with an incompetent person in the room.

2. They listen first

Listening is one of the most undervalued skills of a good VC. It means that they understand the value of letting the CEO lead the company.

A Good VC Listens First

A good VC knows only to interfere when necessary, not at every opportunity. They also will not bull rush their way into the company, assume they’re always right, or apply what has worked in a previous scenario.

A Good VC Listens First

Listening is especially important because innovation is happening at a staggering pace -- even changing business plans and the way money is made.

Listening to the market, customers and other board members are all vital to succeeding in the good times and the hard times because things will get hard.

3. They don’t run at the first sight of blood

You should test their commitment to your idea, the company and the team.

• Do they talk about it and actively promote your company?

• Are they genuinely as excited about growing the company as you are?

• Will they be your “fox hole buddy” when times get tough?

They don’t run at the first sight of blood

The best VC for you will be very excited about partnering with your company and will bear down with you when things get hard - because it will get hard.

4. Their focus is your success

The right VC knows that their job is to work for you, not the other way around.

Their main concern should be how they can make the CEO insanely successful!

They should instinctively know how to do more with less intervention.

Focused on your success

If they can only engage at certain strategic points, it prevents them from meddling too much, becoming a distraction, or worse, a dictator.

Focused on your success

The people you surround yourself with at the table will make all the difference in the result of your company.

That’s why I believe it’s so important that founders know how to build an effective board. And there are certain personalities that are harmful to have at the table, but by far the worst is the one that sees their success as more important than yours.

When VC Isn’t Right

If you ever have serious concerns about the VCs interested in investing in you, it is important to consider if venture capital is even the best option for you or not.

Funding Options

There are many options for funding early stage companies and the future of yours will depend significantly on the people you choose to partner with.

That’s why selecting these people carefully is a decision worth putting every thought and consideration into.

Learn more!Visit http://avalon-ventures.com/blog for more actionable advice on early stage startups, VC funding and other entrepreneurial tips.