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How to choose a venture capital fund for cooperation?
/>This article will help you figure out what to look for, how to behave and what questions to ask.
How to choose a venture capital fund for cooperation?
Funding is not just about getting money. This is an agreement that can determine the fate of a startup for several years to come. An erroneous choice of fund leads to conflicts, loss of time, loss of control over the company. If you haven't interacted with venture investors before, this article will help you figure out what to look for, how to behave and what questions to ask.
Why you shouldn't agree to the first option
When choosing an investor, it is important not to rush. Some startups, having received an offer from the fund, accept it without unnecessary questions - simply because there is an offer. It can be costly.
Example: An agrotech startup received investments from a fund that had no experience in hardware solutions. A few months later, conflicts arose: the investor did not understand how production cycles work, and demanded reporting that the team could not provide. As a result - failure to meet deadlines, increased tension, disbandment of the team.
The fund should be suitable not only for the amount of investment, but also for expectations, communication style, experience and level of support.
What distinguishes a suitable fund from an unsuitable one
There are three main criteria by which you can tentatively understand whether the fund is suitable for your project.
Stage at which the fund operates
Funds vary in what stage of development they are willing to invest. Some work with ideas and prototypes, others only with companies that already have revenue.
Before going to the fund, you should ask yourself questions:
- At what stage is my startup;
- Do we have revenue;
- Are we ready to show an increase in metrics
If your project is at the idea stage, you should not waste time on funds that only work with Series A.
Industry specialization
Funds usually focus on certain markets: fintech, healthcare, AI, SaaS, ecology. Even if the fund is ready to invest in you, but does not understand the specifics of your field, it is unlikely to be a useful partner.
Check the fund portfolio. If there are similar companies among portfolio projects, this is a plus. This suggests that the investor knows how processes work in your area and will be able to connect expertise and connections.
Reputation and transparency
Funds rarely share failures. Therefore, it is best to communicate with the founders who have already worked with this fund. Ask directly:
- Did the investor help after the deal
- Did you interfere with operations
- Were there any difficulties at the stage of going out of business
Funds with bad reputations can put the brakes on a company's growth, create internal conflict or simply fail to deliver on promises.
Questions worth asking an investor
It is important to remember: this is not an exam where an investor evaluates you. This is a dialogue. You also have to understand who you're going to work with. Below is a list of questions to ask a representative of the foundation at the first or second meeting:
These questions will help identify the weaknesses and strengths of the potential partner.
How to look for funds
- Step-by-step instructions:
- Identify the stage of your startup: prototype, growth, scaling
- Make a list of funds operating at this stage. Use sources:
Crunchbase,Dealroom, AngelList, accelerator and venture studio websites - Select funds by industry
- Explore briefcase and cases
- Find warm contacts through mentors, consultants, entrepreneurs
- Interview
- Ask portfolio funders for feedback
Examples of successful fund selection
Reface + Andreessen Horowitz
Reface has entered the international market with a product in the field of generative technologies. The foundation evaluated the potential of personalized content and provided funding without interfering with governance, but helping with entry into the U.S. market.
Preply + Hoxton Ventures
EdTech startup Preply was looking not just for money, but for support in entering the European market. Hoxton Ventures invested at an early stage and became a link with new partners in the UK.
People.ai + Lightspeed Venture Partners
The American-Ukrainian startup received support from the fund with expertise in B2B sales. The fund helped not only with money, but also with the strategy of entering the US market.
What to do after the fund interests you
- Find at least two funders from the fund's portfolio and chat with them
- Ask for details on standard conditions
- Clarify who will be your primary contact in the fund
- Check the legal aspects of the agreement through an independent lawyer
- Don't be afraid to refuse if conditions don't meet expectations
Final thoughts
Choosing a venture capital fund is not a search for money, but a search for a partner. The more carefully you approach this process, the more chances that your business will grow sustainably and without unnecessary conflicts. There is no universal "best fund" - there are those that are right for you. And it is quite possible to find it if you take your time and ask the right questions.
Mila Oreper
