October 26, 2026
Check a venture fund the way it checks you. Talk to founders it has backed, including ones it didn't put you in touch with, and especially founders whose companies struggled, failed or replaced their CEO. Ask how the partner who will join your board behaved when things went wrong, whether the fund kept investing in later rounds, and whether it pressed its own lawyers, executives or directors on the company. Then compare the fund's size with the exit you're building toward, and check whether what the fund puts on paper matches what the partner told you.
Key takeaways
Because you can't undo the decision. A lead investor in a priced round often gets a board seat, the right to approve major company actions through the preferred stock's protective provisions, and information and pro rata rights that last until a sale or IPO. Under the standard venture documents, a sale of the company generally needs the approval of a set percentage of the preferred stock (the "Requisite Holders," often a majority), so a fund with a large preferred stake can have a real say in when and whether you sell. You can't fire an investor the way you can fire a vendor. See Protective Provisions and How Do I Build an Early-Stage Startup Board?
A fund will often spend weeks on diligence about you: calling your customers, former colleagues and earlier investors. Doing the same in return is normal, and good investors expect it. The best time is after a fund shows serious interest and before you sign a term sheet. Once you sign, the no-shop clause usually stops you from talking to other investors, so what you learn after that point is much harder to act on.
Start with the references the partner offers, because they're useful for specific questions. But treat them as a highlight reel. A fund will usually put you in touch with its happiest founders.
Then find your own. Many funds list current and past portfolio companies on their websites, and funding announcements and startup databases fill in the rest. Look for:
Founders the partner backed personally. The firm's brand matters less than the person who will sit in your board meetings.
Founders whose companies struggled. A fund's behavior in a down round, a bridge or a layoff tells you far more than its behavior when everything is growing.
Founders who were replaced as CEO. The company's current CEO, especially one the investors recruited, may not be the person who can tell you how the transition was handled. The original founder can.
Founders whose companies failed or sold for less than the money raised. Ask how the fund behaved when the outcome stopped mattering to its returns.
Founders a stage or two ahead of you who have the fund on their cap table but not on their board. They see how it acts as a follow-on investor.
The best introductions come through people who know both you and the founder you want to reach, such as other founders, your angels or your accelerator network. A short, direct note also works: you're considering the fund, you'd value 15 minutes, and the conversation stays between you. Aim for at least five or six calls, with no more than two from the fund's own list.
Founders are often reluctant to criticize an investor who still sits on their board or may fund their next company. Make it easy for them. Promise confidentiality and keep the promise: never repeat to the fund who said what. Ask for stories rather than ratings: "Tell me about the hardest board meeting you've had with them" gets a better answer than "Are they good on the board?" Listen for hesitation, faint praise and what they don't say. Ask every founder a few of the same questions so you can compare answers. And end each call by asking who else you should talk to, since founders who had a hard time with a fund often know one another.
Be discreet in the other direction too. The startup world is small, and partners often hear about reference calls. That's fine, because checking out a fund is normal, but don't share term sheet details you've agreed to keep confidential.
Use this as a menu, not a script. Pick the questions that matter most for your company.
Your relationship is with the partner who leads the deal and takes your board seat. Ask how many boards that partner sits on, since someone on ten boards has limited time for yours. Ask how long they've been at the fund and whether they're a decision-making partner, because a junior partner may need others to approve help at the moments that matter.
Ask also what happens if the partner leaves. In the NVCA model voting agreement, the investor's board seat is filled by a person the fund designates from time to time, and the fund can ask for its designee to be removed and replaced. If your partner leaves, the fund can generally put someone else on your board, possibly someone you've never met. You may be able to negotiate a right to approve a replacement designee, or at least a conversation before one is named.
Venture returns tend to be concentrated in a few large outcomes, so many funds look for each investment to have a realistic chance of returning a large share of the whole fund. The bigger the fund, the bigger the exit that moves its numbers. Ask how big the fund you'd be in is, when it was raised and how much is left for new investments and follow-ons.
Example. Compare two funds and a $300,000,000 sale of your company. A $60,000,000 seed fund that owns 10% of the company at the sale receives $30,000,000, half its fund. A $1,500,000,000 multi-stage fund that owns 15% receives $45,000,000, 3% of its fund. To return its whole fund from your company alone, the seed fund needs a $600,000,000 sale ($60,000,000 ÷ 10%), and the large fund needs a $10,000,000,000 sale ($1,500,000,000 ÷ 15%). These figures ignore fees, liquidation preferences and later dilution, but the gap holds.
That gap matters legally, not just commercially. If the large fund holds enough preferred stock to control the preferred vote, it can block a sale it considers too small, even one the founders and other investors want. See Drag-Along Rights and Liquidation Preference. None of this makes a large fund a bad partner. It means you should ask directly what kind of outcome the fund would welcome, and compare its answer with your own plan. See Venture Capital 101.
Many funds keep part of each fund in reserve to invest in later rounds of their own portfolio companies. Ask how the fund decides when to use those reserves, and check the answer against what founders tell you. A fund that leads your round and then declines to invest in the next one can send a signal to new investors, so it helps to know in advance how the fund decides. A fund that invests in you late in its investment period may have less set aside for your later rounds. See Pro Rata Rights.
Recommendations are normal. Funds know lawyers, recruiters and potential directors, and an introduction can be genuinely helpful. The question is whether they're offered or imposed.
Lawyers. The company's lawyer represents the company, not the investor, and should be free to push back on the fund's terms. A fund that insists you use a particular firm, or a firm whose work depends heavily on that fund, is asking you to negotiate against it with its own team. See Why Shouldn't You Ask Your Startup Lawyer for VC Intros? and Why Your Startup's Lawyer Is Not Your Lawyer.
Executives. Ask founders whether the fund made hiring a particular CFO, sales leader or CEO a condition of investing. Then read your own documents. The NVCA model voting agreement includes an optional clause that fills one of the common stock's board seats with whoever is CEO. If your documents use it and the board later replaces you as CEO, the stockholders are obligated to vote you off that seat and elect your successor, so a CEO change can cost a founder both the title and the board seat. Founder vesting matters too: if you're terminated, your unvested shares can usually be bought back at what you paid. See Single Trigger vs Double Trigger Acceleration.
Directors. An independent director can be valuable, but an "independent" seat the fund effectively picks shifts control of the board. Ask that any independent director be approved by both the common and the preferred directors.
It's the closest thing to a trial run you'll get, so compare what you were told with what you receive. Does the term sheet match what the partner described on the call? Do the closing documents match the term sheet, or do new investor rights appear in the drafts? Does the fund ask for things it never mentioned, such as a larger option pool, an extra board seat or a veto over your budget? Watch especially for re-trading: a lower price or new terms after you've signed and the no-shop has taken away your alternatives, without a real diligence finding to explain it. And notice how the fund treats your other investors, since you'll want it to treat them fairly in future rounds. See How Do I Handle Multiple Term Sheets? for comparing offers and handling exploding deadlines.
Changes aren't always a red flag. Diligence can turn up real problems, and a fund that explains a change and gives you time to respond is behaving reasonably. The pattern to worry about is a fund that says one thing and writes another, and treats your questions as a lack of trust.
For related reading, see How Do I Find the Right Angel Investors?, 6 Types of Investors in Startups and our Founder Guide: Series A.
If you're weighing a term sheet from a fund you haven't fully checked out, contact us before you sign it.
