How Do I Find a Good Venture Capital Firm?

Venture capital is a people business, and the best venture capital firms are those that are not only experienced and knowledgeable, but also easy to get along with.

So how do you find out who's good and who's not? Remember that it's a very, very small world. Venture capital firms are easy to reference: reputations of the better firms are well known to experienced lawyers and accountants. Actively seek information by making phone calls and speaking with others knowledgeable in the community. You should be looking for insight into the personality, intelligence, and objectiveness of the venture capitalists.

It's also easy to find information about venture capital firms through published sources, such as a venture capital journal and the firms' own Web sites. Typically a firm's Web site lists its complete portfolio. If you're in serious discussions with venture capitalists and angel investors, it's always appropriate to ask such firms for references from their portfolio companies. You should interview the CEO of selected portfolio companies of prospective investors in your business. The all-important questions to ask and understand before choosing to work with venture capital firms include:

• Do the venture capitalists keep their word?
• Do they make themselves accessible to you?
• Are they helpful with introductions and skillful in helping the company?
• Are they supportive of management?
• How do they react in a crisis?

Don't assume anything. Remember, their due diligence is going to include reference checks and even a formal background check on you. You owe it to yourself to take the same care. The relationship with a venture investor may last for years. Make sure you pick a partner you can work with.