How to choose the right startup investor before the first call

Start with facts that must fit

Write six facts first. Name your stage and funding ask. Name your market and place. Add your timing. State the help you need. This may be capital, a lead, or links.

For each investor, mark yes, no, or not sure. Ask about each unclear point. It is not proof. Do not use fame as proof.

An investment thesis is an investor's stated plan. It may name a stage, place, or field. Test it against your facts.

• Can this investor back our round?
• Does its plan fit our market?
• Do we need a lead or expert?
• Can its pace fit our timing?

Read current primary material

Start on the investor's own site. Read its firm, fund, team, and portfolio pages. Read new posts. Save each link and date.

Some firms test basic fit first. They also check for a direct rival in their portfolio. First Round says it does this before its first call. [2]

One old deal proves little. An investor can change focus, team, and pace. Mark old data as not sure. Ask. Do not guess.

• Current stage and field focus
• Named team member and role
• New deals in your field
• Close rival or buyer link
• Stated pace or deal steps

Check behaviour and conflicts

A portfolio can show skill. It can also flag a conflict. A portfolio is the firms an investor has backed.

Ask if it has backed a close rival. Ask how it keeps your facts safe. Ask who can say yes or no. Share no trade secret yet.

The British Business Bank says to check for conflicts. It says to speak with firms at a similar stage. It also says to seek views not set up by the investor. [1]

Ask past founders what took place. Ask how fast the investor wrote back. Ask what help it gave. Ask how it took bad news. Seek clear facts.

• Call a founder the investor names.
• Find one other founder if you can.
• Ask both people the same things.
• Keep facts apart from your own view.

Design a small first-call test

Send a short note. Give your firm, round, timing, and one fit point. Add one key question.

Use the call to test facts. Ask if this plan is still live. Ask who makes the call. Ask what comes next. Ask how it deals with a conflict.

Ask what help it can give. A good reply gives limits too. Do not ask for a funding pledge.

A first call is not a deal. First Round runs calls to check past work at a later step. [2]

• Is this plan live for our round?
• Who makes the deal call?
• Can you lead, join, or pass?
• What may make you pass?
• What is the next step?

Keep terms and advice for the right stage

Due diligence means checks before a deal. Early checks tell you who needs more time. Deep checks come before you sign. [1]

For US VC deals, NVCA has model deal forms. These include a stock purchase agreement, investor rights agreement, voting agreement and co-sale forms. NVCA says its forms are a start, need edits, and are not legal advice. [3]

Use a good local lawyer. Rules and forms change by place. A first call sets no terms. It creates no deal.

Walk away from a fee due before funding. The British Business Bank calls such a fee a red flag. [1]

Master Collective may help with networking and introductions. An introduction is not a recommendation, a diligence result, a funding choice or a capital pledge.