Get the Inside Track on How to Best Handle VC Due Diligence
Get tips on how to handle VC due diligence from an entrepreneur and current venture capitalist.
Mark Suster, entrepreneur and current VC at GRP Partners, knows that determining how much to provide for VC due diligence can be tricky. “There is no universal answer” when it comes to VC due diligence, Suster writes, but he lays out some guidelines for founders to follow when going to initial meetings, follow-up engagements, and meeting with all partners.
For first meetings and the initial VC due diligence, Suster recommends that “you should have a limited number of discussions until you’re pretty sure that you’re likely to have positive results in fund raising,” but, he says, “you should be open in the meetings that you do have.”
After “two or more meetings,” Suster writes, “it is always appropriate for a VC to ask you for your past 12-month financial performance and your going forward forecasts.” Finally, when you’re ready to meet all the partners, Suster recommenders that entrepreneurs “allow [VCs] to make some careful calls into customers or partners” so that they have “necessary ammunition to lobby their partners before and after your meeting.” VC due diligence can be intimidating for founders, but don’t stray too far into blind openness or paranoid secrecy when dealing with investors.