Who is the best-fit VC for my business?

I am often asked this question by entrepreneur friends when they have a choice amongst competing VC funds ready to fund their business, all other commercial terms being more or less equal.

First, a universal truth - every VC becomes your friend and advocate if your business tracks well, and value creation continues to happen at a fast pace, post investment. They encourage, talk very well about you at every forum & go out of their way to help you by leveraging their knowledge and networks. However, this is something you don't know a priori when you have to choose from amongst two or a few interested funds.

At the point of deciding which VC fund to invite into your business, the key parameters to diligence out and evaluate are as follows:

  • Brand / pedigree of the fund as an institution
  • Fund's past investments in your business sector / segment, and the implicit industry focus & insights it foretells
  • Fund's ability to write or syndicate the next larger cheque if you needed additional capital for the next level of scaling up
  • Profile of the Partner from the fund who is going to take the lead on the investment in your business - past experience, years at the fund, personal chemistry et al
  • Fund's & Partner's post-investment behavior with other portfolio companies - this would require speaking with the entrepreneurs of a few portfolio companies of theirs; choose to speak with a set of entrepreneurs ... those whose businesses are doing well & also those whose businesses are not doing so great. Discussions with the latter is essential

Naturally, if you are not facing the problem of plenty, the question about best-fit VC doesn't arise - Beggars can't be choosers!