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How extensively do investors, like VCs, look into a potential startup founder's history?

Jeff Andrews's Profile

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Based on my experience a VC's decision to invest is predicated on two primary pieces, i.e. ability to monetize the business and the ability of the management team to execute. The founder's history speaks directly to the ability to execute.

Topic Expert
Kent Thomas
Title: Founder
Company: Advanced CFO Solutions
(Founder, Advanced CFO Solutions) |

I agree Regis - management's background - including and importantly their reputation, prior success and results are critical to a sophisticated investor's ultimate decision to invest. You should expect and plan on a thorough investigation where matters of ethics can easily tip the scales when a decision is made.

Topic Expert
Phyllis Proffer
Title: Owner, Investor Relations Counselor
Company: The Heights Company, LLC
(Owner, Investor Relations Counselor, The Heights Company, LLC) |

The founder's history is critical to the investment decision. The VC is trying to predict future results. Regis made a good point about management's ability to execute and I would add credibility and reputation. Investing in a start-up is high risk and the VC is interested in learning as much as they can in order to better align their risk factors compared with the amount of money they plan to invest. The founder's history is as important as product information, market stats, debt structure and competitive intelligence.

Anonymous
(Chief Financial Officer) |

Extensively, as above commentators have indicated. Expect a criminal background check, possibly a "PI-type" check of acquaintances, contacts NOT listed as references, and of course a thorough review of behavior in past deals.

Gary Honig
Title: President
Company: Creative Capital Associates Factoring Co..
LinkedIn Profile
(President, Creative Capital Associates Factoring Company) |

Yes to all of the above, and to bring it up to date; these days equity investors whether Angel or a managed Venture firm want to see a founder who has successfully raised funds. Either they have already raised money for their existing project or better yet have raised multiple rounds for a previous project - even if it failed. Investors don't want to deal with founders who don't understand a term sheet or the nuances of valuations. One way to mitigate this issue is to have a seasoned law firm shepherd the transaction.

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