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