How can you evaluate the track record of potential investors? (2024)

Key takeaways from this article

• Check their portfolio:

  Dive into the investors' previous ventures to understand their investment patterns and successes. You'll see if they're in sync with your field and if they have a history of fostering growth in businesses like yours.

• Seek founder references:

  Chat with other entrepreneurs who've walked the path with these investors. They'll give you the real deal on whether these folks are just check writers or true mentors who roll up their sleeves to help.

This summary is powered by AI and these experts

• Utpal Doshi Partner - Corporate Venture Capital
• SVET Svitlo Angel Investor , (20+ years), Serial…

• SVET Svitlo Angel Investor , (20+ years), Serial Entrepreneur (14+ companies with > $100M cap), Author (> 1M views), Lived in 40+ countries, the Founder of Evernomics, Crypto Influencer (since 2014),

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  To evaluate potential investors, consider their experience, investment philosophy, portfolio performance, reputation, and alignment with your goals. Check their track record of successful investments, exit strategies, and value-added contributions. Assess their industry expertise, due diligence process, and responsiveness. Review references from other entrepreneurs they've worked with. Evaluate their terms, valuation, and potential for future funding rounds. Ultimately, choose investors who can provide smart capital and strategic guidance.

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• Scott Samuel Founding Partner - Imagine Ventures Investor | VC/LP | Founder | Board Member | Cancer Survivor

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  There is no way to truly measure performance. The best VC's strike out at times. And some get lucky. Period. What you can do, what can be judged is character. Talk to founders and others, you'll get a sense of the one thing that matters. You can't do a good deal with a bad person.

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• Dr. Deepak Motwani Principal @ Wadhwani Foundation - Empowered 150+ early stage startups in raising over 65 CR+ in CY 2023 | Entrepreneur | Ex-IIMAVentures

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  Investment is not a one-time game; it's a habit and practice aimed at multiplying wealth and profits. Therefore, to assess the investment potential of any investor, I always prioritize checking their track record and existing portfolio. It is also crucial to understand the frequency and size of investments made by the investor within a financial year. Furthermore, knowledge about the preferred sectors adds value in getting the investor on board. However, the most critical aspect is understanding the potential investor's intent towards startup investment.

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• Utpal Doshi Partner - Corporate Venture Capital

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  Investors may be sector agnostic or sector specific and their portfolio is also created accordingly. Before approaching a potential investors, it would be prudent to check their portfolio and understand investment thesis whether it aligns with the startup venture. Also, check their contribution in terms of whether they are active or passive investors. This would help founders to approach right set of investors.

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• Sagar Agrawal Founder at Qubit Capital | Investment Banker | Helping Startups Raise Funds Globally

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  Evaluating potential investors involves a meticulous look at their portfolio. A diversified portfolio indicates strategic risk management and market understanding. Assess their success rate, industry alignment, and commitment to long-term vision. Reach out to portfolio company founders for testimonials. This analysis offers insights into the investor's philosophy and suitability for your venture, facilitating a fruitful partnership.

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• Kiran Mehta VC Investor - Sharing Insight, Doing Deals, Building Value

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  I’d also try and get references from people that they don’t offer as references either, don’t get sucked in by selection bias. It’s also worth speaking to investments that have gone wrong, as well as those that went to plan.

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  See Also

  Angel Investing 101: A Primer for Early Stage StartupsBusiness valuation | How investors determine the value of your business | Entrepreneur’s ToolkitHow VCs Negotiate: 8 Skills Top Founders Master for Startup FundraisingWhat Is Startup Valuation and How to Calculate It?

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• Utpal Doshi Partner - Corporate Venture Capital

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  Founders should check for reference in confidence. Investors may find it offending if they know that founders are seeking reference.

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• Kiran Mehta VC Investor - Sharing Insight, Doing Deals, Building Value

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  I’d also try and get references from people that they don’t offer as references either, don’t get sucked in by selection bias. It’s also worth speaking to investments that have gone wrong, as well as those that went to plan.

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• 🇫🇷 Giancarlo Chapoutier 🇩🇪 New (Ad)venture | Investment Manager | VC Investor | Wine Tastings and more.

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  Ask for references, but also contact portfolio companies directly. Try to talk to those where everything wasn't all nice and fun. The Investor's real face is revealed in difficult moments and exits.

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• Sagar Agrawal Founder at Qubit Capital | Investment Banker | Helping Startups Raise Funds Globally

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  Don't hesitate to ask potential investors for references. Speaking directly with founders or CEOs of companies within their portfolio can offer invaluable insights into the investor's approach, support level, and commitment. These firsthand accounts provide a clearer understanding of the dynamics and benefits of partnering with the investor, aiding in your decision-making process.

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• Sagar Agrawal Founder at Qubit Capital | Investment Banker | Helping Startups Raise Funds Globally

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  Assessing the reputation of potential investors is crucial. Look into their track record of integrity, professionalism, and ethical conduct within the industry. Seek feedback from other entrepreneurs, industry experts, and professionals who have interacted with them. Evaluating their reputation provides valuable insights into their reliability, credibility, and ability to add value beyond just financial investment. It ensures that you're entering into a partnership with an investor who upholds high standards and fosters trust within the entrepreneurial ecosystem.

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  Assessing an investor's reputation within the startup ecosystem is a critical step akin to charting the waters before setting sail. Investigate their digital footprint, encompassing media narratives, social media engagements, and thought leadership contributions. Networking with an array of founders, mentors, and industry peers who have interacted with these investors will yield invaluable insights into their community standing, relational dynamics, and their approach to navigating challenges and conflicts. This multifaceted reputation reconnaissance is vital in predicting the potential impact of their involvement in your venture. Spread Shark Love #divineintervention #gabenfreude

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• Mudassir Mustafa Helping Seed - Pre Series A startups in Product and Growth

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  Evaluating the reputation of potential investors is key. Look into their standing within the industry, including how they're viewed by peers, entrepreneurs, and within the broader business community. Reputation speaks volumes about an investor's integrity, reliability, and the value they bring beyond capital. Online forums, industry reports, and networking events can be great sources of information. A respected investor with a positive reputation is likely to be a valuable ally in your venture's journey, contributing not just with funds but with credibility and networks.

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• Annabelle Lin Private Equity | Venture Capital | Board Member | x-Googler | x-Operator

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  Research their standing in the industry through media coverage, industry reports, and public endorsem*nts. Look for consistent themes in how they are perceived, including their investment acumen, ethical standards, and business conduct. Pay attention to any awards, recognitions, or notable successes mentioned. Assess feedback from community forums and professional networks for unsolicited opinions. Negative reviews or controversies should be weighed carefully. A strong, positive reputation, particularly for integrity and successful investments, can indicate a reliable and skilled inv

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• Sagar Agrawal Founder at Qubit Capital | Investment Banker | Helping Startups Raise Funds Globally

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  Understanding the vision of potential investors is essential for alignment. Dive deep into their investment thesis, goals, and strategies. Assess how their vision aligns with yours, particularly regarding the long-term direction of your venture. Look for investors who share your values, aspirations, and commitment to growth. Discuss their approach to support, mentorship, and adding value beyond capital. By understanding their vision, you can ensure a synergistic partnership that fosters mutual success and sustainable growth for your venture.

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• • Report contribution
  Grasping the vision of potential investors is a crucial maneuver in ensuring alignment with your entrepreneurial north star. Delve into their goals, values, and the fundamental motivations driving their investment choices. Engage them in discussions about their expectations, success criteria, and key performance indicators. The ideal investors resonate not just with your business plan but with the ethos of your mission and culture, providing not just capital but guidance and support as you navigate the path to scaling your venture. Spread Shark Love #divineintervention #gabenfreude

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• Mudassir Mustafa Helping Seed - Pre Series A startups in Product and Growth

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  Understanding a potential investor's vision is crucial for a fruitful partnership. Assess whether their long-term goals align with your company's direction and values. An investor's vision for your industry and your specific venture can significantly influence strategic decisions and growth paths. Engage in deep conversations with investors to gauge their perspectives on future trends, innovations, and how they envision your company fitting into the broader market landscape. Alignment in vision ensures that both you and your investor are working towards a common goal, fostering a strong, supportive relationship.

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• Annabelle Lin Private Equity | Venture Capital | Board Member | x-Googler | x-Operator

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  The need to understand their vision, analyze their investment thesis, goals, and long-term strategies. Look at how their past investments align with stated objectives and the outcomes achieved. Assess their foresight in industry trends and how effectively they have navigated market changes. A clear, consistent vision that aligns with successful investments suggests strategic acumen. Consider how their vision has influenced their portfolio's performance and growth trajectories of their investee companies. This approach provides insight into the investor's strategic thinking, adaptability, and potential alignment with your business objectives.

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• Utpal Doshi Partner - Corporate Venture Capital

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  This is very crucial as investors not just offer their investment but also share their expertise and networks. It would be very important for startup founders to reach out to such investors and get their guidance.

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• Chandrasekar K. Investor | Consultant | SME advisory | Mentor

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  It's not advisable to ask for funds, without having done the whole 9 yards on structure, governance and Product Market Fit. Please bring investors on board, only those who have expertise & are able to spend time and transfer knowledge, which you need. Always, remember that you're sharing ownership. If you're someone who thinks I own and control the destiny of this startup, I just need you to fund my ideas, then remain bootstrapped please.

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• Annabelle Lin Private Equity | Venture Capital | Board Member | x-Googler | x-Operator

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  Scrutinize their background, education, and professional experience in relevant industries or markets. Assess their knowledge depth, skills, and how they've applied this expertise in past investments. Look for a history of sound decision-making and successful outcomes in sectors where they claim expertise. Analyze their contributions to the success of their investments, such as strategic guidance, operational improvements, or market expansions. Consider endorsem*nts or testimonials from industry experts and peers. An investor with proven expertise in relevant domains is likely to add significant value and make informed investment decisions.

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• Sagar Agrawal Founder at Qubit Capital | Investment Banker | Helping Startups Raise Funds Globally

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  When evaluating potential investors, it's essential to assess their expertise thoroughly. Look into their industry knowledge, experience, and past successes. Determine if their skills align with your venture's needs and if they have a track record of adding value to companies similar to yours. A well-rounded investor with relevant expertise can offer invaluable insights, strategic guidance, and connections vital for your business's growth. Ensuring alignment in expertise enhances the potential for a successful partnership built on mutual understanding and shared goals.

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  In the final act of vetting potential investors, evaluating their expertise becomes paramount, as their knowledge and experience are the catalysts that can accelerate your business growth. Scrutinize their professional backgrounds, skill sets, networks, and accessible resources. Engage them in a dialogue to understand their unique value proposition, what sets them apart as investors, and how they envision contributing to your journey. Aim to partner with those whose industry acumen, market insights, and connections align with your domain, offering not just funding but strategic mentorship and invaluable introductions. Spread Shark Love #divineintervention #gabenfreude

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• • Report contribution
  There is zero relationship between a person’s track record, even track records, and their competency as an investor.For instance, I was a high school swimmer. For a period of time, I held the school record in the men’s 50 freestyle, and our 200 medley relay did as well. I was proud of those achievements. But my swimming records are totally unrelated to my skills as a lawyer.Similarly, an investor with a track record should be praised and honored for that glorious achievement on the field of competition. Particularly if it’s the javelin throw, because that’s also scary. But you’ll need to look elsewhere if you want a good gauge of their investment acumen.

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• Mudassir Mustafa Helping Seed - Pre Series A startups in Product and Growth

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  Beyond evaluating an investor's portfolio, references, reputation, vision, and expertise, consider their commitment to ethical investing and social responsibility. In today's business environment, aligning with investors who prioritize sustainability, ethical practices, and positive societal impact is increasingly important. Investigate their involvement in initiatives or investments that drive social change, environmental sustainability, or corporate governance. An investor's dedication to these principles can not only enhance your company's brand but also attract like-minded customers and employees.

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• Harsh*t Krishna Advisor, Investor, Mentor | FinTech, Software, DeepTech, Consumer, EnergyTransition

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  It's surprising that the article does not talk at all about track record metrics as applicable to any private investor of raised capital - RPI, DPI, TVPI, IRR, MoM, Cumulative Fee and Carry %.Holistically, I would divide an investor track record screener into:- Team (experience, quality thereof, executing history together)- Committed capital managed- Current fund metrics like RPI, DPI, TVPI, IRR, MoM- Market positioning- Investment concept (thesis, themes targeted, risks and mitigation)- Performance on ancillary specific metrics like impactAny investor's performance would be colored by your lens, whether as a founder or a prospective LP.e.g., Founders need to be very conscious of the non-capital value add an investor brings.

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  I like to hear the stories associated with deals in a track record. I want to know why the investment was made, what the role of the investor was (what is their attribution to the deal? Who sourced the deal? Who was the lead investor?). For each "success" story I want to know how the exit was made successful by partners and what the contributions were made by partners along the way. What did they do for founders? What did they learn from their mistakes along the way? In terms of return multiples I like to know how long it takes to get to the multiple and that it is inclusive of management fees and carry. I like track records from contrarians who followed their own conviction and supported the portfolio companies to those autonomous exits.

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