Founder Resources
Due Diligence Questions
65 questions every founder should ask VCs before signing. Know what good answers look like -- and what red flags to watch for.
Fund Dynamics
Understand the economic structure of the fund. This directly impacts how they'll behave as your investor.
What is the total size of this fund?
Why Ask This
Fund size determines check size ranges and follow-on capacity. A $50M fund writing $5M checks has very different economics than a $500M fund.
Good Answer Looks Like
Clear number with context on how it fits their strategy. '$150M fund, we typically lead Seed and Series A with $3-8M initial checks.'
Red Flag
Evasive about fund size, or fund size doesn't match the check they're proposing. A $1B fund leading your $2M seed round likely won't give you attention.
What is the vintage year of this fund? How much is deployed?
Why Ask This
A fund in year 1 has different incentives than one in year 4. Early funds are actively deploying; late funds may be more selective or rushing to deploy remaining capital.
Good Answer Looks Like
'Fund IV, 2024 vintage. We've deployed about 40% and are actively investing.' Shows they have runway and aren't pressure-deploying.
Red Flag
Fund is nearly fully deployed (80%+) -- they may not have follow-on reserves for you. Or brand new fund with no track record.
What is your typical initial check size?
Why Ask This
Ensures alignment between what you need and what they typically write. Over- or under-sized checks create misaligned incentives.
Good Answer Looks Like
A clear range that matches your round. 'We typically write $2-5M initial checks at Seed, with $5-15M reserves for follow-on.'
Red Flag
Check size is far outside their normal range (they're stretching or experimenting), or they can't give you a clear number.
How many companies do you invest in per fund?
Why Ask This
Portfolio concentration affects attention. A fund with 20 companies will give you more time than one with 100.
Good Answer Looks Like
'We target 20-25 companies per fund with 2-3 board seats per partner.' Concentrated portfolio = more attention.
Red Flag
50+ companies per fund with a small team. You'll get a logo, not a partner.
What is your follow-on strategy?
Why Ask This
Follow-on reserves determine if they can support you in future rounds. No reserves = they become a passive investor after Series A.
Good Answer Looks Like
'We reserve 50% of the fund for follow-ons and have followed on in 80% of our portfolio companies.' Demonstrates commitment.
Red Flag
No clear reserve strategy, or they say 'we evaluate follow-ons on a case-by-case basis' (often means no reserves).
What does your LP base look like?
Why Ask This
LP composition affects fund behavior. Corporate LPs may create conflicts; unstable LP bases can cause fund distress.
Good Answer Looks Like
'Mix of endowments, foundations, and family offices. Our LPs have been with us across multiple funds.' Stable, long-term capital.
Red Flag
Heavy reliance on a single LP, or LPs with potential conflicts of interest with your business.
Are you raising a new fund? When?
Why Ask This
GPs raising new funds are distracted. Also, they may push for markups/metrics to help their fundraise.
Good Answer Looks Like
Transparent about timing. 'We closed Fund V last year, so we're fully focused on deploying and supporting portfolio.'
Red Flag
Currently in market raising a new fund (means they're doing their own fundraising) or unclear about timing.
What is the management fee and carry structure?
Why Ask This
Non-standard fee structures can indicate misaligned incentives. High management fees mean the GP is profitable regardless of returns.
Good Answer Looks Like
'Standard 2/20 with an 8% hurdle.' Industry standard alignment.
Red Flag
Unusual structures like 3% management fees, no hurdle rate, or GP putting in zero personal capital.
How much GP commit is in this fund?
Why Ask This
GPs investing their own money have skin in the game. Zero GP commit = misaligned incentives.
Good Answer Looks Like
'Partners have committed $5M+ collectively.' Shows they believe in their own strategy.
Red Flag
Zero or negligible GP commit. They're playing with other people's money only.
What is the fund's investment period vs. fund life?
Why Ask This
Investment period determines how actively they're deploying. Fund life affects when they need to return capital to LPs.
Good Answer Looks Like
'3-year investment period within a 10-year fund life, with two 1-year extensions.' Standard and gives you time.
Red Flag
Investment period is almost over (means they're rushing), or unusually short fund life (pressure to exit quickly).
Do your LPs have co-investment rights?
Why Ask This
LP co-investment can be good (more capital available) or bad (adds complexity and more stakeholders).
Good Answer Looks Like
'Some LPs have co-invest rights for larger rounds. We coordinate it to make it seamless for founders.'
Red Flag
Unclear about LP rights, or co-invest introduces parties that could complicate your cap table or governance.
What is your fund's target return multiple?
Why Ask This
Target returns affect risk tolerance and expectations. A 5x target fund needs home runs; a 2-3x fund is more flexible.
Good Answer Looks Like
'We target 3x net to LPs. We've returned 2.5x on Fund I and are tracking higher on Fund II.' Realistic with proof.
Red Flag
Unrealistic targets (10x on a $500M fund) or unwilling to discuss historical performance.
How is investment decision-making structured?
Why Ask This
Understanding who makes the final call and how fast prevents surprises. Some funds have Monday partner meetings; others take weeks.
Good Answer Looks Like
'Each deal goes through IC with all partners. We can go from first meeting to term sheet in 2-3 weeks.' Clear and fast.
Red Flag
Vague process, or 'it depends' with no timeline. Extended decision processes (8+ weeks) are a sign of indecision.
What happens if a partner leaves the firm?
Why Ask This
Key-person risk is real. If your lead partner leaves, who manages the relationship?
Good Answer Looks Like
'We have a structured transition process. Another partner takes the board seat, and we maintain the same level of support.'
Red Flag
No contingency plan, or 'it hasn't happened.' If they can't answer this, they haven't thought about it.
What percentage of your fund is allocated to new investments vs. follow-ons?
Why Ask This
The split reveals their actual commitment to new companies vs. existing portfolio. Affects how much attention you'll get.
Good Answer Looks Like
'50/50 split between initial investments and follow-ons. We follow on in about 70% of companies.' Balanced and committed.
Red Flag
Heavily skewed toward follow-ons (80/20) means they're not actively doing new deals, or heavily toward new (they abandon companies).
Working Style
How a VC actually works with portfolio companies day-to-day. This is where the real value (or headache) lives.
How involved are you at the board level?
Why Ask This
Board dynamics can make or break a startup. An overly controlling board or a disengaged one are both problems.
Good Answer Looks Like
'I take a board seat and prepare for each meeting. I focus on strategy and governance, not micromanaging operations.'
Red Flag
Wants board control (majority seats) or admits they don't attend board meetings regularly. Both extremes are dangerous.
How often do you meet with portfolio founders outside board meetings?
Why Ask This
Board meetings are formal. The real relationship happens between them. Monthly or bi-weekly check-ins show genuine engagement.
Good Answer Looks Like
'I do a monthly 1-on-1 with each founder. Sometimes more if they're in a critical phase. I'm always available via text.'
Red Flag
'I'm available if you need me' (reactive only) or 'we have quarterly catch-ups' (too infrequent to be helpful).
What does 'value add' actually look like for you?
Why Ask This
Every VC claims to be 'value add.' This question forces them to be specific. Actual examples > vague promises.
Good Answer Looks Like
Specific examples: 'I introduced Company X to their first enterprise customer. I helped Company Y recruit their VP Eng from my network.'
Red Flag
Generic answers: 'We have a platform team' or 'We help with recruiting and BD.' If they can't name specifics, it doesn't exist.
Can you connect me with 2-3 founders you've backed to use as references?
Why Ask This
The single most important diligence question. Talk to actual founders -- they'll tell you the truth.
Good Answer Looks Like
Immediately names founders and offers to make intros. 'Happy to connect you with [names]. They'll give you an honest perspective.'
Red Flag
Hesitates, wants to 'curate' the list, or says 'our portfolio speaks for itself.' If they won't give references, there's a reason.
What is your response time on average for emails and calls?
Why Ask This
Responsiveness during fundraising predicts responsiveness post-investment. If they're slow now, it gets worse after the check clears.
Good Answer Looks Like
'I respond to founder emails within 24 hours, usually same day. For urgent matters, I'm always reachable by text.'
Red Flag
Can't commit to a response time or acknowledges they're 'busy but try.' Check VCPeer ghosting rate data for verification.
How do you handle disagreements with founders?
Why Ask This
Conflict is inevitable. How they handle it reveals whether they'll be a partner or an adversary during tough times.
Good Answer Looks Like
'I share my perspective directly but ultimately respect that the founder makes the call. My job is to advise, not dictate.'
Red Flag
'I've never had a disagreement' (dishonest) or describes using board votes to override founders (adversarial).
Do you lead deals or follow?
Why Ask This
Lead investors set terms and do diligence. Followers just fill out the round. You want a lead who's committed.
Good Answer Looks Like
'We lead 80%+ of our deals. We set the terms and do full diligence.' Demonstrates conviction.
Red Flag
Mostly follows other investors. Follow-only investors add less value and may not have strong conviction in your company.
What is the typical time from first meeting to term sheet?
Why Ask This
Process speed matters. Fast = decisive. Slow = either bureaucratic or using you as a free option.
Good Answer Looks Like
'2-4 weeks from first meeting to term sheet if we're excited. We'll tell you quickly if it's not a fit.'
Red Flag
More than 8 weeks, or 'it varies widely.' Also watch for 'we like to get to know founders over time' -- this is a slow no.
What resources or operational support do you offer?
Why Ask This
Platform teams, recruiting help, marketing support, and GTM playbooks can be genuinely valuable if they actually exist.
Good Answer Looks Like
Specific team members with names: 'Our talent partner Sarah helps with first 5 hires. Our GTM lead Mike runs a quarterly CFO dinner.'
Red Flag
Vague references to 'platform' with no names or specifics. If the platform team is one person doing marketing for 40 companies, it's meaningless.
How many boards are each of your partners currently on?
Why Ask This
A partner on 12 boards cannot give you meaningful attention. 5-7 is manageable; 10+ is spread too thin.
Good Answer Looks Like
'Each partner sits on 5-6 boards. We intentionally limit board commitments to stay engaged.' Disciplined approach.
Red Flag
Partner is on 10+ boards, or they dismiss the question. Check LinkedIn/Crunchbase to verify.
Term Sheet
The terms you agree to define your relationship with the VC. Understanding their defaults helps you negotiate better.
What are your standard terms for this stage?
Why Ask This
Establishes a baseline. VCs with 'standard' terms are usually easier to work with. Non-standard terms should raise questions.
Good Answer Looks Like
'1x non-participating preferred, standard broad-based weighted-average anti-dilution, single trigger on change of control.' Market terms.
Red Flag
Participating preferred, full ratchet anti-dilution, or 2x+ liquidation preferences at Seed/A. These are aggressively founder-unfriendly.
What areas of the term sheet do you most commonly negotiate on?
Why Ask This
Reveals what they consider flexible vs. non-negotiable. Also shows self-awareness about their terms.
Good Answer Looks Like
'We're flexible on valuation and board composition. We're firm on standard protective provisions.' Reasonable flexibility.
Red Flag
'We don't negotiate' or 'our terms are take-it-or-leave-it.' Rigidity signals a difficult long-term partner.
What is your typical liquidation preference?
Why Ask This
Liquidation preferences determine who gets paid first in an exit. Anything above 1x non-participating is unfavorable to founders.
Good Answer Looks Like
'1x non-participating preferred. Standard across our portfolio.' Industry standard and founder-friendly.
Red Flag
Participating preferred (double-dip) or 2x+ liquidation preferences. These dramatically reduce founder payouts in moderate exits.
Do you require pro-rata rights?
Why Ask This
Pro-rata rights let the VC maintain their ownership in future rounds. Standard at Seed/A, but can create issues if they block other investors.
Good Answer Looks Like
'Yes, standard pro-rata. We exercise in about 70% of cases but don't block rounds if we're not following on.'
Red Flag
Super pro-rata rights (right to increase ownership) or using pro-rata to block competitive investors from participating.
What protective provisions do you typically require?
Why Ask This
Protective provisions give VCs veto power over certain decisions. Standard ones are fine; excessive ones limit founder control.
Good Answer Looks Like
'Standard NVCA protective provisions -- approval for new equity issuance, debt above a threshold, and M&A. Nothing unusual.'
Red Flag
Approval rights on hiring/firing executives, operational budget changes, or customer contracts. These micromanage founders.
Do you require a board seat? What board composition do you expect?
Why Ask This
Board control determines governance. The standard is 2 founders + 1 VC + 1-2 independents at early stage.
Good Answer Looks Like
'One board seat, with 2 founder seats and 1 mutually agreed independent. Standard 3-person board at Seed, 5 at Series A.'
Red Flag
Demanding multiple board seats or board control (more VC seats than founder seats). This removes founder authority.
What information rights do you require?
Why Ask This
Reporting requirements take time. Monthly financials are standard; weekly metrics dashboards are excessive for early stage.
Good Answer Looks Like
'Monthly financial package, quarterly board updates. We try to keep reporting burden low early on.'
Red Flag
Weekly reporting requirements, real-time dashboard access, or extensive KPI reporting at pre-seed/seed. Too much overhead.
Do you use side letters? What do they typically include?
Why Ask This
Side letters contain additional terms beyond the main agreement. They can include MFN clauses, advisory arrangements, or special rights.
Good Answer Looks Like
'We occasionally use side letters for MFN provisions or advisory compensation. Always disclosed to co-investors.'
Red Flag
Extensive side letters with hidden terms, non-standard vesting acceleration, or rights that conflict with other investors' interests.
What is your no-shop period?
Why Ask This
No-shop clauses prevent you from talking to other VCs while they do diligence. Shorter is better. Standard is 30-45 days.
Good Answer Looks Like
'30-day no-shop with a 2-week diligence timeline. We move fast because we respect your time.' Short and decisive.
Red Flag
60+ day no-shop period, or no-shop without a binding term sheet. Extended no-shops let VCs monopolize your time risk-free.
Do you require founder vesting or re-vesting?
Why Ask This
Some VCs require founder shares to re-vest after investment. This is standard at pre-seed but can be aggressive at later stages.
Good Answer Looks Like
'4-year vesting with 1-year cliff, with credit for time already spent. Standard and fair to founders.'
Red Flag
Full re-vesting from zero at Series B+, or vesting schedules tied to unrealistic milestones rather than time.
Track Record
Past performance reveals future behavior. Ask these questions and verify the answers independently.
What is the success rate of your portfolio companies?
Why Ask This
Most VCs lose money on most deals. A good VC is honest about this. The key is the magnitude of wins vs. losses.
Good Answer Looks Like
'About 30% of our companies achieve strong outcomes, 40% are moderate, and 30% don't work out. Our top performers drive fund returns.'
Red Flag
Claims most companies succeed (dishonest) or can't discuss outcomes at all. Transparency about failure is a sign of maturity.
Can you share examples of portfolio companies that failed? What happened?
Why Ask This
How they handle failure reveals how they'll treat you if things go wrong. A good VC learns from failure; a bad one blames founders.
Good Answer Looks Like
Names specific companies, explains what went wrong, and describes what they learned. 'We invested in X, the market shifted, and we helped the team wind down gracefully.'
Red Flag
Refuses to discuss failures, blames founders entirely, or claims they've never had a failure. Everyone fails; character is how you respond.
What are your realized markups and IRR across funds?
Why Ask This
Performance data tells you if they're good at picking and supporting companies. Unrealized markups can be misleading; realized returns matter.
Good Answer Looks Like
'Fund I returned 3.2x net. Fund II is tracking at 2.5x with 60% realized. Our IRR across funds is 25%+.' Specific and verifiable.
Red Flag
Only shares unrealized or gross returns (hides fees and losses). 'We have several unicorns' without discussing actual returns.
How many exits have you had? What were the outcomes?
Why Ask This
Exits are the ultimate proof of value creation. IPOs, acquisitions, and the range of outcomes tell you what to expect.
Good Answer Looks Like
'12 exits across two funds. 3 IPOs, 5 strong acquisitions, 4 acqui-hires. Our best exit was [name] at $2B.' Specific and honest.
Red Flag
Very few exits relative to fund age, or only talks about IPOs while ignoring the many failures. Also watch for 'exits' that were actually fire sales.
Have you ever been involved in removing a founder?
Why Ask This
Sometimes founder removal is necessary. What matters is how it was handled and whether the VC exercised good judgment.
Good Answer Looks Like
'Once, after extensive coaching and board discussion. We gave the founder a generous package and helped with the CEO transition. They're still a friend.'
Red Flag
Has removed multiple founders, or describes it cavalierly. Also a red flag if they've never had to make a hard governance decision (lack of experience).
What is the median and mean return multiple for your portfolio?
Why Ask This
Median is more informative than mean because a single outlier can skew the average. Low median with high mean = concentrated luck.
Good Answer Looks Like
'Median is 2.3x, mean is 4.1x. We aim for consistent returns, not just home runs.' Shows a disciplined portfolio.
Red Flag
Can only share mean (hiding that most companies return 0-1x) or refuses to share any performance metrics.
What is your follow-on investment rate?
Why Ask This
VCs who follow on signal confidence in their existing portfolio. Low follow-on rates suggest they pick poorly or abandon companies.
Good Answer Looks Like
'We follow on in about 75% of our companies. We evaluate each round, but our default is to support founders who are executing.'
Red Flag
Follow-on rate below 50% without good explanation. Could indicate poor initial selection or a tendency to abandon companies.
Have any portfolio founders publicly criticized the firm?
Why Ask This
Public criticism is rare because founders fear retaliation. If it exists, take it seriously and investigate.
Good Answer Looks Like
Addresses it directly if it exists. 'We had a situation with X. Here's what happened, and here's what we learned.' Transparency wins.
Red Flag
Dismisses criticism as 'disgruntled founders' or isn't aware of public feedback. Check VCPeer reviews for verification.
What is the average holding period for your investments?
Why Ask This
Holding period affects exit strategy. VCs with short holding period expectations may push for premature exits.
Good Answer Looks Like
'Average holding period is 7-8 years. We're patient capital and don't push for exits on our timeline.' Long-term alignment.
Red Flag
Pushing for 3-4 year exits, or mentioning fund life constraints that could force early exits against your interests.
Can you walk me through a deal that didn't go as planned and how you supported the founder?
Why Ask This
The real test of a VC is how they behave when things are going badly. This question reveals character.
Good Answer Looks Like
Specific story with a positive outcome: 'Company was running out of cash. We led a bridge, helped pivot the business, and introduced the customer that saved them.'
Red Flag
Can't name a single example, or the story reveals they pulled support when things got hard. If they abandon companies in trouble, they'll abandon you too.
Post-Investment
What happens after the money hits your bank account matters more than the fundraising process itself.
What happens in the first 90 days after you invest?
Why Ask This
The onboarding process reveals how organized and supportive the VC will be. Good VCs have a structured post-investment playbook.
Good Answer Looks Like
'Week 1: intro to our operating team. Month 1: talent needs assessment. Month 2-3: strategic planning session and customer intros.' Structured support.
Red Flag
'We'll figure it out' or no clear onboarding process. If they don't have a plan for the first 90 days, expect ad hoc support at best.
How do you handle bridge rounds?
Why Ask This
Most startups need bridges at some point. Whether a VC supports bridges reveals their true commitment.
Good Answer Looks Like
'We've provided bridges to 60% of our portfolio. We evaluate the business, but our default is to support founders who are executing.'
Red Flag
'We generally don't do bridges' or 'we evaluate on a case-by-case basis' (usually means no). This is a critical support question.
How do you support companies through down rounds?
Why Ask This
Down rounds are emotionally and structurally challenging. A supportive VC helps navigate the process; a bad one makes it worse.
Good Answer Looks Like
'We've been through several down rounds. We typically lead the inside round, help restructure the cap table, and protect the founding team's economics.'
Red Flag
'We've never had a down round' (statistically impossible if they've invested long enough) or they describe aggressive behavior like cramdown rounds.
Under what circumstances would you support replacing the CEO?
Why Ask This
Understanding their threshold for founder replacement helps you assess the real risk. This should be a last resort, not a first response to challenges.
Good Answer Looks Like
'Only in extreme cases: ethical violations, consistent underperformance despite coaching, or founder burnout. We always try coaching first.'
Red Flag
Low threshold for replacement, or a pattern of replacing founders early. Check their track record -- how many founders are still CEO?
Do you provide operating resources (talent, marketing, sales)?
Why Ask This
Concrete operating help can be worth millions in saved time and money. But only if the resources are real and dedicated.
Good Answer Looks Like
'We have a 5-person platform team. [Name] runs talent and has helped place 40+ executives across our portfolio this year.' Specific and measurable.
Red Flag
Vague 'platform' references without naming people, or the platform team is clearly overloaded (2 people for 80 companies).
How do you help with recruiting executives?
Why Ask This
Executive hiring is one of the most impactful areas where VCs can help. Good VCs have deep networks and structured processes.
Good Answer Looks Like
'Our talent partner maintains a network of 500+ vetted executives. We've placed 15 VP-level hires this year. We also subsidize executive search firms.'
Red Flag
'We send introductions when we can.' Passive, unstructured help that rarely materializes into actual hires.
How do you handle conflicts between portfolio companies?
Why Ask This
VCs often invest in companies with overlapping markets. How they manage this conflict affects your competitive position.
Good Answer Looks Like
'We have a clear conflict policy. We don't invest in direct competitors, and we wall off information between overlapping companies.'
Red Flag
No formal conflict policy, or they admit to having competitors in the portfolio without clear information barriers.
What happens when it's time to sell the company?
Why Ask This
Alignment on exit strategy is critical. Some VCs want 10x or nothing; others support moderate exits that can be life-changing for founders.
Good Answer Looks Like
'We support the founder's decision. If a $200M exit creates generational wealth for the team and it's the right move, we're supportive.'
Red Flag
'We need 10x returns on every deal' or 'we'd block anything below $1B.' This misalignment causes real harm to founders.
Do you help with customer and partnership introductions?
Why Ask This
Warm customer intros can accelerate revenue meaningfully. The best VCs have deep relationships with potential customers.
Good Answer Looks Like
'Last quarter we facilitated 25 customer intros across our portfolio. Our LP base includes 30 Fortune 500 CIOs we can introduce.'
Red Flag
'Our portfolio network is the best intro channel.' True in theory but often means no proactive effort from the VC.
How do you support founders' mental health and well-being?
Why Ask This
Founder burnout is real and pervasive. A VC who recognizes this and provides support is genuinely valuable.
Good Answer Looks Like
'We cover executive coaching for all founders, have a founder mental health hotline, and our partners are trained to spot burnout signs.'
Red Flag
Dismisses the question, or sees mental health as a weakness. 'Just grind through it' is a dangerous attitude from someone on your board.
Red Flags to Watch
Patterns that should make you pause, ask more questions, or walk away entirely. Trust your instincts on these.
They pressure you to sign quickly without giving you time to consult advisors or lawyers.
Why Ask This
Legitimate VCs expect you to do diligence on them. Pressure to sign suggests unfavorable terms they don't want scrutinized.
Good Answer Looks Like
'Take the time you need. We recommend you talk to your lawyer and at least 3 of our portfolio founders before signing.'
Red Flag
'This offer expires Friday' or 'we don't usually give founders this long to decide.' Exploding term sheets are a power play.
They are unwilling to share references from portfolio founders.
Why Ask This
Reference checks are the most important diligence you can do. A VC who blocks this is hiding something.
Good Answer Looks Like
Proactively offers 3-5 founder references, including companies that didn't work out.
Red Flag
Curates a specific list, delays introductions, or says references aren't necessary. Major warning sign.
They want to 'help' by bringing in their own executive team before the investment closes.
Why Ask This
Inserting their people before closing is a control move. It creates dependency and shifts power dynamics.
Good Answer Looks Like
'After we close, we'll work with you to identify where operational support would help.' Post-close, founder-directed.
Red Flag
Insisting on placing a CFO, COO, or their 'operating partner' as a condition of investment. This is a takeover setup.
The VC has a pattern of replacing founders in their portfolio.
Why Ask This
Some VCs have a strategy of investing and then bringing in 'professional management.' Check the data.
Good Answer Looks Like
Most portfolio founders are still CEO. 'We've only replaced a CEO once in 8 years, and it was mutual.'
Red Flag
Multiple founder replacements across their portfolio. Check LinkedIn and Crunchbase to see if original founders are still leading.
They are slow or unresponsive during the fundraising process.
Why Ask This
Fundraising behavior predicts post-investment behavior. If they ghost you before investing, it only gets worse after.
Good Answer Looks Like
Same-day email responses, clear next steps after every meeting, proactive communication about timeline.
Red Flag
Days between responses, unclear process, 'we'll get back to you soon' without specifics. Check VCPeer ghosting rate.
They ask for excessive personal financial information.
Why Ask This
Some background check is normal. Demanding personal tax returns, net worth statements, or spouse's financial info is not.
Good Answer Looks Like
'We do standard background checks through a third-party firm.' Routine and professional.
Red Flag
Asking for personal financial statements, credit reports, or family wealth information. This is unusual and invasive.
The term sheet has unusual or non-standard provisions.
Why Ask This
Non-standard terms often favor the VC in ways that aren't immediately obvious. Have your lawyer explain every provision.
Good Answer Looks Like
Clean term sheet with NVCA standard provisions. Your lawyer confirms everything is market standard.
Red Flag
Pay-to-play provisions, full ratchet anti-dilution, super voting rights, or redemption rights. Use VCPeer's Term Sheet Analyzer to check.
They badmouth other VCs or competitors.
Why Ask This
Professional investors focus on their own merits. Trashing competitors signals insecurity and poor professional conduct.
Good Answer Looks Like
'We respect [competitor VC]. They're good investors. We think we're the best fit for you because [specific reason].'
Red Flag
'Don't take money from [firm], they're terrible' or gossiping about other VCs' internal problems. Unprofessional.
They offer a valuation significantly above market.
Why Ask This
Flattering valuations can be traps. High valuation + aggressive terms = worse outcome than lower valuation + clean terms.
Good Answer Looks Like
Market-rate valuation with clean, founder-friendly terms. They explain the logic behind their valuation.
Red Flag
Valuation 2-3x above what other VCs are offering, combined with participating preferred, ratchets, or milestone-based vesting.
They insist on exclusivity before providing a term sheet.
Why Ask This
Exclusivity (no-shop) is reasonable AFTER a term sheet, not before. Pre-term-sheet exclusivity benefits only the VC.
Good Answer Looks Like
Happy to compete for the deal. 'Take meetings with other VCs. We're confident we're the right partner.'
Red Flag
'We need exclusivity to begin diligence.' This prevents you from running a competitive process and maximizes their leverage.
Preparing for a Specific Meeting?
Use our Meeting Prep Tool to generate a custom prep sheet for any VC in our database -- including red flags, recent reviews, and suggested questions.
Meeting Prep Tool