We raise growth capital for tech companies, so I spend a lot of time with CEOs trying to choose between Firm A and Firm B as an investor.   I wrote an initial post on questions a CEO should be asking directly of a General Partner wanting to invest in the company. In this follow-up I share some questions to be asked when talking with external references.

The most valuable source of discovery is discussions with CEOs where your prospective boss has been an investor / Director. Request a few references. Any reputable investor will have them at the ready. Most will be surprised and disappointed if you do not ask.

Pursue the offered conversations, but also dig around on your own to find references not offered. A LinkedIn or Crunchbase search of current and former portfolio companies will turn up a few former senior executives. You may even find executives who were fired by the investor. Some references will share complaints over issues they brought on themselves, but you can usually filter the feedback and learn from it.

A few good questions for portfolio executives regarding how your prospective investor behaved include:

What percentage of the Board meetings did investor attend in person?

How often did (s)he ask questions that were already covered in the Board book? (suggesting book had not been read)

Did the investor keep email open during Board meetings?  Obviously a negative

How well organized is the investor?  This is a key point as investors need to juggle details on an incredible variety of companies, sectors and people. Keeping it straight is not easy.

How good is (s)he on follow up?  If the investor promises an introduction, how many times do you need to remind them before it happened?

Can you identify key customers / partners / senior hires where the investor provided the initial connection?

Does the investor know the difference between assistance and interference?

How did the investor react to bad news?

How often was the investor imposing on you for help in building his own business via LP meetings and diligence, diligence on his prospective new investments, etc.?  Some of this is normal, but investors should be mindful of CEO time.

You may have strong instincts about which investor is the best fit.  Make the diligence calls anyhow.  What you learn may just affirm your choice.  However, the conversations with other CEOs will provide some lessons for how to get the most value from your new investor post-closing.