How Early Stage Entrepreneurs Evaluate Venture Capitalists

Abstract

This study examines the process and criteria by which entrepreneurs evaluate venture capitalists—the flip side of VCs' due diligence efforts. The selection process involves such issues as the time invested to gather information, the sources of information, and the number of venture capitalists considered. Selection criteria are divided into four groups: 1) Valuation; 2) Value-Added Services; 3) Reputational Factors; and 4) Venture Capitalist Attributes. The article presents results for all respondents and compares results when the respondents are sorted by geographic region, industry, experience, and age. The article also examines satisfaction, sorting respondents by the factors listed as well as by time devoted to the search and criteria ranking.