Posted by Anonymous on 2007-07-03
Tags: Closing Due Diligence References
A venture capitalist told me today that he passes on a number of investments because of bad references. He mentioned a specific instance where a former employer thought the manager in question was "a criminal" and another case where he learned that the group of founders were "fighting among themselves" to see who would run the company. In addition, the venture capitalist went on to say that in such cases, venture funds generally "just pass" without giving a good reason, since it is difficult to explain the reference context without giving away confidences.
This brings up a very important point that I have learned from personal experience: venture capitalists do both soft and hard references, and these references will haunt you one way or another. The "hard references" are the ones that you provide. The "soft references," which can include dozens of individuals, are people within your industry, potentially competitors, that they call in an off the "record format." In some cases, the calls you get from associates trying to learn about your business may be an industry research or reference call in disguise. So, what can you do" Members, read on...PRIVATE: Members Only (1824 Characters)