How do crypto project founders pick the right VC?
Words: Alana Levin, Venture Partner, Variant
Written by: @IsdrsP (Head of Lido Validators)
Compiler：Luffy，Foresight News
Just as VCs will conduct due diligence on investment projects, founders should also conduct due diligence on potential investors.
A VC's top priority is to increase the company's odds of success. There are many ways that VCs can achieve this, and determining how effectively each investor can support their startup should be at the heart of founder due diligence. If I'm in the founder's shoes, I'd filter VCs based on the following criteria.
First, does VC really improve the chances of a project's success?
Can investors provide value beyond pure funding?
I think so. Through conversations with founders, here are some of the most frequently mentioned ways in which VCs can really help.
Branding: Gaining support from "Tier 1" VCs usually (at least in the short term) enhances the company's brand. This provides direct help in recruiting talent. The brand halo effect is slightly smaller when hiring the first 10 employees, but it's critical to attracting talent when a company reaches the Series A funding stage or later. Given the huge impact of early hires on a company's trajectory and culture, it's ideal for founders to attract these talents from their own network.
A strong brand means that the agency or partner is well known, respected, and seen as an important factor in the success of the project. Success is the best brand.
Knowledge and insight: Does the investor have lessons that can be used to provide useful advice to entrepreneurs? Are they particularly good at identifying factors that affect the market or business?
There are actually two things here: one, the relevant experience that the VC may have gained from the successful companies in their portfolio (or similar experiences themselves had as founders); Second, they are able to provide a clear understanding of broader market dynamics and how these dynamics may affect the company over the next 6 to 12 months.
Networking: Sometimes VCs can help founders (or other functional heads) reach the right people. The "right person" may include other executives or potential clients with relevant experience. Founders still need to fight for business on their own, and few customers are gained because of the VC's influence. But investors can certainly help entrepreneurs open at least some of the doors they want to enter.
Promotion channels: Some VCs have an audience, so being a "KOL" is part of the value they provide. It's clear nowadays that many VCs are trying to build their own marketing channels through podcasts, newsletters, X accounts, etc. Sometimes, these channels can indeed be an effective means of raising awareness and driving traffic for new startups.
You've received an investment offer, what should you do next?
First of all, congratulations! The opportunity to choose from a range of competitive investment offers is both an achievement and a privilege. Take your time and enjoy the process.
It's likely that you've already had some gut judgments about who you want to work with. The due diligence process often reveals things like the types of questions people are asking, the insights they share throughout the process, how quickly they follow up and how quickly they respond, and whether they feel culturally compatible.
It's time to validate that intuition. Here's the process I'll follow, in no particular order:
Conduct background checks on investors: These investigations should cover companies that are successful in the VC's portfolio, as well as those that are on the verge of or have collapsed. It's important to understand how investors partner in both successful and stressful situations. Ideally, these references are companies that you are working with as well as the investors you are working with.
Check for conflict risk: Does the institution have a history of investing in competing companies? More importantly, have they invested in any companies that could theoretically compete with yours?
Consider the partner's tenure at the institution: Typically, you choose both an institution and an individual partner. I encourage more founders to ask about potential partners' ambitions and future plans. A related reflection experiment is to ask yourself: If this partner leaves tomorrow, would you still be interested in this institution?
Determine if the institution is a match for your company's stage: Whether a fund continues to invest in businesses that are at the same stage as your company can affect the usefulness of its resources, the degree to which your company is prioritized in resource allocation, and the relevance of the advice investors can provide. A $1 billion fund provides a $5 million seed round investment, which represents only 0.5% of its total allocation. Frankly, if a fund invests $50 million to $100 million in a late-stage company, it becomes more difficult for the former company to get the attention and help of the agency internally.
Find out what the agency thinks about exit: It may sound a little strange. But in an era where IPOs are becoming increasingly rare, understanding investors' views on acquiring or selling secondary stakes can save you a lot of headaches down the road. Similarly, in the cryptocurrency space, understanding investors' views on selling tokens is a useful reference factor for token design and launch strategies.
Choosing a partner is often a "one-way street". Picking the right VC can never "make" a company, but it can improve the company's chances of success and at least make life a little better for the founder. Spending a few extra days doing due diligence on potential investors may pay off in the long run.
This article is sourced from Foresight News:
https://foresightnews.pro/article/detail/84075
Respectfully submitted by the AIC Team
May19, 2025
