Managing a startup is a tremendous undertaking in itself. Managing a startup, while raising money, is typically a Herculean task. By the time that the due diligence is complete, an entrepreneur is usually pretty exhausted and eager to be done with the fundraising process. However, this is a key time for entrepreneurs to ensure that they are working with the right partner.

In my post, Your Company Is Who It Hires, I describe the importance of hiring the right people. This principle holds true for your investors too. Investors offer more than money, they offer operating assets (e.g., contacts and ideas) and they also become affiliated with your company in the minds of outsiders. As a result, having the right investors can really help you and having the wrong ones can really hurt you.

Bad investors can be too controlling, create unnecessary headaches and make decisions solely for their personal short-term financial gain; a bad investor takes more than they give. Furthermore, a bad investor can deter good investors from getting involved in the future.

As a result, in order to make sure that the investors can truly be a value-add, both with internal operations and external perceptions, you will need to conduct due diligence on VCs. The best way to do this is to ask the VC for references that can vouch for the VC. Typically these come in the form of entrepreneurs that the VC has backed in the past.

It’s important to note that few entrepreneurs conduct due diligence on VCs. This is probably because they both don’t have the time, don’t have more than one potential investor and have already asked their trusted advisers about the VC in question. As a result, VCs are not entirely accustomed to facilitating this type of due diligence, creating a need for you to broach this topic somewhat carefully as you might catch them off-guard. Ultimately, you should use your best interpersonal skills to find a friendly way to ask for some references.

These references can prove to be valuable even if the VC is your only potential investor and you intend to take their money regardless of the feedback you hear. References can help shed light onto the VC’s strengths/weaknesses and overall style. This can help prepare you to interact with them effectively when they join your board.