Three Questions to Ask Investors During COVID-19

In early 2019, I wrote one of my most-read blog posts, Two Simple Questions To Ask Every Potential Investor. Those questions were:

“What do you specifically look for when you’re investing in companies?”

And a followup question, “Now that I’ve heard everything you’re looking for, I think we’re a fit for your fund. But in your opinion, is that really the case?”

Now that we’re in COVID-19 times, those questions remain as relevant as ever. Here’s why.

First, what’s going on with venture investors?

Venture funds typically operate on 10-year cycles. The first five years are something called an “investment period” during which the fund invests capital into startups. During the next five year period money isn’t invested and the fund collects proceeds by selling their shares, or by their startup investments being acquired or going public. For the sake of this blog, we’re going to focus on the first five year period and why it’s important.

In the first five years, a fund’s General Partners (GPs) create an agreement with the people who invest in the fund, called Limited Partners (LPs). The LPs commit to place a defined amount of capital into the fund for a set period of time.