I’ve written before about my startup philosophy and my philosophy on venture capital. When I decided to investigate VC’s it took me some time to get any kind of understanding of how this world works. I believe part of the difficulty stems from the fact that some of the power of a VC results from them controlling information flow (because they are, in fact, salesmen of a sort). Tom Evslin has a great piece on his blog, Fractals of Change, intended to be an introduction to the world of venture capital for the would be entrepreneur. I highly recommend it.
Some great advice:
Ed Jordan, my CFO at ITXC had an excellent way of judging VCs: “would you give them your money to invest?” he always asked me after a meeting. If the answer is no, run – don’t walk – away from the potential deal. Trust Ed (and me) on this: you don’t want to be stuck with dumb or incompetent VCs.