I just came back from a fun seminar at Samuel Curtis Johnson Graduate School of Management at Cornell. The BR Venture Fund hosted a due diligence seminar and brought in senor principal of the Cayuga Venture Fund, Cliff Lardin. I’ve pitched to VCs in Palo Alto, San Francisco, New York and Minneapolis and this was the first time that someone actually gave a nice, coherent explanation of the diligence process.
Cliff emphasized that each step in the process is a gate or a filter. At each step, certain criteria must be met for the process to continue. The first filter is generally pretty basic: Do we invest in the space? Is this a real company? And questions like that.
One point that Cliff emphasized was that even if a VC likes your company, they cannot invest if their charter prevents them from it. Full stop. This echoes some of my experiences as an entrepreneur. I found that getting a meeting with a VC is generally pretty easy but YOU, the entrepreneur, must ask whether they are even able to invest in this space.
I learned the hard way that many people will take a meeting with the entrepreneur but in your initial phone call, be sure to see if they are allowed to invest in companies like yours. That one question will save you a lot of time and travel expense.
NOTE: apparently WordPress duplicated part of my original post. I'm not sure what happend but I removed the duplicate portion.