पाठशाला Pathshala · धन Dhan, Money · Lesson 21 · Build

Choosing investors: run the reference call before you sign

An investor will spend weeks checking the company. A founder should spend one week checking the partner, starting with the founders the fund did not put on its list.

Pathshala, The Founder Library · 11 October 2026 · 7 min read

Vintage rotary telephones sit side by side in close-up indoors. — Photograph: Ahmet Bozkus · Pexels

A founder can replace a co-founder, a chief financial officer or an office lease. A lead investor holding preference shares and a board seat cannot be replaced at all. The only time to choose well is before signing, and the best evidence is what the partner did for founders when it cost something.

This lesson covers why the partner matters more than the fund, how to build a reference list the fund did not curate, what to ask and how to read the answers (with a figure for the gap that matters), the fund-level checks that take an hour, and how to do all of it without souring the deal.

The partner, not the brand

A fund’s name opens doors. The partner on the board decides how the next five to ten years feel. That partner votes on the budget, the hiring of senior people, the next round and any sale, and is the person who calls other investors when the company needs a bridge. Paul Graham’s Hacker’s Guide to Investors puts the difference plainly: what separates the great investors from the mediocre ones is the quality of their advice. It also warns that when a startup gets into real trouble, venture investors may simply sell it at a low price rather than try to save it. Whether this partner is the second kind is the question to answer.

Two consequences follow. Reference the individual, not the firm; a fund with a strong record can still field a partner who is new, distracted or on too many boards. And ask what happens if the partner leaves. Funds lose partners, and the company may be handed to someone it has never met. Ask who would take the seat, and meet that person before signing.

The list they give you, and the list you build

Every fund will offer references, and every reference it offers will be good. These calls are still worth making, because they reveal how the partner works when things go well: how fast they answer, what kind of help arrives, how board meetings run. But they cannot answer the question that matters, because the fund chose them.

Build a second list. Start with the partner’s board seats and portfolio over the last five to eight years, from the fund’s website, press coverage and the company profiles on LinkedIn. Mark the companies that grew, the ones that shut down or were sold for little, and the ones that raised a later round in which the fund did not participate. Then find the founders. Mutual connections, accelerator alumni groups and other investors will usually reach most of them within a week. Aim for three who did well and three whose companies struggled or were dropped, plus one co-investor who has sat on a board with the partner.

What to ask, and of whom

Keep the call to twenty minutes and ask the same questions every time, so the answers can be compared. Open with the decisive one: knowing what you know now, would you take this partner’s money again? Then ask for stories rather than adjectives. What was the worst quarter of your company’s life, and what did the partner do in it? Did the fund take its pro rata share in the next round, and if not, how did it explain that to the incoming investor? When you disagreed on something material, how was it resolved? What did board meetings feel like the week after a bad month? Has the partner ever pushed for a sale, a pivot or a change of chief executive, and how?

Two classic telephones on a desk in a dim office panelled in dark wood. — Twenty minutes a call and the same questions every time. The stories matter more than the adjectives. Photograph: tu nguyen · Pexels

For founders whose companies failed, add two more. When did the partner stop answering quickly, and did they tell you before or after they had decided? And how did the end go: a sale, a shutdown, a fight over preferences or a clean wind-down? A partner who stayed decent through a shutdown is rare and valuable. A partner who went quiet the month the plan slipped will go quiet again.

The co-investor call is different. Another investor who has sat on a board with the partner sees things founders do not: how the partner argues inside the investor group, whether they honour informal commitments to follow on, how they behave when the syndicate disagrees about a sale or a bridge, and whether their own firm backs their judgement. Ask for one example of each. Then put a short set of questions to the partner directly, because the answers are a reference in themselves. Which of your companies went badly, and what would you do differently? Which founder would you most like me to call, and which would you least like me to call? How do you decide whether to take your pro rata share in a company that is behind plan? A partner who answers the second question honestly has already told you a good deal; one who cannot name a company that went badly has either been very lucky or is not being straight.

Reading the answers

Write each call up the same evening in three lines: the yes or no, the best story and the worst one. Then compare the groups. The fund’s own references will say yes almost every time; that is why they were chosen. The useful number is the share of founders from the hard-times group who would take the money again, and the gap between that share and the curated one. A small gap means the partner behaves the same way whether or not things go well. A large gap means the brand has been doing the work.

Two cautions. Founders whose companies failed are sometimes bitter for reasons unrelated to the investor, so weigh specific stories more than tone, and look for the same story from two different people. And one bad reference is an anecdote, not a verdict; three with the same shape are a pattern. If the answers leave doubt, go back to the partner, describe the concern without naming the source, and listen to how they answer. Defensiveness is information too.

The fund chooses which founders you hear from first. You choose which founders you hear from last. Decide on the ones it did not choose.

The fund behind the partner: registration, age and reserves

Three facts about the fund take an hour to check and change what its money means. First, registration. An Indian fund should appear on SEBI’s register of Alternative Investment Funds, which listed 2,038 registered funds as on 9 October 2026; a foreign fund will invest under the foreign investment rules instead, and [the FEMA lesson](/library/fema-for-founders-when-a-foreigner-invests) covers what that means for the paperwork. Second, the fund’s age. Ask which fund the cheque comes from, when it closed and when its investment period ends. A fund near the end of its life has less patience and fewer reasons to back a company through a hard year. Third, reserves. Ask how much the fund has set aside for follow-on rounds in its portfolio and whether the partner expects to take the pro rata share in the next round. A fund that cannot follow on sends a signal to the next investor whether it means to or not.

Graham’s guide also notes that a large fund pushes its partners towards large cheques and limits how many boards each partner can carry. Ask the partner how many boards they sit on today. A partner carrying many active boards usually means the company will get the partner’s attention only in a crisis, which is the wrong time to get it for the first time.

Running the references without souring the deal

Good investors expect to be referenced and some are pleased to be asked. Tell the partner, once the term sheet arrives, that you will be calling founders from their portfolio, including some not on their list, and that you will keep the conversations confidential. Do the calls inside the exclusivity period, before the definitive agreements are signed; once the money is in, a bad reference is only a story. Paul Graham’s fundraising survival guide warns founders off inexperienced investors who can make a deal fall apart. The reference calls are how to find out which kind of investor is across the table before the deal depends on them.

The reference week, step by step

On the day the term sheet arrives, ask for the fund’s references and the name of the partner who would take the board seat. That week: call the curated references; build the off-list of three founders who did well, three who struggled or were dropped, and one co-investor; check the SEBI register, the fund’s vintage, its reserves and the partner’s current board count. Write each call up the same evening. At the end of the week, put the six lines that matter on one page: the yes count in each group, the gap, the best and worst stories, and the fund facts. Read it with your co-founders before the lawyers start drafting. If the page says walk, walk while walking is still cheap.

Nothing here is legal or investment advice. The SEBI register count was checked on 10 October 2026.