How can founders of crypto projects choose the right VC?
TechFlow Selected TechFlow Selected
How can founders of crypto projects choose the right VC?
Choosing a partner is often a "one-way street."
Navigating Web3 tides with focused insightsAuthor: Alana Levin, Investment Partner at Variant
Translation: Luffy, Foresight News
Just as VCs conduct due diligence on startups they consider investing in, founders should also perform due diligence on potential investors.
A VC’s primary role is to increase the odds of a company's success. There are many ways VCs can achieve this, and determining how effectively each investor can support your startup should be at the core of a founder's due diligence process. If I were a founder, here are the criteria I would use to evaluate VCs.
First, does the VC genuinely improve the chances of success?
Beyond just providing capital, can an investor add other forms of value?
I believe so. Based on conversations with founders, here are some of the most commonly cited ways VCs can truly help.
Brand: Having backing from a "top-tier" venture firm often (at least in the short term) elevates a company’s brand. This provides direct benefits in hiring. The halo effect of brand matters less when recruiting the first 10 employees, but becomes critical for attracting talent once the company reaches Series A or beyond. Given that early hires have a major impact on a company’s trajectory and culture, ideally founders draw these initial team members from their own networks.
A strong brand means the firm or partner is widely known, respected, and seen as a key contributor to project success. Success itself is the best brand.
Knowledge and Insight: Does the investor have relevant experience that can offer useful guidance? Are they particularly skilled at identifying factors that affect markets or businesses?
This actually includes two aspects: first, relevant experience the VC may have gained from successful companies in their portfolio (or from personal experience as a founder); second, their ability to provide clear understanding of broader market dynamics and how those might impact your company over the next 6 to 12 months.
Network: Sometimes VCs can help founders (or functional leaders) connect with the right people. These “right people” could include experienced executives with relevant backgrounds or potential customers. Founders still need to close deals themselves—rarely does a customer come solely because of a VC’s influence—but investors can certainly help open doors the founder wants to walk through.
Distribution Channels: Some VCs have built audiences, making “being a KOL” part of their value proposition. Today this is evident: many VCs are actively building distribution via podcasts, newsletters, X accounts, etc. Sometimes, these channels can indeed serve as effective tools for boosting visibility and driving traffic to new startups.
You’ve received an investment term sheet—what now?
First, congratulations! Having the opportunity to choose among competitive offers is both an achievement and a privilege. Take a moment to enjoy the process.
You likely already have some gut sense about who you’d like to work with. The due diligence process often reveals insights—such as the types of questions people ask, the quality of insights they share throughout, their responsiveness, and whether there’s a cultural fit.
Now it’s time to validate those instincts. Here’s the process I would follow, in no particular order:
Conduct reference checks on the investor: These should include both successful companies in the VC’s portfolio and those that failed or nearly failed. It’s important to understand what kind of partner the investor is in both success and stress. Ideally, these references are companies that also worked directly with the investor you’re considering.
Assess conflict risks: Has the firm historically invested in competing companies? More importantly, are they currently invested in any companies that could theoretically compete with yours?
Consider the partner’s tenure at the firm: Often, you're choosing both a firm and an individual partner. I encourage more founders to ask potential partners about their ambitions and future plans. A useful thought experiment: if this partner left tomorrow, would you still want to work with the firm?
Evaluate stage alignment: Whether a fund consistently invests in companies at your stage affects the usefulness of its resources, how prioritized your company will be in resource allocation, and the relevance of the advice offered. For example, a $1 billion fund making a $5 million seed investment allocates only 0.5% of its capital to that deal. Frankly, if the same fund deploys $50–100 million into late-stage companies, it becomes much harder for the seed company to get internal attention and support.
Understand the firm’s views on exits: This may sound odd, but in today’s environment where IPOs are increasingly rare, knowing the investor’s stance on acquisitions or secondary sales can save significant headaches later. Similarly, in crypto, understanding an investor’s perspective on token sales is a useful input for token design and launch strategy.
Choosing a partner is often a one-way street. Picking the right VC won’t “make” a company, but it can improve the odds of success—and at the very least make life a bit easier for the founder. Spending a few extra days on due diligence for potential investors could pay off significantly down the road.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
Variant
