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VC activity has slowed down dramatically this year, but there are still opportunities for seed-stage startups to evaluate their investors and hone in on their value proposition. Navin Chaddha, managing partner at Mayfield Fund, suggests that while founders may feel intimidated by questioning potential investors during the current economic climate, building a mutual zone of trust is crucial for the road ahead.
In this + article, Chaddha provides a ten-question checklist that can help founders assess whether the VCs they’re talking to are a good fit. Despite the obvious power imbalance, founders need to know whether the people they’re getting into business with understand how to operate during a downturn, and this article offers valuable insights.
## Sections:
– VC activity slowing down
– Opportunity for seed-stage startups
– Evaluating the value from investors
– Navin Chaddha’s ten-question checklist
### VC activity slowing down
According to the National Venture Capital Association, deal count for seed-stage startups decreased 52% year over year in Q1 2023. There is a significant decline in VC activity, which may seem like an opportunity for investors to learn new skills or travel. However, for seed-stage startups, this is the time to find out how much value their investors actually provide.
### Opportunity for seed-stage startups
While the economic conditions caused by COVID-19 have sparked an understandable level of fear and uncertainty, they have also presented an opportunity for seed-stage startups to evaluate their investors and assess key partnerships. It is highly important that a company’s early investors can navigate challenges and provide more than mere monetary support.
### Evaluating the value from investors
Despite the power imbalance between founders and investors, it is important for startups to gauge the potential value of their support. According to Navin Chaddha, this process can be daunting, but it’s worth asking early investors about their ability to operate during downturns. Founders need to build a mutual zone of trust with investors who understand the risks of operating in a recession.
### Navin Chaddha’s ten-question checklist
In his + article, Navin Chaddha provides startup founders with ten important questions they should ask before working with new investors. These include queries about investors’ experience in building and scaling startups, their understanding of industries relevant to the startup, and their support for founders during tough times.
## Conclusion:
VC activity may have slowed down dramatically during the pandemic, but that does not mean founders do not have opportunities to grow. This time presents a unique opportunity for seed-stage investors to assess their investors and determine their value. Entrepreneurs should remain patient and do their homework to build a mutual zone of trust with investors for the long run.
## FAQs:
### What is the National Venture Capital Association?
The National Venture Capital Association is an organization responsible for representing the US venture capital industry. It compiles statistics and analyzes industry trends and company data.
### Why is it important for startups to evaluate the value of their investors?
Early-stage startups crucially depend on early investors for not just monetary but also strategic support. A VC investor who understands the risks associated with operating in a recessionary environment is better placed to guide the founder and help navigate through volatile times.
### What is Navin Chaddha’s ten-question checklist?
Navin Chaddha’s ten-question checklist is a set of queries that founders can ask prospective investors to assess their ability to operate during downturns. These queries cover topics such as investor experience, support for founders, vision alignment, and domain expertise, among others.
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