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As the flood of pandemic-era venture capital recedes, startups need to avoid the scarcity trap that accompanies the chase for dwindling investor dollars. And as the markets turn, founders should remember the fundamentals they learned during times of plenty.

Investors are pulling back as fears of a recession grow. In the first quarter of 2022, global venture funding declined 19% to $143.9 billion from the previous quarter’s record-breaking peak, according to CB Insights.

Whether you’re looking for angel investors to seed your business or later-stage backers to help you scale, the partners you choose today will affect your company’s future — from how you run your company day to day to your exit strategy. That’s why it’s important to pick investors who are a good fit and have track records that show how they might act when the chips are down.

It’s crucial to understand who your partners are before you let them in the tent. Below, we’ll discuss key factors that startups should consider when evaluating investors in a changing landscape.

Kick the tires and get references

Check in with a potential investor’s portfolio companies, both current and past, to see what their experience has been. You’ll need to do this without violating any non-disclosure agreements, but a key question is how investors behaved in previous downturns. For example, in the second quarter of 2020, when COVID-19 upended the global economy, did they provide portfolio companies with a bridge through uncertain times or tell them to find their own money?

Early in the pandemic, investors at a venture-backed technology company we worked with helped the business manage expenses but initially refused to write checks. They also attempted to use their blocking rights to prevent other investors from backing the company and then offered it a term sheet that was substantially lower than the offer they blocked, attempting to take control of the company.

We were able to work with the company to prevent that from happening. But these were people with sharp elbows, and the company had been aware of information in the public domain involving those same investors that should have been noted. Heed such signs if you come across them during your due diligence.

So, what can you do? Ask around your network (including your attorneys) and the investor’s existing portfolio to see what kind of reputation an investor or fund generally has and what kind of value they’ve added to the companies they’ve backed. You can also ask funds for a reference to a portfolio company where their investment didn’t work out.

Talking to the CEO of a company where things didn’t go as planned can shed light on how an investor behaves in challenging circumstances. Just like anyone else, investors have reputations and tendencies, and this is information that’s available to founders, if they’re inclined to look.