A term sheet tells you what an investor offers. It does not tell you who the investor is. Four checks, none of which needs a lawyer or a favor, close most of that gap. We would rather you run them on us too.
1. Ask for founder references
Ask for two or three founders the investor has backed, and ask for at least one whose project struggled. Everyone gives good references from projects that went well. What an investor did when things went wrong is the part you are buying. Then message the founders directly, not through the investor.
2. Read the company registry
Find the legal entity that will sign your documents and look it up in the public registry of its jurisdiction. Check the exact name, the registration date, the registered address and the listed directors. Names are easy to confuse online: similar brand names exist in many sectors, and a fund, a management company and an unrelated firm can share most of a word. Make sure the entity on your term sheet is the one you researched.
3. Check the announced rounds
Pick three recent deals the investor claims. For each one, look for an announcement from the project itself, not only from the investor. Check that the round size, the date and the investor's name match across sources. A claimed deal that the project never mentions deserves a direct question.
4. Never pay first
An investor does not charge founders to be considered, to get a term sheet or to close a round. Be careful with any request for an upfront fee, a "listing deposit", a "legal retainer" or a token transfer before funds arrive. Services that a founder chooses to buy from third parties are a separate matter and should be priced openly. At Vanneck, the investment comes first and the support comes with it. We do not sell services separately.
A short checklist
- Two or three founder references, including one from a difficult project
- Legal entity name matches the registry and the term sheet
- Three announced rounds confirmed by the projects themselves
- No fee requested before funds are wired
- Standard terms stated in writing, with any departure explained
If an investor will not help you run these checks, that is also information.
This article is general information for founders and not legal or financial advice.