With the recent explosion of “micro-VC” funds (Seed/Series A Funds <$50M), positive macroeconomic trends and an increasing number of crowdfunding platforms (chief among them AngelList Syndicates), financing options for early-stage startups are plentiful. All capital is not created equal, however.

Though it’s self-serving, we are strong believers that startups should optimize for the right partners over valuation when fundraising. On our end, we do the same; we pick the founders we are excited to work with day in and day out for the next 5-7 years, and optimize for the best startups, not necessarily the best valuations. While valuation drives all returns, we want to be partners with the best founders and ideas possible, and recognize that can mean paying a higher price.

Your goals when raising venture or angel capital should be to close the proper amount of investment capital as quickly as possible, while partnering with the right investors at a valuation (and terms) that leaves both parties happy. And with the right partner, those key terms — capital raise amount, valuation, and upside/downside/control provisions — should become a discussion, not a negotiation.

Given the availability of early-stage capital, every startup founder should be asking questions of their investors to make sure they are choosing the right long-term partner. I’m calling this the due diligence phase, although this should really happen before a deal is reached and formal due diligence has begun. A few key areas to focus on:

 Follow-On Capital

Especially at the earliest stages, having an investor that can provide follow-on capital is critical. Additional capital is key in case you’re running out of cash, but also to signal to future investors that your original investors still believe in the business. It’s important that the investor can connect you to other sources of capital as well. Yes, capital tends to find the best businesses, but the best capital doesn’t always find the best businesses.

Questions to ask an investor:

Growth Expectations

Growth and capital burn expectations can vary wildly across early-stage investors; it’s so important that your investors are aligned with your long-term vision. Be wary of raising capital for a lifestyle business from an investor expecting a 50x return potential, and vice versa.

Questions to ask an investor:

Portfolio

It’s critical to understand both the status of an investor’s current portfolio and where your company fits within their portfolio as a whole. Investors could be stringing you along without much dry powder to invest, or investing in your company as part of an overarching thesis about an industry. Or, you could be their first investment!

Questions to ask an investor:

Big picture, make sure your interests are aligned with your investors not just on valuation on terms but also company growth and where you fit in their portfolio. And, ensure that your investor will provide more than just capital but their time and knowledge as well. You have options for capital as an early-stage company: bootstrapping, grants, angel funding, crowdfunding, venture equity/debt funding, and others. Being diligent about choosing your first capital partners can be instrumental to your long-term success.

Think you have an interesting company and we may be a fit? Tweet at us or send us a note.