Answer from Tom Maiaroto, Sr. Full-Stack Developer
When conducting their due diligence work, venture capitalists will definitely refer you to other people they know, work with or have invested in. I wouldn’t be concerned by the idea that they want to connect you to people in their network.
In fact, these due diligence conversations may feel like interviews because the other party knows exactly why you're talking to them. This means that their questions may come off as interrogative, but you shouldn’t feel that they’re being hostile.
Don’t worry about not going deep enough on the interviewer’s questions. You should be able to talk about high-level concepts, and that should be enough.
By “high-level concepts,” I mean you should say something like, "I built this ANN to do this" or "I'm using this naive Bayes classifier on this set of training data to classify this." You aren't proving technical theories in these conversations. They’re discussions that should help assess the viability of your technical approach -- nothing more.
Protecting Your IP
You want to make sure that the person you’re speaking with is able to tell a VC, "Ya, this person seems to know their stuff and they can use that math to draw those conclusions for their product." That's it. If they are asking how you solve very specific problems, then I would start to be more concerned about your IP.
You should absolutely ensure that you give an NDA to whomever the VC connects you to. While VCs won't normally sign an NDA, other parties should have no problems with the agreement. If they do, then that's another red flag as far as your IP is concerned.
If you feel the interviewer is digging for sensitive information, try to steer the discussion back to an appropriate, conversational place. You can say, “It seems like you have some of the same challenges that I have; maybe there's ways for us to work together."
You never want to say or assume that you work for them. “Together” is the operative word.
Or you can turn the conversation into a business development opportunity by saying, “You guys may even be interested in licensing what we have. We’re able to use it to provide technical solutions across multiple domains, but our product isn't so close to what you're doing that it would present a conflict.”
Try not to be too hostile or accusatory. Always remember that this person is reporting back to the VC -- who you need to impress. If you feel your IP is in jeopardy, be delicate and tactful.
Sniffing Out an Acquisition
Another scenario that may come up is when a VC is in interested in your tech and team. This situation might lead to a smaller, earlier acquisition option for you. But you may not want an early exit because it means a smaller acquisition price. Ask yourself how much work you’re really willing to dedicate to this project. If you’re not in it for the long haul, then it may be wise to sell what you have while there is an offer on the table.
Also consider what round of the financing process the start-up you’re speaking with is in. This could shed light on how the investor is approaching an investment in your company. If the interviewer is from a late-stage start-up, then the investor might be looking to diversify by acquiring smaller companies with promising IP.
Remember: You don't want to assume that everyone you’re speaking to -- VC, founder, etc -- is looking for free info and IP. In most cases, they’ll be genuinely seeking to learn more about your company, ideas and acumen. In some (rare) cases, someone may be after your IP. You need to handle every conversation professionally and use the above tactics to redirect conversations that may be predatory.