From The Feinline, the blog of Sempre Management cofounder Michael Feinstein. On that Madoff Madness. (Financial Cliche Warning: there is that Ronald Reagan quote: otherwise it's a balanced account, as they used to say in Q1 2008.)
* Don't just trust your VCs reputation. Verify it through your own diligence, including blind reference checks and discussions with executives of companies that didn't work out.
* Don't trust your VC when she agrees to some additional terms that aren't on the term sheet or promises to 'take care of you' if you are let go. Verify every deal and agreement with terms in writing. You never know if the person you make the agreement with will be the one you have to enforce it with. If the deal is really a deal, no one should object to putting it in writing.
* Don't trust that your VCs will fund your company if you can't raise money elsewhere. VCs will always promise support for your company, but that isn't the same as wiring funds into your account. If the VCs are promising to backstop your company with a bridge financing in the event that you can't raise money, get that agreement in writing, including the terms. Once your company is actually on the brink, the terms may change. But, if you have a prior agreement, hopefully it will be honored.
* Don't trust the commitments that are promised by customers and partners. Follow-up with emails confirming, or formal contracts if appropriate. It may seem overly formal during more friendly relations, but the actual commitment may give you some moral high ground if the going gets tough.