If you are going to raise capital for your business and you are seeking an investor, you should be prepared for the types of questions you’ll get. You might also consider these questions as you create your pitch deck presentation.
Here is an article by respected writer Elizabeth Yin regarding the questions a business investor or VC might ask you. You can Follow Elizabeth here. Elizabeth is a former founder who’s reviewed over 20,000 pitches as a General Partner at Hustle Fund and as a former Partner at 500 Startups.
Questions a Potential Investor Might Ask
- Tell me a bit about your background and your co-founder(s)’s background.
- How do you all know each other?
- How long have you worked together and in what capacity?
- Why is your team uniquely motivated to solve this problem?
- Why did you pick your co-founder?
- Who do you need to hire during the next 18 months to be successful?
- When was the last time you had disagreed on a business issue? How did you resolve it?
- Do the founders have the knowledge to build the technology or would they need outside help?
- What does the cap table look like? (equity distribution across founders)
Problem You’re Solving
- What is the specific problem you are solving?
- How big / serious of a problem is it?
- Why is this a problem?
- Who has this problem?
Solution / Product
- How are people solving this problem today?
- Describe your solution to this problem.
- What effort / timing is required to switch from a different solution to yours?
- (For deeptech) What is unique about the tech? (Do you have any patents / IP?)
- What are the external factors that may affect the solution? (e.g. limit usage by regulation)
Market / Market timing
- Why now?
- Why hasn’t this worked / been done before?
- How big is this specific market?
- How many people does it affect?
- How much money are people spending to solve this?
- What is your unfair advantage?
Customer Acquisition / Unit Economics / Go-To-Market
- Who is your customer persona?
- Who is the end user?
- Who is the buyer?
- What does a day-in-a-life look like for these people?
- How much are people paying today? (range?)
- How much do you think you can charge in the future?
- How are you currently getting users / customers? (what customer acq channel(s)?)
- How do you think you will get users / customers in the future?
- How much does it cost you currently to get a user? And in which channel?
- How much does your solution/product cost (COGs)?
- How much will it cost in the future?
- Why do people buy / use your solution?
- What is the sales cycle to-date?
- What differentiates your solution from other alternatives?
- Who are you more afraid of: Google or another startup?
- Who are you most afraid of?
- What happens if a Google (or equiv) does this?
- Who are the major players?
- What is your moat?
- When did you start the company?
- How many customers do you have to-date?
- Or how many pilots / contracts signed?
- When are the start dates of those pilots / contracts?
- What are the contingencies?
- Or how many LOIs signed? What do those look like?
- Or how many pilots / contracts signed?
- How much revenue have you generated to date?
- (Note: GMV is different from revenue)
- As product revenue vs consulting / services revenue?
- What are your margins?
- Any notable customers?
- Any enterprise customers paying big money?
- What does retention or churn look like?
- What does engagement look like?
- Any upsells?
- When will your company break even in terms of profitability and cash flow?
Fundraising / plans
- How much have you raised to date?
- At what terms?
- Who are your current investors?
- How much are you looking to raise?
- What are you looking to achieve (milestones) with this round if everything goes well?
- Use of proceeds?
- Where are you in your round?
- Have the current terms been set? And if so, what are they?
- What is your burn rate?
- What is your top priority for the next 3-6 months?
- What are your capital costs? (if capital intensive, like hardware / e-commerce)
- Minimum batch sizes / inventory / etc?
- Have you secured a lead investor for the round? If so, who and how much is the lead investing?