Do You Have What It Takes Buddy?
It doesn’t really matter who the investor is.
The investor could come before you in any format…as a serial entrepreneur or an ex banker or a VC or infact your dad or a group of your friends who could be excited seeing your amazing idea come live. One thing however doesn’t change and honestly that is the key which is….
“Why the hell should someone invest into you or your idea”
From my experience of being with startups with success and failure (both) in raising funds there have been numerous occasions when investors (in all formats as mentioned above)have asked amazing questions. Also from my discussions with friends, startups, serial investors across the globe there came out a list of some good, authentic and “Valid questions that came out which typically investors ask”
As one of the experts said in the discussion and this is also my favorite one:
You can kill your audience with power-point slides, projections, quotation from analysts and market conditions research, try to convince VCs with your reality distortion lenses, etc, etc, etc………
That’s all crap.
If you don’t have a working prototype, something tangible, you are as good or bad as the next guy….
There could be a million other questions that investor may ask you basis the business that you are in e.g. an investor may have a different set of questions if you are a tech startup vis-a-vis if you are in a service industry e.g. digital marketing agency.
Please understand the investor (whoever that maybe) wants to explore how will you provide him security for the money and convince him that the business proposition will be a success.
Having said that here are list of some top standard 15 questions
- What is the GAP you are addressing in the market? What is the opportunity you are exploring? What is the problem you are trying to solve?
- What is your and your team’s expertise to run this business? BTW Who are all in your team and what do they bring to the company?
- Why do you think you will succeed ? What is your backup plan?
- What the hell is your USP? How does it set you apart from competition? How will you capture the market and and what cost? How is your product disruptive? Will it change some market dynamics? How will get your market share?
- Do you have the research data to back your claims?
- What is the ROI on this business? Do you have detailed cost and revenue projections in place?
- What is your EXIT strategy for business?
- How many consumers or TA have validated this product ? Have you test marketed your product or service in the TA (Target Audience) ?
- How much equity investment do you have available ? How much have you invested already? Are there anyone else who have invested into you?
- How the hell would you make money? Whats your revenue model?
- What are you looking from the investor? Money, influence, contacts?
- How do you plan to grow and expand your business? Where will you operate from?
- How will you market your products or services?
- How will you improve the customer or TA experience with your product and services?
- What is the vision of your company? What is that you want to become?How do you think that is possible.
I think and post my discussion with some amazing investors and entrepreneurs if you have answers to some of these basic standard investor related question you can and elevator pitch and leave only a small room for queries.
As one of the entrepreneurs Thomas Storey shared this amazing example in the discussion thread:
Let’s go back to 1987.
Entrepreneur: “We have developed a European style coffee shop. Full line of coffee beverages with comfortable furniture, wood accents…”
VC: “what do these coffee beverages cost?”
Entrepreneur: “$4 to $7 each…they use imported, sustainable coffees…”
VC: “Your prices are too high. Dunkin’ Donuts has a shop on every corner, you can get coffee at home, at your office, at the damn gas station….too much competition for your expensive cup of coffee…we’re not interested…”
Ok, the VC just rejected Starbucks, one of the most successful consumer product stories in history. (Yes, a good number of investment people said no to Starbucks)
Why did the VC blow up Starbucks? Don’t know I wasn’t there, but, I can guess.
It is difficult to apply a structural method to evaluating creativity…it just is.
Schultz got the investment to open his “espresso shop” after a lot of fits and starts. This Starbucks concept was “new.” Espresso is “strong” and it is an expensive form. Prepared coffee was a readily available commodity throughout the US in 1987. His European coffee shop design was unique in the US. His product was expensive.
Having said that there are a lot of questions that you may be faced to answer but if you go with experts, experience, iterations or by pitching your idea, prototype to a diverse audience before going to an investor chances are you will be able to get what you have pitched for.
A million thanks to some of the amazing global experts and entrepreneurs who shared their thoughts to this discussion “Typical Questions That Investors Ask”
Do share your views and add thoughts!