I’m often asked, “what questions will investors ask?”  You should be prepared to answer the questions below and more. Most of these answers can be found in your working business plan. You know, the living document that you review and compare to your company’s actual results at least once a quarter and preferably monthly? You are doing that right?

Potential investors what to know everything from a basic overview of your company, your product or service to why you believe it will be successful.

 

what questions will investors ask

General

What does the company do?
What is unique about the company?
What big problem does it solve?
How big is the market opportunity?
Where are you headquartered?
How many employees do you have?

 

Management Team and Founders

Who are the founders and key team members?
What relevant domain experience does the team have?
What key additions to the team are needed in the short-term?
Why is the team uniquely capable to execute the company’s business plan?
What motivates the founders?
How do you plan to scale the team in the next 12 months?
How are the founders showing their commitment to the business?

 

Financial I

How much capital are you raising?
How long will that capital last?
What will be your monthly burn rate?
How much burn will occur until the company gets to profitability?
When will the company get to profitability?
Do you have detailed financial projections for the next two years?
What key cost components are there for the product or service?
What are the unit economics?
What are the likely gross margins?
What are the key metrics that the management team focuses on?
What are the factors that limit faster growth?
How much of a stock option pool is being set aside for employees?
What future equity or debt financing will be necessary?
How much equity and debt has the company raised; what is the capitalization structure?
What are the key assumptions underlying your projections?
What are the company’s three-year projections?

 

Financial II – Financing Round

What milestones will the financing get you to?
What is the planned use of proceeds from this round??
Will existing investors participate in the round?
What is the company’s desired pre-money valuation?
How much is being raised in this round?
How much equity is being held by whom?
Are there any convertible loan notes on the company?
Have you made use of EIS/SEIS?
Have you done crowd funding?
Has an accelerator/incubator put money in?

 

Marketing and Customer Acquisition

How does the company market or plan to market its products or services?
What is the company’s PR strategy?
What is the company’s social media strategy?
What is the cost of a customer acquisition?
What is the projected lifetime value of a customer?
What advertising will you be doing?
What is the typical sales cycle between initial customer contact and closing of a sale?
Have you done any customer development?
Have you done focus groups and what are the results?
What is the actual addressable market?
What percentage of the market share do you plan to aquire over what period of time?

 

The Market

Your investors want to know the market opportunity being addressed and the potential for the company to become very big.
Why does your company have high growth potential?
How did you arrive at the sales of your industry and its growth rate?
What percentage of the market do you plan to get over which period of time?
What is unique about the company?
What is the actual addressable market?
What sources did you use for your research?

 

Products and Services

Why do users care about your product or service?
What are the major product milestones?
What are the key differentiated features of your product or service?
What have you learned from early versions of the product or service?
Can you provide a demonstration of the product or service?
What are the two or three key features you plan to add?
Do you have any patents pending?

 

The Competition

what questions will investors ask

What are the barriers to entry?
Compared to your competition, how do you compete with respect to price, features, and performance?
What gives your company a competitive advantage?
What advantages does your competition have over you?
Who are the company’s competitors?
Can you tell me the top 5 direct as well as 5 indirect competitors?
What is the history of your competitors?
What could be a competitive advantage in a thick or under served market?

 

 

Patents, Intellectual Property, Trademarks

Would any prior employers of a team member have a potential claim to the company’s intellectual property?
How was the company’s intellectual property developed?
What comfort do you have that the company’s intellectual property does not violate the rights of a third-party?
What key intellectual property does the company have (patents, patents pending, copyrights, trade secrets, trademarks, domain names)?
In what legal jurisdiction is the IP held?
Can the IP be liquidated?
Are you infringing the IP of another company?
Are you looking to acquire IP from distressed companies that may add value to your company?
Would you opt not to have a patent pending in order to be able to remain in complete stealth mode?

 

Downsides, Risks and Threats

Are there any product liability risks?
Do you have any regulatory risks?
What legal risks do you have?
What do you see are the principal risks to the business?
Is what you want to do illegal?
Is there anything that can pose a potential risk in the future, as in changes in regulatory frameworks?
How is the risk distributed across the team?
Is there any way to increase down-side protection?
Is there a way to shift risks around?

 


Exit Strategy

How will valuation of an exit be determined given market comparables?
Who will be the likely acquirers?
When do you see the exit happening?
What is the likely exit – IPO or M&A?
Who do you want to sell to?
How much will my return be?
Do you have any examples of comparables?
Where do you see yourself financially in 5 years down the line?
Are you in talks already?

While this is by no means a complete list of questions that investors will ask you, it’s a good place to start.  Remember – Preparation is the key.

Until next time,

To Your Growth & Profits

William De Temple CEO Antirion LLc

William De Temple, CEO Antirion LLc

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Forbes.com. (2017). Available at: https://www.forbes.com/sites/allbusiness/2013/06/10/65-questions-venture-capitalists-will-ask-startups/#27fc09a07c0d