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5 Investor Questions Startup Entrepreneurs Must Be Able To Answer

    

Fundraising is quite a process, and for early stage startups, there will be a million things to do and a lot of information coming from every direction. Of course, one of the priorities will be preparing the pitch presentation, whether for seed funding or potential angel investors. This initial cash infusion is usually critical in shaping a company's trajectory, so the pitch definitely needs to be on point. But, founders need to do more than put together a solid slide deck and rehearse their spiel. They also need to be prepared to handle an intense round of questioning, and making general statements without some details to back it up will not suffice. Here are five questions startup founders absolutely must be prepared to discuss intelligently:

 

1. What demand are you filling and for whom are you filling it?

This may seem like a question that requires a discussion of the actual product or service that the company is looking to deliver, but a really good answer will go beyond that. The startups that have been most successful in recent years have gotten to where they are by identifying a problem and figuring out how to solve it creatively. The rise of ride sharing apps and delivery services for basically anything someone might need in a hurry are great examples. The companies that have succeeded in those areas recognized a demand somewhat specific to a certain generation or type of person and determined how to capitalize on cheap technology to fulfill it. Thus, to answer this question, startup founders must be able to give an overview of a problem they see, perhaps in a certain population or region, and explain their intent to solve it, while obviously explaining that they can do so profitably.

 

2. What is the sales model and how will it be managed?

Ideas and action are obviously very different things. Plenty of people have a ton of great ideas, but most of them likely are clueless when it comes to making those ideas a reality. As a result, investors will want to see a realistic sales model, with a clear indication with respect to sales goals, how the model will be implemented, who will oversee it, what the sales metrics are, and how performance will be evaluated. Generic statements about using social media to advertise and create email listservs do not constitute a sales model. Investors will want to hear and see all of the gritty details, with charts, targets, and projections.

 

3. How will you reach and increase your customer base?

This obviously goes along with the sales model, but it requires a focus on marketing and advertising, as well as a more in depth look at expansion. Again, generic statements about mundane methods will not be enough. Startups should clarify if they intend to start off small, perhaps in one city, and only if and when that proves successful, seek to expand elsewhere. It is unwise to make it seem like a company can infiltrate multiple markets at once with an untested model, so a conservative approach is probably the safest bet. A company should discuss its future plans without making promises it won't be able to keep.

 

4. What are the current and projected financials?

Clearly, this is information that will be included in the pitch deck, but we include it here because it has to be something the founders can really speak about without hesitation. There cannot be inconsistencies, no one should have to correct someone else, and fumbling over numbers will make investors lose interest in a heartbeat. Every person that will attend a pitch has to know these figures inside and out, know how to compare them, and be able to discuss discrete items as well as how each piece fits into the larger picture.

 

5. Why should we invest in you?

This is basically like that interview question that employers like to ask prospective employees to see what it is that makes a person uniquely qualified for a role. Of course, from an investor perspective, this is meant to elicit a response that explains what it is that genuinely sets your company apart from the others. There may be something unique about one or more founders, there may not be another company doing what you will be doing, or you may have amazing connections with important people. It doesn't matter what it is that makes you different, so long as you can sell the fact that this peculiarity is essentially invaluable.


These are just five of what will likely end up being a slew of questions that investors will throw at startup founders, both to get the information they want and see how well the founders are able to deliver under this kind of pressure and scrutiny. Thus, startup founders should never enter a room with a bunch of investors until they can adequately address any and all potential avenues of inquiry.

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