Overview

 

Almost every startup today intends to get investment from Angel Investors, Venture Capitalists, etc., however, less than 1 in 400 companies get to raise the funding from the investors despite having a good business plan. The reason being, they don’t pitch it right. They don’t get their homework done before pitching in front of the investors.

 

Investors will want a clear and concise overview of the company for which the investment is sought. Entrepreneurs, being the torch-bearer of a startup, it is his responsibility that he should be prepared enough for pitching in front of the investors. Investors and other Venture Capitalists ask a lot of questions before investing in any startups and it is evident that a startup being a new player in the ecosystem will be less trusted by any investor.

 

There are many things that an Investor might want to know about the company and the questions can range from anything related to the background of the founder to the profitability table. Pitching in front of the investors can finish off in 5 minutes and can stretch to 5 hours as well.

 

Getting ready with the probable questions before hand will put an entrepreneur in a better position to prepare himself and impress the investors increasing the chances of getting the investment.

 

There is no such particular sequence in which an investor might throw questions at an entrepreneur but put forth are 50 probable questions that investors ask start-ups and an entrepreneur should prepare well in advance before pitching to the potential investors.

50 probable questions that investors ask start-ups

 

1) What does the company do? 

2) What problem does the company solve?

3) What is the opportunity of this kind of business in the market?

4) What is unique about the company?

5) How much will the company grow?

6) Who are the target customers of the company?

7) What percentage of market share do you plan to capture over 3 or 5 years?

8) On what basis you have come to this conclusion?

9) How did you arrive at the figures on growth or sales?

10) Why do you think that your company has growth potential?

11) Who are the founders and what is their domain expertise?

12) Who are the other key team members and the expertise they have?

13) What do you think you need in your team in the near short term?

14) What is your plan to scale the team in the next 6 to 12 months?

15) Why do you think users will value your product or service?

16) How do you differentiate your product or service from the rest in the market?

17) What is your next major milestone?

18) Any other features you wish to add to your product or service?

19) Who are the competitors of your company?

20) What is the thing which gives you a competitive advantage?

21) What are the areas where your competitors score well?

22) What is the pricing policy of your company?

23) What early traction has your company got with respect to sales, website traffic, etc.?

24) How do you plan to gear-up the traction?

25) How do you plan to market your product?

26) What kind of advertising do you intend to do?

27) How soon do you close a deal starting from customer-contact to sale?

28) What is the cost of customer acquisition?

29) What are the most likable risks that your company faces?

30) What are the product liability risks?

31) What are the legal and regulatory risks that your company faces?

32) Does your company have Intellectual Property (Trademarks, Copyrights, and Patents)?

33) How was the Intellectual Property (IP) developed?

34) Are there any chances that an employee of your company might claim the IP of your company?

35) Is your company violating IP rights of the third party in any way?

36) Show us the company’s 3-years or 5-years projection.

37) What are the assumptions underlying your projection?

38) What pool of stock option has been set aside for employees?

39) How much equity and debt has the company raised? Show the structure.

40) What future equity or debt financing will be necessary for your company?

41) What are the factors that stop your company from growing faster?

42) When will the company get to see a profit?

43) How much investment do you intend to raise in this round?

44) What is the desired pre-money valuation of your company?

45) How will you use the proceeds if you get funded?

46) What is the milestone you aim to achieve with this financing?

47) What is your planning on exit? Is it going to be IPO or Merger or Acquisition?

48) What is the expected date/time of exit?

49) Who do you think might acquire your company?

50) How will you determine the valuation during the exit?

 Closing

 

Just getting yourself pitch ready doesn’t finish the game, around 75% of the startups have failed to receive investment even after signing the term-sheet; the investors have backed out of the deal and have not invested in the startup as the paper-works are not in place. So, before you board to sail, get a due-diligence check done for your company to avoid losing the prospective investor.

 

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