If pitching to investors is a frightening thought for you, you’re not alone. Many entrepreneurs are intimidated by investors, especially if they never pitched to any before. How can an entrepreneur prepare for the million possible questions the investors will ask?
As a venture capitalist, I can narrow down the facts behind investing and give you the cheat sheet to it:
1. The idea
This is where most of the questions will focus. Investors want to ensure your idea solves a problem in the world, can sell and make a profit, and can grow significantly (i.e. scale up). Here is what they want to know and questions they might ask to get it:
The product sells (i.e. solves a problem & people are willing to pay for it)
- How much have you sold? This will probably be their first question
- How much have your sales grown?
You make enough profit to sustain the business
- How much are you selling it and how much does it cost you?
- How/where are you making the product?
You can scale up the company in the future
- How will you grow the business?
- How much are you expecting the business to make in the coming year?
You can compete effectively against new entrants, especially large players.
- Do you have a patent?
- What stops others from replicating this?
Your industry is attractive.
- What’s the size of your industry?
- How fast is your industry/segment growing?
2. The people
This is where investors will put the most weight but ask the least questions. The investors will be assessing you as you interact with them. Here is what they want to know:
You are capable of running the company
- What is your background?
- Did you successfully run a company before? How much do you know about the industry? What’s your educational background?
You are fully committed to make the company succeed
- How much of your time and energy are you dedicating to the business?
- How much money have you invested into the business? They want to see that you have your own money invested into it.
You have the right team working with you.
- Are you covering the important functions (marketing, finance, sales, operations, IT, etc) and that you are managing your growth well (controlling your cost effectively)
You have personality that fits:
Investors will be assessing how well they will be able to work with you. Generally, they will scare away from you if you are argumentative, too hard-headed, greedy, flaky, etc. It’s a subjective assessment, so one investor might love you while the other might not. Don’t take it personally.
3. The investor fit
Investors will assess how well the opportunity fits with their needs. They will assess how well they can contribute and benefit from the deal.
Investors will put in some of their resources to push your business to the next level. They include:
Obviously, the investor will inject money into your business to fuel its goals.
- How much money do you need?
- How much equity are you offering for that investment?
The less experienced and capable the entrepreneur is, the more time the investor needs to put in to compensate and ensure the business succeeds. Time is the most precious resource for successful people and is worth more for them than money. The less time they will need to put in, the more attractive you will be for them.