Raising funds from venture capitalists for startups is challenging at any phase and demands a great pitch. Entrepreneurs should be ready to answer the questions venture capitalists will ask them. The failure to have less-than-stellar answers to these questions will reduce the likelihood of the startup getting funded. Below is a list of questions you would possibly hear when pitching your startup.
An ideal investor pitch deck must include a clear and compact overview of the company. VCs want to know what company does, why it should be interesting to them and potential customers. Accordingly, be sure to have proper answers to the following questions:
- What does your business do?
- What makes it different?
- What big problems can your company solve?
- What are your market opportunities?
- Where will your company be headquartered?
- Can your business scale?
- What is your plan to grow?
A startup founder should convince the venture capitalists that his business addresses market needs and has great potential to grow. The following questions will help VCs to understand company`s market opportunities:
- How do you define your target audience?
- What percentage of the market are you planning to «seize» over time?
- Do you have customers?
- Who are they?
- How are you going to drive sales and secure business growth?
- How do you define success for your company?
Founders & Team
When making a decision to invest or not venture capitalists always take into consideration who the founders are and what the team look like. Entrepreneurs must position themselves as passionate, dedicated and experienced specialists in relevant sphere. So, be ready to answer these types of questions:
- Who are the startup founders?
- Do the team members have experience in relevant domain?
- Do you plan to enlarge team in the nearest future?
- How many employees does your company have?
Services and Products
The entrepreneur should clearly specify what the company’s service or product consists of. Moreover, he should be able to convince the venture capitalists how the company differs from other folks in the marketplace and prove that he has a unique value proposition. So, anticipate to get the following questions:
- Why are you convinced that consumers really need your service or product?
- What are the main product milestones?
- What key features make your service or product different?
- How did you develop your product?
- What features are you planning to add?
- Demonstrate your service or product
Knowing who your competitors are and what they are doing is an important part of running a successful business and venture capitalists know it. Make sure to anticipate questions regarding your competitors.
- Who are the company’s viable competitors?
- Does your company have competitive advantages?
- What are your competitors’ advantages?
- How do you compete with respect to performance, pricing and features?
Marketing and Customer Acquisition
Investors want to hear about possible marketing strategies of the founders. Be prepared to show reasonable estimates for customer acquisition answering the following questions:
- How is the business going to market its services or products?
- Does the company have a PR strategy?
- Does the company have a social media strategy?
- How much will it cost to acquire a new customer?
- Have you calculated the lifetime value of a customer?
- Where are you going to advertise to reach your target audience?
Venture capitalists favor startups which have early traction. That’s why they are likely to ask questions like these:
- What early traction does the company have (high website traffic, sales, etc. )?
- Do you have any ideas how to accelerate early traction?
- How can you explain the early traction? What are main reasons for it?
“Launching a startup is like taking the brakes off your car when setting off on a long journey” (@riklomas). Any startup business is a risky venture, so be prepared to give a reasonable answer to the following questions.
- What are major risks to your startup?
- What legal or regulatory risks does your company have?
- Are there any risks related to product liability?
There are a lot of entrepreneurs with great ideas. However, not every great idea is becoming a reality, that’s why every investor is concerned about recoupment of his investment. So, you are likely to hear questions like these:
- What experience do you have?
- What is your tracking record?
- How are you going to recoup investments?
- When are you paying back?
- What is your exit plan?
The role of intellectual property valuation in startup investment is very important. So, the venture capitalists will probably want to hear answers to these questions:
- Has your business secured its intellectual property rights (trade secrets, patents, copyrights, etc.)?
- Are you sure it doesn’t violate third party’s rights?
- Are there any prior team members or employees who can have pretensions for your intellectual property?
Investors want to know how much is being raised and how the entrepreneur is going to use money – hire employees, build products, enhance services, marketing etc. Accordingly, a startup founder should be able to show the milestones he is going to achieve with fund raised in current round. The questions will possibly be the following ones:
- How much do you expect to raise in this round?
- Are existing investors supposed to take part in the round?
- How do you plan to use proceeds from this round?
- What milestones are you going to finance?