Questions you ask with the intention of acing investor meetings and landing that funding is as much about the answers you have to what investors will grill you with. Here’s what you should be quizzing them with and why.
Startup founders are most often consumed with mastering investor meetings by having all the right answers. That’s not a bad thing. Here are the top 100 questions you should be ready to get hit with.
However, asking questions, and good questions says a lot about you too. Even more important than landing a big check or big-name investor is making sure you are choosing the right investor for your venture, at this stage, and for where you want to go next.
To get the best in your corner (and their money), as well as kicking off the relationship right, here are the top questions entrepreneurs should be asking investors.
1.) What Percentage of Your Meetings Lead to Term Sheets?
In other words “what are the odds this date is going somewhere?” It can also help you get a better perspective on the number of no’s you can expect before getting the checks you crave.
2.) What Percentage of Your Term Sheets Turn into Checks?
A term sheet (or offer) alone isn’t a guarantee of a closed deal. They may have really bad term sheets that no one accepts. Or they may be so inefficient and tough in the process founders end up going elsewhere for their capital. If the number seems high, ask them why they think that is.
3.) How Often Should We Expect to Meet After Funding?
Some investors are going to be far more labor-intensive than others. You do want a good amount of interaction. Raising money is far more about the added value you can get with these people on your team and with a vested interest in your success than the funding itself. Yet, you don’t want to be weighed down and held back from actually gaining and delivering results.
4) How Often Do You Lead Rounds?
At every stage, you are going to need a lead investor. Without a lead, you are nowhere. If they won’t lead you are probably going to be circling back later anyway.
5) How Many Follow Up Investments Have You Made?
You may not always want a follow-up investment from the same investor. You may have different needs and goals in the next series. Though if they are a fit, then it’s far more efficient to get more money from the same source, than starting from scratch again.
6) Who Else Would Be Interested in Funding This?
Don’t leave this meeting without a lead on another investor or source of funding. If they are in, who do they usually co-invest with? If it’s not a fit, who do they think would be the right fit.
7) What could we improve on the pitch?
This will be a good question to understand what you can do better from a storytelling perspective and how to shape up your pitch deck which is the most important document when you are fundraising. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
8) What’s Your Timeline?
Where are they at with their fund or portfolio? Do they have cash ready they desperately need to deploy and get working? Are they under a lot of pressure to deliver big returns to their earlier investors? Or are they patient investors looking for a very long term investment, as a family office?
9) Who Would You Put on Our Board?
If you accepted their check, who would they want to see on the board? Their nephew or someone else internally? If, they aren’t demanding board seat, who are the names they’d like you to get on there? Who is their fantasy board lineup?
10) What Do You Expect This Investment to do for Your Portfolio?
What are they going to get out of this? A simple return is obvious. Most investors are much more strategic than that. Know and you can deliver. Or turn them down.
11) What Has Made the Biggest Difference Among Your Successful Investments?
What moves, entrepreneurial traits or tactics have made the biggest difference in their startups being flops or top performers?
12) What is Your Top Concern?
Get it out in the open and get the chance to squash their objections on the spot instead of leaving them the chance to give you a ‘soft no’.
13) What’s the First Thing You’d Want Us to Do After Closing?
Get a head start and clear expectation of what they are thinking you should do, and they would like to do with your company.
14) How Long Does it Typically Take You to Close?
Know if this is within your runway. Know whether the process is taking abnormally long or not.
15) What Will We Least Like about Your Due Diligence Process?
Due diligence is typically hell. Every investor is a little different. Know the process and worst pains so they aren’t a surprise later on.
16) Who Else Needs to Approve This Investment?
Are you really talking to a decision-maker? If not, you might be wasting a lot of precious time. If this is a low-level associate, make sure you know who you need to convince and what their trigger points are before you get there.
17) How Much Are You Going to Invest and Commit Today?
Be confident. Make the ask. Get a figure and keep the ball moving in the right direction.
18) How Much Have you Raised of Your Current Fund?
This will give you an idea if they are meeting with you to invest or if they are fundraising and looking to use you as leverage during their fundraising efforts to show their investors their pipeline of deal flow.
19) How Much Do You Reserve For Follow On Rounds?
Depending on the answer you will know if that investor may be able to help in future rounds. This is typically helpful if you land a VC that has enough capital to continue investing in your next financings as this will save you a lot of time from not having to do future roadshows.
20) Could you introduce me to an entrepreneur in your portfolio that failed?
There are two things that you will accomplish here. The first thing is that you will show a high level of sophistication towards the VC. The second is being able to ask the entrepreneur how the investor behaved during tough times.
In summary, use these questions to ask investors to ace your next meeting and speed your startup along to the funding it needs. At a minimum, you’ll go in sounding smarter and more prepared. You’ll set up more favorable negotiations. Even if you come out without a funding commitment you’ll have learned a lot and have some better leads and data to supercharge your next pitch.