7 important questions to prepare for ahead of your meeting with investors
Every new business venture requires funding. Few persons are able to bootstrap their way to success. But for most, funding comes from external sources like early stage investors or private equity (PE) firms. It’s crucial to be well-prepared for meetings with potential investors because you must be asked some difficult questions. In fact, if you must succeed in getting investors to part with their money you must anticipate certain questions before attending any such meeting.
And Savvy investors look for more than just a polished pitch deck; they look for passion and knowledge. They look for clarity of purpose, with a well-developed plan to achieve it. And they are also very futuristic. As an entrepreneur who was able to raise over 60 million naira in just a couple of months for one of my startups I can tell you from experience what investors are looking for. And by virtue of my consulting jobs I have also had to sit on the other side of the table as an investor. So today, I share with you five key questions you’ll need to prepare for, to get to drive investors to the point of signing that cheque.
Before I proceed let me say that there are many questions you will have to answer in a meeting with potential investors. So what I am about to list is non-exhaustive. But there are the most important of all the questions you will have to answer in any meeting with potential investors.
1.What problem are you solving?
This will almost certainly always be the very first of all the questions you will have to answer in any meeting with investors. Unfortunately, not many entrepreneurs prepares for it. If you can’t answer this question without a blink then I am sorry.The number one fact about every successful business in the world today is that there is a problem it is solving. Uber is solving a problem. Amazon is solving a problem. Google is solving a problem. AirBnB is solving a problem. The question is, what problem is this idea you are pitching solving in the society? The bigger the problem you are solving the bigger the potential it carries. So, before you step out for a meeting with an investor among other questions, ask yourself this question. And unless you are able to provide a very clear and persuasive answer don’t go.
2. How big is the market for this product?
The second of all the questions you will face in a meeting with an investor is ‘how big is the market’? This question used to read ‘is there market for the product’? But it has changed in recent times. Having a market is not just enough. You must have a market big enough to be worth the effort and investment. You need a market that will enable you brake even as fast as possible. It is not about discovering a problem that only one random visitor have in a community of 500,000 residents then you say you want to build a business around that.
So an investor wants to hear how many people currently have this problem you are seeking to solve. Is it a one-off problem or a recurrent one? For how long has the problem been and will that need always be there?
However, the investor also wants you to be able to succinctly share this among other things in under five minutes. If you’re unable to offer a concise elevator pitch, then you’re likely overthinking your ideas. Ensure that your elevator pitch explains the demographic distributors of the market you are serving.
3. Who is on your team?
As an entrepreneur who has navigated numerous investor meetings in search of funding for my dreams I discovered that one of the most important questions to prepare for is that of the team. for this reason my team is always very important to me in all investors meeting. So, you see a great team is not just for you. It is equally important for potential investors as well. Quite often, entrepreneurs preparing for these meetings spend too much of their prep time thinking about the market potential of their product and not nearly enough time reflecting upon their team. Don’t get me wrong, market potential is definitely important. But if you don’t have a great team you may never get the opportunity to explain the potential of the market.
Investors need to know that the management team behind the product is skilled, knowledgeable and competent. But you see, it goes beyond skill, knowledge and competence. What about the cohesion? Are the various skills complementary? What about their value – do they align? No investor wants to invest in a company where there will be constant in-fighting among the founders. Of course you know that such portends danger for the growth of the company. So prepare well enough to talk about how long the management team has worked together and how the team handles disagreements. When I meet with entrepreneurs, I want to see a team that is deeply and authentically committed to the shared vision and not individual goals.
4. What are your obstacles?
This is one question entrepreneurs sometimes neglect to prepare for. Investors don’t only want to hear about your initial successes. They also want to hear about your obstacles, early setbacks and how you have been able to handle them till that point. Prepare to discuss the strategies you used to overcome these obstacles. After an early failure, did you dust yourself off, stand back up and tackle the problem head-on? Or are you likely to give up once the first breeze blows?
When I stand as an investor, I like to see that entrepreneurs are flexible enough to navigate the obstacles that all early stage and growth companies face. However, I also want to know that entrepreneurs won’t obsess over these obstacles. The most successful entrepreneurs maintain a laser focus on their goals, and they’ll do what it takes to continually drive the team and the business toward those objectives.
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5. Who is you competitive advantage?
Well, before you answer the question of competitive advantage you have to first know your competitors. So do you even know your competitors? A lot of entrepreneurs discovered a problem and rushed into solving it without taking the pain to do enough research to know if there are people offering similar services already. Of course, that someone is already doing it does not automatically mean you should stop. But it will definitely help you in other key aspects of decision making and strategy formulation.
One powerful way of been ahead as an entrepreneur is showing command of your business and market by thoroughly understanding your competitors. Investors love unicorns — those business ventures that are truly disruptive. So have you got one? But let me shock you now, no matter how disruptive your company may be, you will have competitors. If you lack in-depth knowledge of your competitors, as well as your markets and opportunities, your credibility may be called into question. You should be prepared to explain how your company and product are different from and better than each competitor. Give concrete details drawn from first hand research and in-depth analysis of the competitor. Why is this important? Investors look for specifics rather than vague claims. Offer the investors a roadmap that explains how your company will pull ahead of the competition.
6. Do you know your numbers?
Numbers, numbers, numbers!!! There is nothing that fascinates an investor with experience like hearing numbers from you. You will be double unfortunate if you go for any investors meeting without rehearsing for questions that have to do with numbers.
So before heading into a meeting with potential investors, you must remind yourself of the investors’ goals. Each time an investor funds a new business venture, they expect a healthy return on investment. Because of that, you should be prepared to discuss your business model and financial information at length. If possible bring your monthly financial projection for the first 36 months of operation. Also do well to bring your quarterly strategic plan and target for at least the next 3 years.
Among the numbers you must understand perfectly are your burn rate, runway, total revenue gross profit, net profit, depreciation rate, operating cost etc. I repeat, you are doomed if you don’t know your numbers.
7. Research each investor meticulously
This is a bit off you might want to think. Is this one of the questions to prepare for ahead of investors meeting? Well, let me explain to you.
It is just as important for you as an entrepreneur to assess investment partners as it is for investors to assess you, your idea and your vision. New entrepreneurs, in particular, tend to be blinded to this, as securing funding is so crucial for forward momentum. Yet, finding the wrong investment partner can be worse than not finding one at all. You need an investment partner who is inspired by your dream. I mean one who will be supportive and collaborative and who will share your belief in the possibilities.
To that end, do your due diligence. You should research potential investors carefully to determine whether they could be a good fit before scheduling a meeting. So if you are impressed with what you have found about about the potential investor it is now time to attempt to impress him also.
You can even attempt to tie in some aspect of the pitch to the investor’s background, if possible. I promise it will help you sell him faster. For instance, if the investor has a history of funding tech startups, then magnify as much as is applicable the tech component of your business.
Conclusion on questions to Prepare ahead of an Investors meeting
As you can see preparing for an investors meeting is no joke if you really want to get the funding you need. There are many questions that will come up when you sit with the investors for a meeting. But with adequate preparation you will be able to excel seamlessly. I have given you 7 of the most important questions to prepare for ahead of any investors meeting. If I may ask, how ready do you think you are for your next meeting?
Hey bro, I know you can do it. In addition to these points, go there, display your passion, vision, commitment to seeing the idea through and above all that you have the character needed to make a great partner and you won’t lack investors. I can tell you this because I have done it myself. I came to a point that I was the one refuting further investment in my startup as the money was way overwhelming.
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