04.07.2009 19:41:28

Investors Network Team

Well you may as well be asking how long is a piece of string? Depending on the investor, the questions you may come across will vary hugely. Here are a few of the questions most commonly asked.
1) Who else have you spoken to?

I believe every single investor asks this early on and I’m not completely sure why they care so much since they should be basing their judgment and strategy on the strength of the idea and not on its popularity. 

2) How will you make money?

Where will the money come from? As simple as this may sound, entrepreneurs, especially those in the service industry are sometimes surprisingly unfocussed on this issue. If you have the - if we build it they will come attitude, then don’t be surprised of the investor does not share your enthusiasm. 

3) How will your company grow?

Investors want a return on their investment, and they naturally want to see you grow your market. I believe going over this question with your co-founders is a great exercise, because your company in three years is going to be very different from what it is right now. Always good to have everyone on the same page about how things should pan out. It doesn’t have to be detailed, just think about whether your growth strategy is going to be achieved by creating new product lines, reaching foreign markets, or adding some nifty features.

4) What technologies do you use?

If you are in the IT industry or your business is web based make sure that you have this question covered and you have either have sufficient information to stand your ground here or have your IT guy with you as backup.

5) How easily can you be copied?

If you’re writing a web app, chances are there are a lot of other teams who could create a similar program (if you’ve got no competitors you might be working on the wrong thing). Just be as honest as possible when answering people on this and make sure that you are clear on what your Unique Selling Proposition is. - What makes your business different?

6) Can we see the demo?

If you're attending one of our investor pitching events you may find a good mix of fairly interesting and useful ideas to compete with. Investors want to see the goods. Basically, always assume they haven’t seen your online public demo and have that local host version on your laptop ready to go.

7) Who are your competitors and how are you better/different?

Unless you just invented a teleportation system, research your competitors and be ready to answer what you can do better than everyone else out there. Don’t even try and avoid this question because about two days after any meeting, you’re going to receive an email asking you to detail how you’re better than 20 other companies the investor just Googled.

8) Who are your customers?

The trick to this question is to be specific. You’ll want to have examples of who is using, who will use, and who wants to use your product. Remember that an investor may be parting with a large amount of money to get your business of the ground. Don’t be surprised if they contact companies you mention as potential customers during the due diligence period to verify their legitimacy as a customer.

9) How will you market your product / service?

This is a favourite question amongst investors. Investors understand the power of word of mouth marketing, and you win bonus points if you can demonstrate the ability to quickly spread the word. As I often tell audiences at seminars and workshops, you can have the best product in the world, nothing will happen if people don’t know about it.

10) What will your market penetration be? 

This was actually only asked of us once, but I had to add it to emphasize that you don’t need to spew out a bunch of BS to impress investors. We could have made up something you probably heard in an MBA class, but instead just said, “We honestly don’t know.” And that’s the truth, because I can’t even begin to guess what percentage of the available form building market we are going to get. The investor was a little bit shocked with the answer, but it definitely wasn’t a deal breaker.

What will Investors ask me?10 quest | FAQ