Questions you should try to answer before meeting any Venturre capitalist.

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 Questions you should try to answer before meeting any Venture Capitalist.

 

 

Nothing is more instrumental for the startup success than being ready reckoner of information.

Doing your homework before meeting an investor improves possibilities for investments. Every investor is human. Investing in startup is more an art than science. There are no formulas or algorithm. Decisions are driven by gut once they hear the startup pitch. The purpose of every meetings is to say enough to get the investor to want to take a next meeting with you. It should say something insightful, or be intriguing to the investor so that they are drawn in and want to know more.

There is no scientific study on below list or it's a comprehensive list nor it's foolproof list. It is through my personal journey, experience after investing in 150+ startups individually in last 11 years and 50 startups through 100X.VC

Nailing your short pitch or one-liner is an important part of the fundraising

Talking about the startup vision

  1. What’s your story? Why did you pick this idea to work on?
  2. What’s unique about what you are building?
  3. What problem is this solving?
  4. Is this a vitamin or a pain killer?
  5. Are you open to changing your value proposition? We have seen similar ideas before what else do you have?
  6. So, what are you working on? What challenges are you facing?
Your team past successes helps paint a picture of excellence

Why you are type A founders, an unstoppable team?

  1. Who are your mentors, advisory board?
  2. What is the domain expertise of each founders?
  3. How is your capable structured?
  4. Do you have founders agreement and ESOP options? 
  5. Can you take us through the founders profile, domain expertise?
  6. What is the current salary of founders? What will be the salary after funding round?
  7. How much cash investment has been done by founders?
  8. How much are founders' personal expenses each month?
  9. What is the founders' family background?
  10. How many people are in the team and what are their roles?
  11. Who is leading what role in the company? Who will be the CEO?
  12. How did the founders meet, whose idea was this and why other founders agreed on the vision?
  13. Are any of the founders willing to relocate if required?
  14. How do we know that founders will stick together as team for long term?
  15. What’s the biggest mistake you have made?
  16. Tell us about a tough problem you as team could overcome?
  17. What’s the worst thing that has happened after you chose this project?
  18. What’s an impressive thing you have done as a team?
Big jobs usually go to the men who prove their ability to outgrow small ones.

Share the hiring plan

  1. What roles would you like to hire for in the short term?
  2. Do you recognize the skill gap in your team?
  3. How big is your team currently?
  4. What are your views on outsourcing?
Success usually comes to those who are too busy to be looking for it

Explain the Market Opportunity and Validation

  1. What is your buyers profile? Who needs your product or service?
  2. How big is the market opportunity? Share the TAM, SAM, SOM
  3. What is your target geography? What is the plan for expansion?
  4. What is your beachhead, key focus target area?
  5. How did you validate your idea/product/service?
  6. How are you understanding customer needs?
  7. What product offering you will begin with and why?
Success is always a matter of some luck and timing.

Your views on the timing to build this business

  1. Why others are not doing it
  2. Why is this the right time for this product and market?
  3. What risks do you see for your business? What is the mitigation plan?
  4. Why this hasn't worked before?
Perfection has to do with the end product, but excellence has to do with the process.

Share the details on the Product Offerings & IP

  1. What stage is the product at? What is the next step in product evolution?
  2. What is the product roadmap? What are the major product milestones?
  3. What is the secret sauce, the IP here?
  4. Do you hold or have you applied for patents for your product/service?
  5. How is the customer response to the early version of the product?
  6. Can you show a live demonstration of the product or Can you share samples?
  7. What is that one feature you are proud or and stands out against competition?
  8. Does this product require training or its self service?
  9. How many product SKUs are there and share the unit economics of each?
We have to keep winning and looking good and keep fighting the best competition out there.

Information on Competition Lanscape

  1. Who are the existing players in the market? What competition do you fear most?
  2. How are your key competitors perceived in the market?
  3. In future who else can become a competitor? Why would big players not do it?
  4. Compare yourself to competition on a product feature to feature matrix, people, funding and size?
  5. What would stop someone else/competitors from doing what you are doing?
A moat is a distinct advantage a company has over its competitors which allows it to protect its market share

Share your Competitive Advantage

  1. What is the moat, barriers to entry?
  2. What are the key things about your field that outsiders don’t understand?
  3. What do you know about this space/product others don’t know?
  4. How is different is your go to market strategy?
  5. Does your pricing gives you an edge or competitive advantage?
 A business model describes how your company creates, delivers and captures value.

What is you Business Model? How do you make money?

  1. What is your monetization model? How will you make money?
  2. How much does customer acquisition cost?
  3. Share your current traction & metrics?
  4. Share your pricing and assumptions on the proposed pricing model?
  5. What are the possibilities of bad debts and age of the debtors?
The buyer journey is nothing more than a series of questions that must be answered

Share your Growth and Marketing Plans

  1. What is the plan to get new customers/users?
  2. How many users currently are using the product? How many are paid?
  3. What is the MRR, ARR?
  4. What is your distribution, marketing and advertising plan?
  5. What is the lead to sales closure cycle?
  6. What is the CAC, LTV?
  7. Do you track NPS (Net Promoter Score)?
  8. Do you have a channel, reseller, affiliate program?
  9. What are the growth hacks you have tried?
Strong customer relationships drive sales, sustainability, and growth.

Showcase Customer Engagement & Metrics

  1. What are the top features of the product customers love?
  2. What is the DAU, MAU and churn rate?
  3. Do you have customer retention cohorts?
  4. What metrics you track for customer success?
  5. What is your digital marketing strategy to create brand awareness?
  6. Which is your most preferred channel of customer acquisition?
  7. Describe in one line What does your brand stand for?
  8. What resistance will customers have to trying you and how will you overcome it?
  9. How are you documenting and collecting customer behaviour insights?
  10. How will you get your first 10000 users or first 100 paid customers?
  11. What is your plan to run trials, sampling program to generate leads?
The curious task of financial statements is to demonstrate to founders how little they really know about what they imagine they can design.

Explain in detail the financials

  1. Do you have any loans on the books?
  2. What is your burn rate? When is your zero cash date?
  3. What are the company’s 12, 24 and 36 months projections? What are the key assumptions underlying your projections?
  4. What is the revenue roadmap for the next 6 months?
  5. What future equity or debt financing will be necessary?
  6. How much of a stock option pool is being set aside for employees?
  7. When will the company get to profitability? How much will the accrued losses until the company gets to profitability?
  8. What are the factors that limit faster growth?
  9. What has been the cash infusion so far?
Fundraising is a long and distracting process, and by the end of it, all you want to do is go back to building the product that you're working on.

Share your experience on fundraising

  1. Have you raised equity/debt before? If yes, who has participated in the fundraising rounds? What is the cap table?
  2. Since when are you fundraising? What is your runway?
  3. Do you have a lead investor?
  4. How do you plan on using the funds you get?
  5. What milestones have you set for yourself?
  6. Do you prefer debt or equity? Share why?
  7.  What if you can’t raise the money you require?
  8. What kind of exit you think this company will have and when? Share your estimates.
  9. What is your pre-money valuation?
  10. How did you come to the current valuation?
No innovation in legal an finance

Share the facts about Legal & Compliance

  1. Have you incorporated, or formed any legal entity yet?
  2. What kind of entity and in what state or country was the entity formed?
  3. Do you have any patent, copyright, domain names or trademark registered?
  4. Please describe the breakdown of the equity ownership in percentages among the founders, employees, and any other stockholders.
  5. Share details if you are using any open source licenses or have third party components being used and partnership agreements if any?
  6. Who writes code, or does other technical work on your product? Was any of it done by a non-founder?
  7. Is there anything else we should know about your company?
  8. Is there any legal case, proceedings happening or going to happen against the company or the founder? Please do the necessary disclosure.
  9. How is the company protecting its IP developed?
  10. Would any prior employers of a team member have a potential claim to the company’s intellectual property?

It takes average of 7 meetings with an investor to get the term sheet. The above mentioned information is collected in no particular order but processed by investors before they issue a term sheet.

All the information processing by investors only results in an outcome in 3 things

  • Is there money to be made
  • Are these people who can make me money
  • How much money I can make
Properly defined, a startup is the largest group of people you can convince of a plan to build a different future. - Peter Thiel

Good ideas are common, what’s uncommon are people who’ll work hard enough to bring them about.

About 100X.VC

100X is the first cheque, SEBI registered VC fund and an investment adviser. We invest in Indian startups at the seed stage. We are sector agnostic. We use iSAFE notes for investing. 100X is the first seed investors who see potential in startup idea, believes in the team & funds it when they don’t have an identity & are invisible to everyone else. 100X when investing in any startup, we treat each of those entrepreneur relationships as the beginning of 8 to 10 years of partnership journey.

 

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