venture capital questions

To keep your business rolling it is important that you serve the purpose and for this capital is very necessary.  Every VC investor has defined business criteria which leads their funding decision. No VCs are interested in investing in a business idea for single-digit returns.

The best way to ensure your company gets VC funding is- ask yourself questions that a VC investor can ask you.

If you don’t know what kind of questions a VC investor can ask, don’t worry. In this article, I will tell you those questions and the reasons for asking such questions.

Why did you decide to sell this product/service?

Investors want to know the reason why you decided to sell this particular service/product in the market. They get to know how well you understand the recent demands in the market and how well your product/service satisfies it.

What makes your product/ service special from the rest?

As I mentioned earlier every business servers a purpose. As a founder, you must articulate it clearly- what does the product or service exactly include, why it is unique. To answer this you can simply add product features and its benefits.  

  • What are the significant milestones of your product or service?
  • What are the crucial characteristics that distinguish a product or service?
  • Which important features did you plan to add in the future?
  • Do you envision upgrading the product or service? And if yes, how frequently you think to enhance it?

These are some questions that can be followed-up. I will suggest you answer “what makes your product/ service special from rest?” in such a way that it answers above mentioned set of questions. And unknowingly you will deliver detail and satisfactory answer to the venture capitalist.

What options this capital will open for you?

This question is quite tricky. Of course, investors want to know how their money will be used. But a hidden reason is investors ask this to know what your company’s plans are.

Give honest answers to yourself. Don’t manipulate your plans for the sake of how to fascinate and attract investors. You may be needing money to buy equipment, hire an employee, or/and invest in any technology. Funding will allow you to do all this simultaneously.

Investors like to be an active participant in business ideas of their interest to help it develop. So think of an open management team to advise. 

What ROI you can offer?

An investor invests in any business idea with a mindset to get a good return over 1-5 years. Established businesses have the ability to offer evidence to their quoted figure. But a new startup’s growth prediction is majorly based on theoretical stats. So, before quoting any figures to the investors. It is recommended to evaluate your business model canvas and based on its results you make a decision.

A conversation on a company’s revenue growth, sales funnel, and customer supports to connect with investors immediately as it showcases founders as metrics-driven.

Do you understand the financials and key metrics of your business?

Venture capitalists are interested in investing if founders understand the financials and key metrics of their business well. By knowing what you want to spend your money and focusing on the prioritize metrics can prove that you coherently handle financials. I will suggest you know the break-even point of your business.

VCs look for entrepreneurs who articulate their business key metrics and convey them intellectually to the team. They also look for a future picture (three to five years ahead, depending upon business type), showing a competitive and conservative outlook of the business.

If you are thinking to present projections showing what revenue the company will achieve in five years, then it won’t drive much of their interest. Investors look for a business that can grow and eventually become an exciting company.  

What are the company’s financial projections?

If you are thinking to present projections showing what revenue the startup will achieve in five years, then it won’t drive much of their interest. Investors look for a business that can grow and eventually become an exciting company.  

Avoid assumptions and random prediction in your projection, such kind of behavior will only give an impression of you being unrealistic. And if you have any predictions present it with a concept of proof.

Have you completed all your legal formalities?

Investors are very particular while making investment decisions. They don’t invest in startups which has legal issues or whose legal formalities are pending. In other words, if you break any kind of law or you fail to meet legal standards then it is a red flag. Always, make sure that you have completed all kinds of legalities that are needed to be done at the begging level of a startup, before pitching your business idea. 

To keep the growth and efficiency of your startup going, it’s important that you fulfill all legal requirements. It will help you to build a good impression in front of investors and also portray you as a trust-worthy.

What are the potential risks?

Investors want to know what risk there could be to the startup or if there is an existing one. They would like to comprehend your thought process and the mitigating precautions you’re taking to decrease these risks. 

Don’t neglect this question as there is risk in every business. Presenting your strategies to reduce or remove the technical, product, sales, or market-related risks will give you an edge in fund-raising. Thus, it is better you be prepared to answer it.

Do you believe in your team and do founders get along?

A strong team’s energy keeps the company running. A strong team flourishes well as it has both passion and experience. A study states 60% of the startup fail because of disagreements in staff. Your team should have the skills, knowledge, and passion to keep the wheels running.

As important it is to believe in your team, it is equally important that founders get along well. You cannot fool investors by showing your very best side to them. Because of the years of experience, even a subtle sign of dispute or disharmony is enough for them to know if there is something fishy or not. A healthy debate between founders is absolutely fine as it ensures the decision taken about the startup are closely considered and carefully made.

Conclusion: VCs look for dedication, commitment, and transparency in the startup. So to prepare a powerful and effective pitch you must have a clear vision of your business. Keeping these questions in mind and understanding it through the VCs perspective will help you to make a powerful pitch deck. Having an effective and well-prepared pitch deck will reduce your stress of convincing the investors that investing in your business idea will be a significant and profitable deal for them.


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