Venture capital · Investor pitch

Hardest, most difficult questions from VCs / Investors

Stan SF Manager

February 5th, 2014

Hello all,

I was presented with an opportunity to present our product/pitch to a few VCs/investors around May.  In preparation for this - I'd like to know 
  • what difficult or unexpected questions you've had to answer from VCs/investors?
  • what details about your pitch or product got their attention vs. lost their attention?
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Jeff Miller Founder and CEO at Wheelz, Inc.

February 5th, 2014

There is a big difference between raising during a Seed stage (<$2m) where you are principally selling vision, market need, and why you/your team are ready to crack it.  Often, at this stage, you are pre-product-launch so there are few business metrics to share.

When you're going for a Series A or later, then you will still principally be selling your vision, but there will be a lot more scrutiny of your actual business metrics and economics.  Again, which metrics will depend on what type of business you are.  I found this TC article to be pretty accurate to my own experience...hopefully you find it usefull.

http://techcrunch.com/2014/01/31/the-complete-quantitative-guide-to-judging-your-startup/

Rick Nguyen Cofounder @ Spot Trender

February 5th, 2014

If you team is so great, your idea is so big, your tech is so amazing, why don't you have TRACTION??

Rick Nguyen Cofounder @ Spot Trender

February 5th, 2014

@Geoff Whitlock Traction is measurable (user growth and/or revenue). A "great" team, "idea" usually aren't. Advanced tech could be duplicated. My point is you can make up an answer for team, idea, and tech, but it's hardest to justify no traction. On the other hand, if you have great traction, investors love you.

Michael Schawel Partner at SCHAWEL+COLES

February 6th, 2014

I would second the need to have all your short-end metrics/projections/forecasts memorized backward and forward. VCs like start-ups that have the math mastered. Don't leave any guesswork and practice in front of a few people.

Geoff Whitlock Co-Founder and President of Surround

February 5th, 2014

Start with, why. Why you, why your product, why their money. Every VC is different. I you can answer the questions of why, you may capture their attention.

Geoff Whitlock Co-Founder and President of Surround

February 5th, 2014

That's an odd question, Rick. The variables are immeasurable. Thanks.

Rick Nguyen Cofounder @ Spot Trender

February 5th, 2014

Anyways the reason I post the question is I've seen it asked by an investor as part of a "tough love" mentoring session. It really stumped the entrepreneur there.

Mark Neild Empowering quietly creative people to prosper through innovative yet authentic and engaging business models

February 6th, 2014

Stan Speaking from the perspective of somebody who more regularly listens to pitches (or reviews plans as part of a DD process) than gives them, here are the 2 things that make the most difference to me. 1. What evidence is there that enough people want to pay for your product? 2. How can you convince me that you and the team can actually execute - ie deliver your chosen business model. Most VCs I work with are more hot on 2 as if you can execute a business model then you will find the right product if the first idea turns out to be a pup. Things that put me off 1. Unfounded claims of any sort ( the proof does not have to be in the pitch and it can be a good technique to provoke a question with a counter intuitive claim in the pitch where you know you have strong evidence to support it if asked) 2. Too much reliance on Google or market survey material rather than talking to real customers. Hope it helps and good luck in May Mark

Vadim Oss Co-founder at Rentini

February 6th, 2014

I think for a startup that is just ramping up the most difficult question will be  "Do you have a proof of how will you make money?"

If you don't have the proof use this time between now and May to establish it in real numbers. No investor will trust in what founder thinks. In numbers they trust and these numbers should come from your customers.

Lawrence Lerner Digitalization and Transformation Coach

February 6th, 2014

Stan congratulations on your opportunity.  I've been on both sides of the table so here are some thoughts.

The toughest questions are the ones you are not prepared to answer.  To be able to answer a broad range of questions, you need to have what I call "command of data." That is, know the facts that relate to your business.  Here are some examples:

  • Who is your market?  This is an area that gets the discussion into a tailspin. I call this the addressable market.  Addressable markets are what and who you can reasonably target.  As an example, anyone should be in the market for a Kindle.  If you start the filtering to make it addressable (this is only an example and not meant to be 100% accurate):
    • Total population of Earth is about 7 Billion
    • Worldwide literacy rate is 84.1% (http://www.indexmundi.com/world/literacy.html) - I haven’t cross checked this. It only includes adults over 15 years old
    • Perhaps you want to only market in the US. Literacy rate is 86% (on 371 million people) http://www.huffingtonpost.com/2013/09/06/illiteracy-rate_n_3880355.html
    • 76.5% of the US population are over 18 http://quickfacts.census.gov/qfd/states/00000.html
    • Using the above numbers we are down to a market size of about 244,000,000
    • The cost of the Kindle makes it a luxury.  Say only 30% (and this is where some research should have been done) can afford the Kindle. About 73 million people.  A large number but that’s market you can address.  It doesn’t mean 100% of them will buy it 
    • The device is small and portable which means it can be sold through any brick and mortal retailer willing to put up the shelf-space.  
  • What's your differentiator? Keep it to one line.  This is hard but demonstrates you have focus and have thought through your value proposition
  • What are your competitors doing?  If you truly do not have competitors (e.g., first iPod) then identify some barrier to entry you can/have created to prevent someone with deep pockets from recreating your idea.  Patents don't create barriers
Good luck!