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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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??

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

@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.

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.

Steve Brett

February 8th, 2014

Answer this question - even if they don't ask it - and then everything else comes down to management, management, managent:

How are you going to change the world?

If you can't answer that with passion and conviction, nothing else you say will matter.

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.

Tim Stutt Founder and CEO, Advisor to Early Stage Startups

February 6th, 2014

9 tips on pitching to investors: 1. When the risk is high, the reward needs to be high! Show the investors that you've done all the homework and have the right team to execute and deliver a big return. 2. Expect that all of your business assumptions will be challenged! 3. Have a real business model that involves people paying you for a valuable product or service. Crucial unless you've already built several startups and people will invest in you just because of your track record. (In any case, having a person like this on your team helps.) 4. Engineering cred alone is not enough of a competitive advantage, you have to build the right product for customers who are willing to pay for it. 5. Once you have established a viable business model, you need to convince investors that the top line of your business is growing fast and can grow exponentially more with their investment, and they need to invest now or the opportunity will disappear. 6. Be specific about what you'll do with the money and the time frame to realize the results. Who are you hiring? What roles will they perform? What will this do for your product and customers? 7. Explain the larger market trends that you're riding, the incumbents that your disrupting, the open space that you'll occupy, and the momentum that you've already built. Differentiate yourself from your competitors. Why will you win? 8. A small but profitable business is not a winner for VCs. Be explicit about your growth targets and the size of the potential business that you're building. Again do your homework, know what type of return your specific investor is looking for. 9. Technical details of implementation are meaningless to most VCs and investors, UNLESS they come from an engineering background. Do your homework before the presentation, find out who will be in the room. Bring a partner along with a mobile phone to lookup any suprise guests, this does happen. Good luck!

Geoff Whitlock Co-Founder and President of Surround

February 5th, 2014

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

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