Investor pitch · Investors

What are the top questions entrepreneurs should be asking investors?

Anonymous

February 6th, 2015

I understand the questions entrepreneurs need to answer in an investor pitch, especially early stage. Problem, how big, how you're fixing it, why you + team are the best ones to do it and what traction have you had?

But usually entrepreneurs or just excited that investors are excited and don't ask any questions of their own. What are the right/best questions to be asking of investors? Would love to hear from entrepreneurs but also from investors who appreciated good questions being asked of them.

Nina Tomaro Content and PR Marketing Manager at eLearning Mind | Speaker | Huff Post Contributor

February 6th, 2015

Some good questions to ask are: 

How do you interact with founders after investing? -you are going to benefit more from someone who want to be involved and make intros, rather than someone passive. 

This also lead to asking what their bandwidth is. How many boards do they serve on?

What's your process. How do you make a decision?

Do you have the necessary relationships to help us build the syndicate for our next round of funding?

What are your return expectations? What is your exit strategy?

How many investments they have made in the past 6 months to 1 year.

What is the size of the fund you would be investing from? What is the average size of your first round of investments? 

What was the toughest portfolio company experience you went through? How do you work through these tough situations?

"What specific criteria do you have for investing in a company?"

Kevin McLaughlin

February 6th, 2015

All good advice above - some other good ones

"where are you in the fund lifecycle?"
"how many exits have you had from the fund"

One thing you'll learn is that while you are 100% invested in one bet - they are maybe 5% invested in 20 bets and depending on where they are in the fund's lifecycle and how well they have done will determine their decision making and appetite for risk.  For example -if they hit a homerun early on and are playing with house money - they are more likely to go for it with your investment.  But if they have yet to have a meaningful exit or have a recent run of failures - there may be tremendous pressure on you to not fail or be a huge return.  And if they are fundraising and you get a decent acquisition offer and they feel they need some good news - they may push you to take an offer instead of a much bigger one in a few years.

Hope that helps

Christopher Wilson Tech product manager, Infusionsoft expert, process automation fanatic, veteran startup exec, & seasoned pitch man.

February 6th, 2015

Hands-down the best thing I believe you can ask and investor is the cultural fit correct? I'm pretty good friends with the CEO of infusionsoft. They just raised another $54 million, and they make sure they looked for the right fit from venture-capital firm on a cultural level, not just on money level.  

Andrew Lockley

February 7th, 2015

Do you follow on? What's your track record of adding value in this sector? How much contact / intervention / support will be involved in our relationship? What do your previous holdings say about you? What's your vision, ethic and philosophy? What's your long term plan for the fund?

Christopher Wilson Tech product manager, Infusionsoft expert, process automation fanatic, veteran startup exec, & seasoned pitch man.

February 7th, 2015

I just had a comment "moderated" about Infusionsoft raising money and having the raise be mostly about the cultural fit for the VC firm and not just a money fit.  Someone who wants to be in it for the long term.  Can I ask why my comment was removed? 

Bhavin Parikh CEO and Co-founder at Magoosh

February 7th, 2015

Here's my list of questions:

1. When's the last time you made an investment? 
You should really know this going in. Some VC's will take meetings even though they don't have the funds to invest.

2. What's your bite size?
If you're looking for 200K, but they're minimum is 500K, then you are wasting your time. 

3. What's your investment process? How long does it take?

4. How involved are you with the entrepreneurs you fund? 

5. Can you make an intro to 2-3 entrepreneurs in your portfolio? I'd love to chat with them and learn (you can use this to check references on the VC.)

Here's an article from Forbes that I co-wrote which has more detail: http://www.forbes.com/sites/theyec/2014/05/13/the-seven-questions-you-should-ask-your-potential-investors/

Jennifer Fortney 20+ years’ experience in PR & marketing comms; Founder of Cascade PR, Chicago firm for small business & startups.

February 7th, 2015

These are all great.  I suggest;

understanding what they're looking for in return
what role they want to play in your company
are they open to future funding
what will they expect of you in terms of accountability (reports, meetings, monthly calls, etc.)

Great question!

Alan Matthews Entrepreneur

February 10th, 2015

I select my investors based on reputation and exit ability.