Business

Questions investors are likely to ask you

Getting your startup financed is no small challenge. It is even more difficult when your startup is at an early stage when there are no “field” tests that can indicate the chances of success, such as a working product, happy customers, stable income, and so on. In the initial stage of a startup, the founders must demonstrate to investors that the company not only has a great product with a clear fit to the market, but they must also demonstrate that they are capable of taking the company through the following stages. and ultimately succeed. In preparation for meetings with potential investors, it is not enough just to master the business plan and fully understand the business model, but also to work hard and prepare for the actual conversation with investors. What does it mean? First, you need to know and understand the potential questions investors might ask and be prepared to answer them in a comprehensive, direct and impressive way. These will include personal questions on your resume, as well as questions about technology, business, and financing. Most likely they will be around 20 questions; Here are some examples:

1. How complicated is your technology? How is it protected? Is it easy to copy it?

Especially in a technology company, protection against theft and copy is very important and provides security to investors, who can ensure that it is a significant technological innovation. In case the specified product requires intense QA testing, software validation, licensing authorization or regulatory approvals, it is recommended to start these at a very early stage of the project as they are likely to be time consuming due to their nature. Any type of approval will increase the value and prestige of the company for investors.

2. How many months are required for each stage of the development process?

Some of the ideas and projects have a small window of opportunity to penetrate the market. In such cases, it is important to show that the startup can complete the development stages in a fairly short period of time (months), without contradicting that although development is quite fast, it will still be relatively difficult to copy the product.

3. Who are the competitors?

When there is a need or market size for a certain product, there are likely already some companies trying to meet it. Therefore, it is important to show that there is real competition and do not try to avoid or hide this topic.

Show your advantages and unique value proposition compared to your competitors. Do not claim that your product is perfect, it is highly unlikely.

It is important to show founders how to leverage the unique values ​​of their product or service over those of the competition, and bring it to the right market – the market where the value of the product is highest and the downsides are least noticeable. .

4. What is the Addressable Market Size (AMS)? How did you get to those numbers?

Established researchers from leading companies such as IDC, Gartner, etc. it costs thousands of dollars. Generally, a new startup does not have the resources to invest in such market research.

It is recommended to invest a good amount of hours in search engines to find other research, presentation slides and other data that will help calculate the relevant market size for your startup. Even if the information you unearthed doesn’t exactly match your target market, you can roughly assess the size of your target market.

There are many more questions, such as: how do you plan to penetrate the market? What is the business model? What is the basis for it? What is your competition’s business model? How much cash do you need up to the balance of the operation? What are the property rates you are willing to pay for the investment? And more.

Knowing these questions and being prepared for them significantly improves the impact you could have on investors and your ability to properly assess the founders’ chances of leading the company to success.

Additionally, most founders come from technological backgrounds (engineers, developers) and lack the business and financial understanding necessary to build and scale a company. Terms like operating profit, cash flow, fixed and variable costs, capital and many more, rarely known, will make it difficult to lead and direct the discussion in front of investors. Such a thing could hurt investors’ enthusiasm and willingness to invest, even if the product is excellent, without competition, and with a large market. After all, even the best ideas could fail without the right business, marketing, and strategic leadership.

Leave a Reply

Your email address will not be published. Required fields are marked *