5 Questions Every Investor Will Ask

If you have ever presented to investors to raise money, you might have noticed a few recurring questions. While these are often relatively generic and it is often the questions you don’t see coming that are the most threatening, this article should help you be well prepared to avoid lacking a response. These are questions that can make or break your performance such that if you fail outright, it will be very challenging to recover from. We encourage you to closely study and analyze these questions so you know how they will impact your company’s performance. Prepare a well-structured response to every question if you do not want to have your chances of funding seized within 15 minutes of your first call.

1. What is Your Business Model?

The first fundamental question that must be communicated to investors is your business model. Investors will want to understand what your company does and how it operates, which is reflected in the business model. The challenge can be very complex because there are several components to a business model that must be considered. However, it helps to outline the core concepts of what your business does to make money and how it will translate that money into profits. Rather than going into every technical detail, which is very easy to do, focus on the high level overview to receive a holistic understanding of your company rather than a very detailed analysis.

2. What is Your Value Proposition?

The value proposition question is phrased differently depending upon the context. The value proposition is what will drive customers to make a purchase for your product or service. This will serve as the fundamental determinant into whether or not your company will succeed or fail. A company with a weak value proposition that does little to address a competitor is likely to not have the ability of acquiring value from customers. It is not only the core nature of the value proposition that matters, but how it is unique relative to its competition. For instance, a company may address a market need more effectively than its competitors through some competitive advantage it yields.

3. What Are Your Financial Projections?

Investors will want to know how you are projecting the profitability of your company and what your exit strategy is. In many instances, companies have overlooked serious errors in the financial model that will make their business invalid. For instance, they may charge very little money for a product or service that has very high customer acquisition costs associated with it. Therefore, it is important to structure the financial projections in a way that looks attractive to investors and is free from error.

4. How Have You Performed Historically?

If you are a pre-revenue startup, this is not always as straightforward as addressing this question with a financial figure. Therefore, it is important to communicate your historical performance in any way possible. If you are building a software, this means providing an update about the software performance. If you are acquiring a preliminary customer base or raising committed capital, this is the results that you have achieved regarding those respective goals. The historical performance is critical for determining how you will perform once the funding has been acquired.

5. Who Is Your Team?

While this may not be asked explicitly, the team is perhaps the most important elements that investors consider when analyzing your business. Investors will want to analyze not only your teams background and experience, but also their qualifications to run the company and passion. You would be astonished how many people pitch to investors that are not true entrepreneurs, but only seeking something temporarily while they search for full-time employment. Demonstrating an entrepreneurial background and the ability to grow a company, produce a great product, or lead a team is a critical dimension to addressing this factor.

We hope that these questions are very familiar to you and that you have already prepared a concise response for each one. As mentioned, the most difficult questions asked by investors are those that are not anticipated. Therefore, the team at Pro Business Plans presented the top five questions asked so that you can prepare a professional response in a timely manner that demonstrates the sophistication of your team and builds the best investment case possible.

Published by Kidal Delonix (1198 Posts)

Kidal Delonix is a contributor to Mr. Hoffman's blog. The views and opinions are entirely his/her own and may not reflect Mr Hoffman's views.