20 Questions Investors Will Likely Ask Startups When Raising Capital

When you"re ready to start raising your next round of funding for your startup, you want to be prepared for any questions or concerns investors may have. For investors, investing in a startup is a major risk. With over 80-90% of startups failing early, it"s no surprise that investors will want to know thorough details about your startup before moving forward and agreeing to provide you funding. Here are 20 of the top questions investors will ask you as a founder about your startup.

1. What is the Background of your Management Team?

Investors want to know that your startup has a qualified management team working hard to make the business successful. Investors want to know that the team has the skills, drive, and experience to help grow the business. Investors will ask this question in a variety of ways, including:

2. What is the Market Opportunity?

Investors want to know that you"ve done adequate market research and that there are opportunities to scale the business. Investors will want to know the realistic market and the percentage your company expects to capture over time.

3. What is the Problem You"re Hoping to Solve in This Market?

You likely started your company with the goal of solving a major pain point in your industry. Investors want to invest in a unique company that can make a difference in adding value to customers. Is your product or service something a customer actually needs or wants? Can you demonstrate that your product or service will be wanted?

4. Does Your Company Have Any Early Traction?

You"ll want to show if your company has made any early traction by beginning to build a customer base or a following. Companies that gain early traction are more likely to secure funding. Other ways to show early traction include the creation of a beta or a minimally viable product, a collection of customer testimonials, or valuable partnerships in the early stages.

5. Are There Plans to Grow the Team?

While your startup may have key team members when your company grows, there will be gaps you need to fill. Investors will want to know if you have the plan to grow your current team. They will also like to see that you have a welcoming team that is open to adding new members and delegating tasks to others.

6. Do You Have Any Additional Expectations from Investors Besides Capital?

Many investors want to know what their role will be and what is expected of them when they invest in your startup. Investors have extensive knowledge, insights, and a network of people that can give your startup a lot of value. Investors can provide the support you need to help improve your odds of successful growth in the market.

7. Do You Have Key Intellectual Property?

Investors will want to know you have set up protections such as copyrights, trademarks, domain names, patents, or pending patents. They want toalso ensure that your company doesn"t violate any third-party"s rights or former partners that may have a claim. You"ll need to disclose if your startup owns the intellectual property.

8. What Motivated You to Start this Business?

Passion, dedication, and determination can go a long way in building and growing a startup, and investors will want to see that in the founders and key members of your team. You can show passion and enthusiasm throughout your presentation by demonstrating that you know the business inside and out and are ready to take on the challenges along the way.

9. What are the Potential Risks?

Of course, investors always want a majority of the presentation to be focused on growth and positive highlights, but it"s also essential to look at the potential risks and your plan to navigate precautions. They will want to know the principal risks and legal risks to ensure the business is operating within the laws that cover privacy protections, liabilities, regulations, and technology. You want to demonstrate that you have the ability to turn a risk into an opportunity for growth.

10. What Makes Your Product or Service Unique?

You will need to detail what makes your startup"s product or service stand out from the competition. What will drive yourcompany"s success over what"s currently available in the market? Investors will want to know critical feedback from customers or partners, any milestones, differential features, and any plans to improve the product or service in the future.

11. How Do You Plan to Use the Capital?

This may seem like a given, but founders don"t always detail their financial plans in their presentations. Investors want to know how the money they invest is going to be spent and how long it will last. Investors want to ensure you have realistic goals and projects that will be sufficient to last you until your next round of funding.

12. Do the Founders Understand Their Key Metrics?

Investors will want to work with founders who have a thorough understanding of the key metrics oftheir company. When they ask about financing and metrics, investors are looking to ensure you have goals and are able to focus you and your team on actions that are actively working towards making those metrics a top priority.

13. Have You Researched Your Competition?

In any business, it"s essential to know and understand your competition so you can develop a product or service that stands out. Your investors will want to know that you have researched the potential competition and your plans to outperform them.

14. What is Your Marketing Strategy?

Marketing is a major component of a successful business, and if you don"t have a solid marketing strategy, your company may fail. Investors want to know your strategy for building your customer base, whether it"s focusing on PR, social media marketing, or creating sales funnels.

15. What are Your Overhead and Costs?

Investors want to know that you have an understanding of your finances. You will have to detail your running costs, including salaries, rent for office or warehouse spaces, any equipment purchases, marketing allocations, and more.

16. How Did Your Business Come Up With Its Valuation?

There are a lot of methods founders can use to determine their company valuation. A lot of the valuation is determined by calculations and guesswork. Investors want to know that you"ve done your research and have come up with a realistic valuation.

17. Do You Have an Approach to Resolve Disagreements?

Investors want to see a team that works well together, but they also understand that there will be disagreements along the way. They will generally ask if there are any reasons team members may be unhappy and if there is a plan to resolve any disputes. Investors will also likely want to see a distribution of sharesand equity among the team and look for any imbalances that may cause issues in the future.

18. What is the Projected Lifetime Value of a Customer?

One way investors can determine if your startup is worth investing in is the lifetime value of a customer, which is how much the business can earn over the course of the business-customer relationship. Your efforts should be driven to keep existing customers, which drives up the value and increase growth.

19. Do You Have any Technology that Differentiates the

Investors want to know that the technology you use or plan to use allows for more efficiencies and allows for streamlined growth. If your product or service uses technology, can it easily be replicated? Is there any competitive advantage to using the technology your startup is currently using?

20. Do You Have an Exit Strategy?

Most investors want to know that they will get their money back at some point in the startup"s journey. They will want to know your preferred or planned exit strategy for investors in the event that the business shuts down or if it fails. They also will want to know if there is a plan for an exit like an IPO or M&A.

Investors meet with a lot of founders over their years of investing and are very familiar with the inner workings of how a successful startup has to operate. They will ask important questions to ensure that you know and understand your business, have the passion and the drive, and are truly invested in making it a success.

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