Top 10 questions VCs will ask
Preparation is key, especially when you're pitching for funds to invest in your startup business.
Whilst there are many types of investment sources (bank loans, government grants, angel investors, crowdfunding... ) venture capital investment is the most common route for ambitious entrepreneurs.
As one can imagine, VCs get pitched to a lot but by preparing yourself for the following top ten most commonly asked questions, you'll stand that extra chance of success:
1. Who are you, and what makes you so special?
Investors are going to want to know flat out why they should put their money into your business, and not the team about to come in after you, or the one who they just met. What makes you stand out from the crowd? What's your USP? (Unique selling point). Clearly and firmly convey what makes you special in the most succinct way possible.
2. Who's in the team?
The people are just as - if not more - important than the product or service. They want to know the full credentials including hard and soft skills. They'll also be testing the chemistry, as this is a two-way human relationship. If you're going to be working together, you're going to have to get along.
3. How well do you know the marketplace?
In addition to finding out about you and the team, investors will want to see that you are a complete expert in the field of your business. Your knowledge of the landscape, trends, where your company fits into this, and what the future holds, is paramount to impressing the right crowd. If someone else can come along and do it better than you, their money is going into their pockets.
4. What are your early signs of success?
Investors need to see more than proof of concept; they need to see what early signs of consumer demand there have been. This will also show how far you've managed to get without their money so far - imagine where the business could go with the funding!
5. What's the market opportunity?
One thing is proving your success, but another is where that success lies. If you're business is doing incredibly well but operating in a pretty niche area, chances are that even having a total monopoly here isn't that attractive a deal to the investor. Sometimes it's better to have a smaller piece of the pie but the pie itself is massive.
6. What are the biggest risk factors to your business?
Let's not get hasty here; even if your business is doing well and operating in a healthy marketplace, there will still be real threats that your business will have to come up against. Investors need to be fully aware of both the opportunity and risk factors, so it's important to be clear about what those are. (These will commonly include competition, rising costs, change of legalities, over-dependence of an item, rapidly changing trends... etc.)
7. Do you have any intellectual property, or differentiated technology?
Part of what makes you stand out from the crowd is this competitive advantage. If you have something trademarked or similar, you are naturally creating a low-supply business that can seem tempting to invest in.
8. What are your financial projections?
Investors are the money people, yes, but you still need to show a firm grasp of your financials. Confidently demonstrating advanced numerical literacy and a knowledge of your own business and the marketplace you're operating in will earn you brownie points, for sure.
9. Is the expected valuation for the company realistic?
Depending on the size of the cheque, investors will want to test and cross-examine you and your numbers. Do not over-exaggerate or inflate your calculations; this will only make things worse for you in the long run.
10. What are you going to do with the money?
Say it like it is. There's no flirting when it comes to important business. How much do you want and what will you do with it. This ties into demonstrating your financial capabilities as well as showing the investor that you've seriously thought through your plans. They need to know where the money will be going and how you intend to spend it. Acquiring funds isn't the same as spending it, so prove you know how to do both.
If you're fundraising at the moment, or thinking about it, speak to a member of the Bloom startup team for a no-obligation discussion on what might be the best steps to grow your business.