Startup managers often find themselves in anxious situations during meetings to attract investors, especially if the success of these meetings determines the fate of their business. During these meetings, you must quickly provide a lot of information about your business and persuade your audience to invest. Investors will ask a variety of questions about your competitive advantage, competitors, team, and actions taken at the startup to assess the likelihood of your business’s success. By being aware of the questions investors will ask, you can prepare the best answers and be ready for the meeting. In this article, we will examine 14 common questions asked in pitch meetings.
1-What is the primary purpose of your products or services?
Every business should have a specific goal, whether it is offering a completely new product or satisfying old needs in a new way. It is crucial to explain to investors what your business is, what needs it fulfills, and how it does so. To prepare for investor meetings, it is best to identify existing problems with the help of your team. Raise issues and challenges without confrontation to find solutions for them. During investor meetings, many people may doubt your idea and see the potential for failure more than success. You must have a plan to convince these people and provide reasons and evidence to show that you will achieve your goal and that success is more likely than failure.
2-Who are your potential customers?
This is one of the first questions you should answer about your business. Even before investors ask you about this, you should have identified potential customers in your business plan. Identify customer personas to determine who potential customers are, where they are present, and how they can be influenced. Some businesses have a general audience, which increases the risk of failure because you must strategize marketing to different segments of the community, compete with many businesses, and provide a competitive advantage. Professional business developers recommend focusing on the most significant market segment, even if the general public needs your products or services.
3-Why do people need your product?
Some startup managers start a business without even clarifying this answer for themselves. A group of people often try new products and brands out of curiosity, and if their experience is positive, they repeat their purchase. If the first group of customers is satisfied with your product or service, other members of the target market will follow and may become permanent customers. Startups that don’t have a plan to create a need in customers or encourage them to buy again are relying solely on the curiosity of the first group. Curiosity is not a strong support and will eventually end.
When investors ask why the market needs your products or services, they expect to see the results of marketing research. You must prove to them that you have a plan to attract customers and make permanent sales.
4-What are your plans for the next 6 months?
By asking this question, investors will understand what your priorities and plans are for your business. Focusing on the wrong topic can increase the risk of your business failing. For example, if a business that has not yet made a profit of 1 million euros aims to make a profit of 1 billion in the next 6 months, it is moving in the wrong direction. Correct the path to prevent failure.
To answer this question, discuss the most important thing you are focused on. Explain why this is crucial for your business and how much you plan to improve in the next 6 months.
5-How much experience do you have in your business?
Investors prefer to invest in professionals. They ask about you and your team to ensure that skilled and expert people will implement the startup idea. Specialised knowledge and practical skills in the desired field are crucial for attracting investors’ attention, but a few years of unrelated work experience will not suffice.
6-What is the competitive advantage of your products and services?
To succeed in the market, you must either offer a new product or present an old product with new features to entice the customer to choose you over your competitors. A longer useful life, easier use, or more support services of similar products are the best competitive advantages you can offer. Some businesses consider a lower price than the market norm as a competitive advantage, but this old strategy is no longer effective, especially if your startup’s competitors are big, established brands.
7-How well do you know your competitors?
To continue operating in the market, you need to compete, and to succeed in the competition, you need to know your competitors. If you don’t have an answer to this question, it means you don’t have a long-term plan to overtake your competitors and capture a share of the market. Unrivaled businesses have a golden opportunity, but they must extract it themselves. The absence of competitors means that there is either little need in your area or no one has offered similar products or services yet. In either case, you should market your offerings to sell well.
8-Why did you choose this field?
A booming market and the potential for high profits are not the right motivations for starting a startup in a particular field. Some people think that starting a startup is an easy way to get rich. They know they need to build a team, have a product or service, market and sell, but they don’t have the ability to implement what they know. These people also have incorrect ideas about attracting capital; they believe that by participating in a fundraising meeting, they can get the funds they want from investors and boost their business.
In the real world, starting a startup is not so simple and may not be profitable for a long time. Amazon, one of the most successful businesses in the world, did not make a profit for its founders in the first 7 years. If making money is the only goal and motivation you have for a startup, you are likely to give up before you reach profitability.
9-Do you only need capital or do you want a partner for your work?
Startup owners seek an investment to cover their costs so that they can transition from a startup to a business, but this is not the only benefit of having an investor on board. Investors ask about you and your team to ensure that skilled and expert people will implement the startup idea.
Their presence can accelerate the growth of your business because they are often experienced and professional people with strong connections. Many people will trust you simply because of the reputable investment name.
The advice and experience that the investor provides you with are more valuable than the money they give you.
10-What do you offer in return for the capital received? Shares or sales points?
Investors usually take a portion of their shares in exchange for the funds they provide to startups so that they can profit after success. But there is another way to agree with the investor, called assigning sales points. In this method, you give a certain percentage of your sales to the investor. Each of these methods has different advantages and disadvantages. Before attending a fundraising meeting, you should evaluate each method and present a specific plan to investors, a proposal that will benefit both parties.
Investors who buy sales points for paid funds protect their capital against the risk of the business not being profitable. Because as long as the startup has sales, they have income, even if it does not turn into a business and does not reach profitability. Offering sales points to investors allows startup owners to retain complete ownership of their company’s shares without adding any additional shareholding.
11-What is your advertising strategy?
The accuracy of the advertising and media strategy you have chosen to introduce your products to your target market is very important to investors. Advertising is necessary to introduce the brand and motivate customers to buy products and services. In your advertising strategy, you should determine how much budget you need and where you will allocate each part of this budget in terms of media or sales channels.
12-Can your business scale?
Investors seek to return their capital in the shortest possible time and maximize profit. Therefore, they prefer to invest in startups that have the potential to become large businesses. In the investor meeting, you should present a detailed plan for business scalability and future growth. You should also outline how you plan to go from 20 customers to 200 customers a day and what prerequisites you need to provide for this.
13-What are your financial figures?
Investors don’t want to give their money to startups that are only successful on paper. They look for businesses that have sold a product or service and provide real market sales figures. It is better to show up at investor meetings with accurate financial data so that you can answer all their questions about it.
You don’t have to give your investors detailed sales and revenue information. Only discuss major trends and significant numbers.
14-How do you assess your business?
Some new entrepreneurs think they have the best startup in the world and will soon compete with Elon Musk! These illusions lead them to expect to receive large capital in exchange for the low value they offer to the investor. They believe that the investor will make a very good profit within the next few years, but they can only prove this in their minds! It is better to assess your business using correct and logical criteria and present it accordingly in the fundraising meeting. There are 3 ways to do this:
- Comparative Method: Value a company using ratios like EV (enterprise value) or P/E (price-to-earnings ratio) by comparing it to similar businesses.
- Merger method: Determine the value of your company based on the price paid for similar companies using the merger method.
- Default Cash Flow Method: The value of the company is determined based on estimated future sales and profits.
Last word: Be professional to attract capital
Starting a startup in the real world is harder than what you read in books and motivational talks. Not everyone is cut out for entrepreneurship, and only a small number of people can do it well. Fundraising meetings are some of the most important meetings you will hold. In these meetings, you should be knowledgeable about all aspects of your business and be prepared for the various questions that may be asked. If you have ever had a meeting with investors and answered questions in addition to the above, please share your experience with us.