99 Questions every Investor will ask… Especially a VC

 

 

 

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About me

I am a 35 year old first generation Tech & Internet entrepreneur. Co Founder & CEO of ideacts innovations. An Internet Media company funded by Sequoia Capital and Saama Capital. I am an Ex Mobile2win employee and possibly the first entrepreneur mentored by Alok. I am also the Author of ‘Breaking Out and Making Big’, a no-nonsense book on new age startups and entrepreneurship…. 

99 Questions

Investor Pitches and Discussions is one of the most difficult things a first time Entrepreneur has to prepare for. In the process of making a Presentation and Business Plan Excel, it is possible that an Entrepreneur might ignore the fact that, it is more important to Prepare oneself for the Discussions that will happen with the Investor. 

Based on my experience of raising 3 rounds with Venture Capitalists and 1 round with an Angel Investor, I have penned down 99 questions every investor will ask.Honestly, even if one is not looking for an investment, answering the below given relevant questions will just help the entrepreneur gather a lot of clarity on the business.

External Questions

• How big is the Industry and Category in $?

• Is there any market research done on the Category or Industry?

• How fast are the Industry / Category growing?

• How much market share does the Startup have?

• How much market share can the Startup get?

• How much time will the Startup need to reach there?

About the Startup

• What Problem does your Company solve and for who?

• What solution does your company give for that Problem?

• Is it a B2B model or B2C model?

• Are few customers paying a lot of money or many customers paying small amounts?

• What are the Sales channels of the company and their % breakup?

• What are the customers happiest about in the Product / Service?

• What is the Product Development Plan?

• Is there a Technology advantage in your model?

• Can something be patented in this company?

Financial Numbers

• Can the company make revenue?

• How much revenue can it make in 5 years?

• What is the cost of making revenue?

• What are the unit economics?

• Will the unit economics grow with scale, stay stagnant or decrease?

• What are the total costs of the company?

• What extra cost will get added with scale?

• What are the Gross Revenue and Net Revenue of the company?

• Is there a difference in the Gross and Net Revenue in the company?

• What is Gross margin?

• What is the EBITDA (Earnings before interest, taxes, depreciation and amortization)?

• What is the PAT (Profit after Tax)?

• When does the company get paid – Pre Sale or Post Sale?

• If Post Sale, then what’s the collection time period?

• What could be the % of payment defaults in collections?

• What are the Projected Cash Flows?

• When does the company reach Positive Cash Flows?

• Is it a Capex heavy business or Opex heavy business?

• What assets would the company build over a period of time?

• What is the existing PnL of the company?

• How much money does the company have today and how long will it last?

People

• How many people does the idea need to scale?

• What talent and skill set do they need to have?

• Where and how will you source them?

• What kind of salaries do we need to give them?

• How does the post funding Organisation Chart look like?

• How many people need to be hired at the Top Management to make it a stable organisation?

• Does the Startup need a COO or should all Vertical heads be reporting to the CEO?

• Who all are working as employees in the company and what are their backgrounds?

• Does the company have an ESOP Pool and Policy and what is the breakup of ESOPs issues till now?

• Who should be on the Board of this company?

• Are there any other Co-Founders?

• How capable are they as executors in the company?

• How do the Co-Founders know each other?

• What is the Equity split in the company?

• What is the complete background of all the Co-Founders? Professional and Personal?

About You

• Can the Entrepreneur execute this?

• Does the Entrepreneur have the relevant experience, knowledge, skill set and attitude?

• How long will the Entrepreneur stay in the company?

• What was the salary of the Entrepreneur before the Startup and in the Startup?

• What are the areas of improvement for the Entrepreneur?

• Is the Entrepreneur passionate about the company?

• If the Entrepreneur is not able to scale the company, would he / she be ready to get a new CEO?

Competition

• Which other companies compete with this Startup?

• What market share do they control?

• What is the revenue of the competitors?

• Which other companies complete partly?

• What is your competition strategy?

• How many companies can get into the same business model after hearing a funding story?

• Has any other company failed in executing the same Business Model?

• What was their reason of failure?

• If there is no competition, then why so?

• Is there any comparison company globally?

• How successful or not is that company?

Investment and Diligence

• Are there any large partnerships which can make the business propel?

• If yes, what are the partners saying about company and partnership today?

• What would happen if a large company enters this category or business model?

• How much money has been put into the company so far?

• Is there any debt on the Entrepreneur, which was taken to start this company?

• Does the company have any Angel Investors?

• Do the Angel Investors want an Exit or are they willing to stay invested through this round?

• How much money does the company need?

• What is the breakup of the money needed?

• How much money from the Investment will go into Capex or 1 time purchases?

• What stage will the company be in after spending this money?

• What is the Startup going to use the money for? Prove the a concept / idea a little more, Go profitable, Sustain till another round or Reach a potential exit?

• If another round, then how soon will the company need it?

• Does the company need all the money in one installment or two installments?

• How far can the company reach if it does not get funded?

• What are the Exit options?

• Can this company go Public?

• Who could be a potential buyer for this Startup?

• What is the strategy of those buyers in regards to the business model / product this company runs?

• How much time will it take for the Investor to exit?

• What happens if this business mode fails?

• What are the adjacent business models this company can create?

• What are the top 5 hurdles for the company in trying to scale?

• Are there any government policies that might affect the business of the company?

• Who all should be contacted to validate the business model?

• What are the assumptions taken in the Business Plan?

• What all can go wrong in the Projections?

• Does the company have any pending litigations?

• Has the company been audited in the past? What does the Audit report say?

• Does this company compete with any of our other portfolio companies?

The book has many more practical suggestions on building startups and the entrepreneurial journey… available at leading book stores n ecom portals – www.breakingoutandmakingbig.com 

I am @rudrajeet | fb.com/rudrajeet 

First Published on: Mar 24, 2015