The meeting to attract investors is one of the most anxiety-provoking situations that startup managers find themselves in, especially if the success of these meetings is tied to the fate of their business. In these meetings, you should provide much information about your business in the shortest possible time and convince your audience to invest. Investors will ask various questions about your competitive advantage, your competitors, your team, and the actions taken at the startup to gauge the likelihood of your business’s success. If you know the investors’ questions, you can provide the best answer and be prepared. In this article, we explore 14 common questions that are asked in pitch meetings.
1. What is the primary purpose of your products or services?
Every business should have a specific goal, whether offering a completely new product or satisfying old needs in a new way. It is essential to explain to investors what your business is, what needs it fulfills, and how it does it.
It is better to find the existing problems with the help of your team before meeting with the investor. Issues and challenges should be raised without confrontation so that it is possible to find a solution for them. In every investor meeting, several people doubt your idea and consider the possibility of failure more than success. You must have the plan to convince these people and prove with reason and evidence 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. Before investors ask you about this, you should have identified potential customers in your business plan. Determining customer personas is very important for today’s businesses because it determines who potential customers are, in which spaces they are present, and how they are influenced.
Some businesses have a general audience. This makes failure more likely because you must strategize marketing to different community segments, compete with many companies, and provide a competitive advantage. Professional business developers recommend focusing only on the most critical market segment, even if the general public needs your products or services.
3. Why do people need your product?
The managers of some startups start a business without clarifying the answer to this question, even for themselves. A group of people always go to new products and brands out of curiosity, and if their experience is positive, they repeat their purchase. In this case, other members’ target market members will follow the first group, and if satisfied, they will become regular customers. Startups that don’t have the plan to create a need in customers or encourage them to buy again rely only on the first group’s curiosity. Curiosity is not strong support, and one day, it will end!
When investors ask why the market needs your products or services, they expect to see results marketing research results. You must prove to them that you plan to attract customers and make permanent sales.
4. What is your plan for the next six months?
By asking this question, investors will understand what your priorities and plans are for your business. If you focus on the wrong topic, you will increase the chances of your business failing. For example, if a company that has not yet made a profit of 10 million tomans intends to make a profit of 1 billion in the next six months, it is moving in the wrong direction. If this path is not corrected, it will most likely fail.
To answer this question, discuss the most crucial thing you focus on. Explain why this is important for your business and how much you will improve in the next six months.
5. How much experience do you have in your business?
Investors prefer to give their capital to professionals. They ask about you and your team to ensure that there are skilled and expert people who will implement the startup idea. Having specialized knowledge and practical skills in the desired field is very important to attract the attention of investors. Still, a few years of unrelated work experience will not satisfy them.
6. What is the competitive advantage of your products and services?
To succeed in the market, you must either have a new product or present an old product with new features to encourage the customer to buy from you instead of your competitors. The best competitive advantages you can offer are a longer useful life, easier use, or more support services of similar products. Some businesses consider a lower price than the market norm as a competitive advantage. 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 complete, and to succeed in the competition; you need to know your competitors. If you don’t answer this question, you don’t have a long-term plan to overtake your competitors and take a share of the market. Unrivaled businesses have a golden opportunity; of course, the gold is in the mine, and they have to extract it themselves! The absence of competitors means that either there is little need in your area or no one has yet offered similar products or services. In both cases, it should be marketed so that the collection sells well.
8. Why did you choose this field?
A booming market and making a lot of profit are not the right motivations for starting a startup in a specific field. Some people think starting a startup is one of the easiest ways to get rich. They only know they have to build a team, have a product or service, market, and sell, but they can’t implement what they know. These people even have wrong ideas about attracting capital; They think that participating in the fundraising meeting can get the funds they want from investors and boost their business.
Startup in the real world is not so simple, and there is even a possibility that it will not be profitable for a long time. Amazon, which is one of the most successful businesses in the world, did not make a profit for the founders in the first seven years. If making money is your only goal and motivation for a startup, you will probably give up before reaching profitability.
9. Do you need capital or a partner for your work?
Startup owners are looking for an investment that will cover their costs so that they can transform from a startup to a business, but this is not the only advantage of having an investor in the group. Investors are usually experienced and professional people with strong connections, and their presence multiplies the speed of your business growth. Many people will trust you just because of the reputable investment name.
The advice and experience the investor gives you are more valuable than the money he gives you.
10. What do you give in return for the capital received? Shares or sales points?
Investors usually take a part of their shares in exchange for the funds they provide to startups so they can profit after success. But there is another way to agree with the investor, called assigning sales points. This method gives the investor a certain percentage of your sales. Each of these methods has different advantages and disadvantages. Before attending the fundraising meeting, you should evaluate each process and present a specific plan to the investors, a proposal that will benefit both parties.
Investors who buy selling 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. The advantage of offering sales points for startup owners is that the shares of their company remain entirely in their possession, and no shareholding is added to them.
11. What is your strategy for advertising?
The correctness of the advertising and media strategy you have chosen to introduce products to your target market is essential for investors. Advertising is necessary to introduce the brand and encourage customers to buy products and services. In the advertising strategy, you should determine your budget and which media or sales channels you will spend each part of this budget.
12. Is your business scalable?
Investors are looking for a return on capital in the shortest possible time to obtain the maximum profit. For this reason, they prefer to invest in startups that have the potential to become big businesses. In the investor meeting, you should present a detailed plan for business scalability and future growth. You should also determine how you want to go from 20 to 200 customers a day and what prerequisites you should provide for this.
13. What are your financial data?
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 accurate market sales figures. It is better to show up at investor meetings with accurate financial data so that you can answer all the questions they ask about it.
You don’t need to provide your investors with detailed sales and revenue information. Talk only about major trends and significant numbers.
14. How do you rate your business?
Some new entrepreneurs think they have the best startup in the world and will compete with Elon Musk shortly! These illusions make them expect to receive significant capital in exchange for the low value they offer to the investor. They believe the investor will get an excellent profit within the next few years, but they can only prove this in their minds!
It is better to value your business with correct and logical criteria and speak accordingly in the fundraising meeting. There are three ways to do this:
- Comparative Method: Ratios such as EV (enterprise value) or P/E (price-to-earnings ratio) are used to value a company compared to similar businesses.
- Merger method: Your company’s value is determined according to the price paid for similar companies.
- Default Cash Flow Method: The company’s value is determined based on estimated sales and profits that are likely to be achieved in the future.
Last word; Be professional to attract capital
Starting a startup in the real world is more complicated than what you read in books and motivational talks. Not everyone is made to start a business, and only a few people can do it. Fundraising meetings are one of the most important meetings you hold. In these meetings, you should master the different aspects of your business and be prepared for the other questions that will be asked.
If you have ever met with investors and answered questions in addition to the above, please write us about your experience.
