Originally asked by J R: I got another one: what are, in your eyes, the most helpful/important questions I should ask when meeting a Business angel/vc for the first time?
To answer your question, I think the most important part is to talk about your mindset when talking to investors, for most startups – get this part extremely wrong. It is unfortunately all too normal to treat investors as the holders of the “holy-grail” (a.k.a. as money), so what happens is that you simply do everything they say and only focus on pitching your company during the meeting.
What one needs to realize is that it is a two-way street. Think of it as marriage (which also most people get wrong in an astonishingly similar way), which is to say – it is a partnership. Your goal is to get the most fitting investor for your company at any given stage, while the investors goal is to find the best company in their deal-flow.
Normally – investors do their part and ask you a lot of questions (once you get to the meeting). They ask you about your team, about your traction, about your potential problems, your finances, your cap-table, your exit strategy, etc.
While at the same time, most startups mainly answer those questions and then ask only the most basic questions. However, if you think about it, you will realize that you are choosing a partner for the next 10 years. This is more important than hiring any employee and your questions to the investors need to be just as tough, and trust me – they will respect you for it.
Let’s give you ten concrete examples, which is what you asked for:
1. What company that you invested into would you recommend me to get in touch in order to get a reference on how you worked together? (Do not call that company, call the one that they DID NOT mention.)
2. Can you give us some concrete examples of how you work together with your portfolio and what exactly do you provide?
3. Given our [ X ] problem, what would your advice be for us? (This is a crucial question during the pitching stage. If you ask for money – you get advice. If you ask for advice – you get money.)
4. What is the age of the fund that you are currently investing from? Do you have a mandate to exit all the investments at the fund expiration? (That gives you the answer on when they will push for an exit)
5. What is the average exit size across your portfolio and what is the average time to exit?
6. When you were raising money (for VC’s), what in your pitch – was the differentiating factor? i.e. What is your magic sauce for selecting companies? Follow-up, what are your return rates to your LP’s?
7. Why do you do angel investments, and what is the best case scenario for you? (This one is for angels, and you need to know if they are a purely financial investor, one who wants to find work down the line, or one that just supports a cause.)
8. If in 2 years, we will get an offer from a potential buyer to purchase our company for 8 million EUR, would you be willing to accept the deal? (How do they treat early exits?)
9. Let’s talk about [ X ] industry. How do you see it developing? What most excited you about it? What do you think are the largest untapped opportunities? If you were to create a startup, what would it be within [ X ] space?
10. If you achieved everything you dreamed of in your life, what would you do then? (I like to input a few very personal questions for investors, to gauge at their personality, and this is just one of them. The goal is to know if they are doing what they truly believe in or is this a stepping stone for them.
What do you think?