If you are raising money and pitching investors, you can expect many questions to come your way regarding your company. Startups that are fortunate enough to get offers may be tempted to jump and not think twice. After all, fundraising is typically a long and tiring journey for many founders. However, it is just imperative to ask those you are raising money from the right questions as well. A lot of investors have money, but not all are created equal. You want to find a thoughtful, qualified investor and ensure that you get the best deal possible without any surprises down the line. Below are a list of questions to ask investors for different goals you may have.
To understand whether an investor has the right amount of capital and industry expertise, some questions you may ask are:
What is the status of your fund? (How much of your current fund have you raised?)
What are specific industries do you focus on?
What are your most successful investments?
What metrics are you tracking when considering an investment?
How many investments do you make per year?
What is your typical investment size?
Questions to see how involved they will be in your fundraising and company:
Do you lead financing rounds?
Who do you typically co-invest with?
What are your standard terms?
Do you take board seats?
Will you be personally involved with my company?
How do you help companies you back?
How often will we be meeting after funding?
To understand their investment process better:
What is your investment process, and how long does it take?
How many more investments are you planning to make this year?
Who else needs to be involved in this decision?
What is the last company backed, and why?
Have you invested in a competitor, or are you considering doing so?
What’s Your timeline and criteria for an exit?
How many follow up investments have you made?
What is your follow-on strategy?
How long does it typically take you to close?
Will there be any fees on the money you provide?
Can you share an example of your term sheet?
If you got a no from an investor:
Can you tell me what I can improve on in our pitch?
Who else might be interested in funding this?
What are some things we overlooked?
What is your due diligence process like?
What are your concerns about our business?
What do you expect this investment to do for your portfolio?
What has made the most significant difference among your best investments?
What is the first thing you’d want us to do after closing?
Many startups sometimes think that the worst thing that can happen to them is never finding funding. This type of thinking leads them to make decisions and sign their names on contracts they do not fully understand. Understanding not only the terms but also the kind of support you need to scale your startup can make all the difference in the longevity of your company and your peace of mind.