7 Questions Every Investor Asks Before Funding a Startup

Investors aren’t an easy pick. They meet hundreds of founders, see thousands of startup pitches, and then finally decide to lose a crunch of their net-worth on the most promising business startup ideas. Pitching an investor requires huge efforts and extensive research to answer tough questions.

To some founders, pitching an investor is one of the most difficult yet significant aspects of a business startup. You might feel as though you have answers to all their question, but so did big tech companies like Google, Uber, and many more, yet they faced rejections.

So, it’s good to learn from other’s mistakes and go prepared with these 7 questions that are asked by every investor before funding a startup.

   1. How is your idea different?

Simply stating the success of your idea which doesn’t even exist outside your mind will not distinguish you from others. To claim your potential, you have to talk in hard facts with some real-life examples that demonstrate your abilities.

According to Danny Warshay, you must “bottom-up” your research to observe and listen anthropologically and empathetically to define the problem. Value your proposition and develop a prototype solution to the problem to showcase your worth at the initial stage. Then replicate that solution to ultimately mimic the long-term impact of your idea. That’s when you distinguish your idea from others.

   2. What is the evidence of your success?

According to the founder of PitchAnything.com, Oren Klaff, a lot of times small-scale business owners focus on the wrong things when they showcase their success portfolio. People don’t understand this question correctly and start naming out the companies they have worked for and the people who have been their clients.

On the other hand, you must tell about your achievements and how you worked out to succeed over time. Tell about the strategies you implemented to attract customers and how you coped with their needs. Tell them about the revenue you generated up till now. Speak of figures because if there is something investors are attracted to, that’s figures and digits.

   3. Who are your competitors?

If you think that answering this question in denial can increase your chances of getting funded smoothly, then be mindful because this could be catastrophic for your startup, warns Klaff. Doing so will degrade your chances because investors might think that your idea isn’t competitive enough to vie.

However, by telling them specifically about your market competitors, you will add credibility to your idea. Moreover, you’ll also position yourself as a confident candidate who knows about his market and how to tackle forthcoming challenges to sell the idea.

   4. How you plan to invest?

Investors think a lot before investing and after they have invested. If you’ll show them a generalized bar-lined chart of how you plan to invest their money, you’d kill your chances. Investors want to know how their money will be utilized in tangible ways such as product development, research, and experimentation, hiring employees, etc.

According to Klaff, young entrepreneurs often go wrong here and talk about general causes like marketing and salaries – which is something obvious and understood. You must talk about the milestones that you will achieve and how frugally you’ll invest their wealth to make yours.

   5. What are the stakes?

To answer this question, do brainstorming and encounter all the risks that you believe might cause hurdles in achieving the goals. Outline the potential risks that might repel investors from funding, and analyze who would be at stake?

Stand at the position of investors and try to comprehend the “bottle-neck” of the problem. Delve into the roots and ask yourselves if it bars your progress. Before funding, investors will always want a clear-cut example that shows how your idea can eliminate the chances of failure.

   6. Where do you stand in the competition?

It’s highly suggestive to be specific with your business strategy rather than speaking in platitudes about the competitive edge. To tell where you stand, you need to show evidence of your existence. Why would they be interested to invest in an idea that doesn’t know what position it holds in the market? This clearly indicates that you are disconnected from people and cannot turn your idea into a business.

“There is a fundamental disconnect between the way we pitch and the way it’s decoded by our brain. When it’s crucial to be convincing, 9 out of 10 times we are not. If you don’t know why, you won’t overcome, succeed or profit from it”, says Oren.

   7. What if you fail?

That’s probably the most striking question of them all. When we hear this question, it kind of blows our senses, but in reality, they are judging our confidence. Investors are looking at your methodology to cope with failures; whether or not you really understand failure and its consequences.

According to Martin Soorjoo, “More often than not, it’s the obvious questions people fall down on because they think them through superficially”. So, understand this question and practice your responses accordingly. Present your previous failures positively to gain momentum. Also, identify your improvements and highlight your willingness to learn from them and succeed.

Therefore, pitching your investor is a key step to prove your abilities; that you have what it takes to be a successful entrepreneur and future leader. With these 7 startup pitch desk questions, you can prepare yourself beforehand to raise the odds of getting funding for your business startup.

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