What Questions Investors Will Ask You Before Funding Your Start-up?

It is the lifeblood of the business which will also give you a head-start.

Your investor is the first person to whom you have to sell your product and he is such a kind of buyer who will definitely want to look at its long-term benefits if he/she ventures into it. They would like to look at every nook and corner of the proposed product presented in front of them.  

A person willing to pump in money to fuel your aspirations will ask tons of questions and you got to tackle it in the most appropriate manner to get that “cheque”.

Therefore, you should prepare yourself to convince them to do that. Let us help you with a few such questions:

Q 1. What is your product and its benefits? Which market segment is it targeting?

It’s your product or any kind of service that you are selling and understanding its characteristics with an in-depth analysis of it is very important. This is the first thing that you would have to concentrate on while presenting the pitch deck. It is important that you stress the value additions which the product or service would produce.

Address any relevant gaps present in society. When presenting your product, first you must emphasize the gaps or issues present in the society or a specific state. After addressing this, focus on how your product or service would benefit the common consumer.

Stress on the gaps that you would like to fill through your product or the solution that you can bring with the help of your product. Highlight your target audience and what they need and why they would choose your product and pay for it considering the fact that there are other products as well.

You have to present your audience’s interest on the table and look into its behavior, buying patterns, and other characteristics which will help you to design your pitch in favor of the audience and create an impression on the minds of the investor.

The creation of a niche to channelize your product on the given lines will help your product to impress investors. It should challenge the present market and the audience in a positive manner and should be able to define its time period amongst the buyers.

Q 2. What differentiates your product from the rest of the lot?

Now, there will be many other competitors in line with a similar product. If your product is one of a kind, then you have to present the uniqueness of that product and why people will buy it to fill a gap. Here you would have to indicate the uniqueness of the product and how it will attract local consumers to buy it.

If the same kind of product as yours is already there in the market, then you will have to devise a Unique Selling Proposition (USP) which will lead you to highlight your product quality, its features, its position in the current market scenario, and of course your team’s core strengths and achievements which will help you to achieve them.

Highlight the key differences which make your product different than the ones which are already there. You should present a proper scaling strategy for your product which is equally important as presenting the above facts.

The way you sell is not a lasting theory and it ought to change someday or the other. Competitors can crop up in no time. Thus, you have to devise your own rules of the game to counter such situations.

What matters here is your plan and how you will be implementing it along with the alternative which you have devised.

Q 3. Are you presenting realistic figures?

Presenting hypothetical figures should be realistic is the key to impressing that person sitting across the table. Study the market dynamics properly and reflect on it share the expected growth numbers for the future. Realistic calculations are what will help you to succeed and hypothetical unrealistic ones with no base will prove worthless in front of the investors.

The product should be of a kind that will ensure its longevity of it and which is able to sustain itself through the rigors of the market conditions. They will usually go for the ones which have high returns and which will provide them with a clear exit strategy.

Q 4. How good is your Team?

In the pursuit to garner funds for your business, you are actually pitching yourself and the team that is behind you to the investor. Your portfolio speaks for you and it should be profound with the knowledge that you have about that particular business domain. More than the idea, the investors will be betting on you and the track record will matter.

How you are able to transfer your vision to the team will matter the most?

Your team is the one which will work for your desires to get fulfilled and they should be skilled enough to do that and ensure that the figures are achieved as mentioned above.

Q 5. How well have you studied your competitors?

In any industry, you are not the sole entity that is there to make it big. There are others as well. When asked by your investor, it is a good sign to mention them as it will help you to display that you know the stuff that will be challenging you in the future.

It shows that you understand market dynamics and how you can win over your competitors. You should exploit the knowledge of the industry and build your own strategy to tackle the rising competitiveness.

What does your brand offer to the present marketing conditions?

Competitor’s Analysis will be needed to answer these types of questions. Therefore, you should have ample knowledge regarding this.  

Q 6. How will you use your money? What will happen when you run out of the same?

You should have a vision of how you will be using the funding that is coming in and how you will utilize it to water your aspirations into something big. You should prepare your cost sheet and a comprehensive business plan with a fair assessment of your projected costs, fund utilization, effective deployment of funds, the tentative Return on Investment (ROI), and what you will do when you will run out of money.

Present them the milestones which will truly help you in gaining the investor’s trust. You have to give them a plan as to how much money you need and when you need it so they are prepared for it by looking into the propositions of the extra funding.  

Q 7. What will the investor gain by investing in your project?

Herein comes the revenue model of your business which will attract investors. They will be interested in your profit margins and how well you will be acting on the scalability of your brand.

They will be interested in the way you will be making money out of the business and increasing the valuation of the business. Investors will also look for a profitable exit strategy before going in for your brand so that it benefits him/her the most.

An investment portfolio of an investor is very important and they will definitely want to yield lucrative results out of the investment that they are planning to make. If your answers to these questions do not sound convincing, then they are probably going to step out of the deal.

Therefore, prepare your pitch properly along with these questions to win them over.

Do you have the right answers to these questions? Tell us in the comments below.

Conclusion

Fund raising is a complicated process where you as an entrepreneur would have to lead the investor to fund your idea into your product. Though an investor funding your product can throw different questions at you, the above questions provide a comprehensive overview of the common questions asked at the end of a funding round.