7 Investor Questions Startup Entrepreneurs Need to Know How to Answer
What are some questions investors ask before investing? It is a great opportunity for entrepreneurs to have angel investors to look into their business plan because the process of getting angel investors these days is quite tedious.
Before an entrepreneur approaches any angel investors, he or she should be prepared to answer possible likely questions that will be asked by the angel investors. If you don’t have thoughtful and reasonable answers to their questions, it reduces the odd that they will invest in your startup.
While some entrepreneurs can accomplish this with ease, some will find it intimidating while answering the questions. I have prepared a list of questions every angel will ask any entrepreneurs during a pitch.
Key questions to ask an investor
Every entrepreneur seeking funding from angel investors should make sure he or she finds reasonable answers to the list of questions shared in this post as it will help tell angel investors that you are really prepared and ready for business. As an investor, here are some questions to ask an entrepreneur before investing:
- Tell us about Yourself and the Company
When angel investors ask you such a question, he or she want to know who the entrepreneur is in person. This include your educational background, business experience, and any information that may help the business in general.
So, as an entrepreneur you should be prepare to answer the question by telling the angel investors about the objective of the company, the products or services you will be offering, the management team if you have one etc.
- Who are Your Major Competitors and What Make your Products or Services Unique?
Competition is always an issue in running a business. Every business must always have competitors, and angel investors want to know them and how strong they are holding the market. Entrepreneurs should be ready to give any market opposition and how they intend running the business to give their products and services a competitive edge.
Also, angel investors want to know what your products does or what benefit is your services to your customers and what makes it unique.
- Who are Your Target Customers?
Another question every angel investor will ask entrepreneurs before investing in a private company is who are your targeted customers? Angel investors are always curious about the target market and the customer base for your products or services.
From the prototype of the business idea created by the entrepreneur, the entrepreneur can easily refine the business idea from the response gotten from customer’s feedback. This may take time and energy but it is better to do this to avoid starting a business that does not have fixed targeted customers in mind.
- What is Your Marketing Strategy for Your Products and Services?
Sometimes angel investors might what to know how the company plan to market its products or/and services. There may also ask a question like, ‘What is the cost of customer’s acquisition?’
These are questions that you should be ready to answer. The marketing strategy includes promoting your business through advertisement, online marketing and others to increase sales.
This will for sure be costly so, it is very wise for the entrepreneur to give the correct amount that will be needed to run the marketing promotion.
- How much Capital are You Seeking and How will the Investment Amount Be Distributed?
This is one vital question angel investors must ask when been pitch. Angel investors want to their return on investment. It is always wise for the entrepreneur to provide an estimate of the capital they are seeking for.
By presenting to the investors the financial breakdown requirement, they will be able to understand the allocation of funds and this will make the entrepreneur to gain credibility from the angel investors.
It is also good to show in the summary how the investor’s capital will be used in the company and how much is being raised from other investors.
- What Time Frame Do You Expect the Invested Money to Last?
This question means when will the angel investors be expecting their invested capital in return. It is like the time frame the cash flow is going to appear.
The entrepreneur must be certain of the expected year or an estimate can be given to angel investors for them to do the calculations themselves. It takes up to a year or more for any business to start seeing revenue on invested capital.
- What is my Stake in the Company and my ROI?
Often time, angel investors want a certain percentage of ownership of the company they are investing their money into associated with large returns on investment.
The entrepreneur should be ready to answer such question in an orderly manner.
The questions listed are some of the most common questions every angel investor will ask entrepreneurs when they get pitched. Smart entrepreneurs should be ready to provide answers to these questions and anyone they think might be ask or commonly ask that was not mentioned in this post.