25 questions investors will ask you

Investors look for fatal flaws. High risk = low value. Low risk = high value. Remember the process of wooing an investor takes time and undoubtedly they will have given you little ‘tests’ over the previous few months that you probably did not even realise. If you passed those surface tests, then investors will be looking far deeper to get answers to these questions:

  1. Is the startup product or market focused?
  2. What is the story behind how the founder started the venture?
  3. What market assumptions has the founder made? Does the founder believe these to be true or are they aware they are assumptions?  
  4. Does the founder know their niche market or are they scatter-gunning a broad market segment?
  5. Is the market size too small?
  6. What is the growth rate of the niche industry and according to whom?
  7. Is the founder coachable? Did they follow up on that person I recommended they contact a few months ago?
  8. How scalable is the founders thinking? Is the thinking global (big picture) to act local or local (implementation) to take global?
  9. Does the entrepreneur have a defined big picture vision capable of inspiring a movement?
  10. Does the founder really know and understand what business they are in? 
  11. What is their business model?
  12. Can the company grow to a $20m valuation?
  13. What would stop a competitor with a billion dollar budget from being able to compete with this startup?
  14. How does the startup and its team have the capacity to disrupt an industry or existing way of being in the world, or is it a ‘me too’ business?
  15. Is the founder hell-bent on executing a plan or do they have the knowledge and capacity to constantly identify new opportunities and continuously create new value?
  16. Is there a clear path to exit? Have trade sale exit targets been identified even if there is a goal to IPO?
  17. How sustainable is the venture? Is it beholden to government subsidies, grants and VC valuation rounds?
  18. Has proof of concept been established in the market? 
  19. How likely is the market adoption strategy to work? What are the team doing to educate new markets?
  20. Does the founder control the startup and team or do they create leaders?
  21. What history does the entrepreneur have in founding a startup? What happened and what did they learn?
  22. Does the entrepreneur have the capacity to make decisions and take action appropriately from both a Board as well as operational perspective? 
  23. Is the startup dependent on the founders' labour hours?
  24. Does the entrepreneur openly admit weaknesses and risks and pose mitigation strategies they seek to strengthen or do they defend, justify, deny and argue about potential areas of risk?
  25. What valuation is the founder thinking today? Does the founder understand startups have zero value and investors bare the risk?