It’s highly important for entrepreneurs to be prepared when they pitch their startup company to angel investors. Before the pitch, entrepreneurs should prepare by anticipating questions angel investors might ask. If you don’t have thoughtful and reasonable answers, it will definitely reduce the likelihood of an entrepreneurs company getting funded. We’ve prepared a list of key questions angel investors might ask during a pitch.
Let’s start off by underlining the three key things investors want to know about when they are pitched a company. Investors want to know what the company does, why it is interesting, and why it could eventually lead to a large exit. With that in mind, you might expect the following questions:
What does the company do?
What is unique about the company?
What big problem does it solve?
How big is the market opportunity?
Founders and Team
For most angel investors, the management team is the most important factor that determines whether they will invest or not. Questions they might ask:
Who are the founders and key team members?
What relevant domain experience does the team have?
Why is the team uniquely capable to execute the company’s business plan?
What motivates the founders and how are they showing their commitment to the business?
How do you plan to scale the team in the next 12 months?
Sometimes investors might not have a clear picture of the market opportunity, so it’s important to paint a clear picture for them. Questions they might ask:
What is the actual addressable market?
What percentage of the market do you plan to get over what period of time?
Why does your company have high growth potential?
Products and Service
Entrepreneurs should be able to clearly and concisely explain what their product and service does and why it’s unique. Questions they might ask:
Why do users care about your product or service?
What are the major product milestones?
What are the key differentiated features of your product or service?
What have you learned from early versions of the product or service?
Can you provide a demonstration of the product or service?
What are the two or three key features you plan to add?
Competition is always an issue. Be sure to differentiate yourself from the competitive landscape. Questions they might ask:
Who are your company’s competitors?
What will give your company a competitive advantage?
What advantages does your competition have over you?
Compared to your competition, how do you compete with respect to price, features, and performance?
Marketing and Customers Acquisition
Investors want to know how the company plans to market itself, the customers acquisition cost, and the long-term value of the customer. Questions they might ask:
How does the company market or plan to market its products or services?
What is the cost of a customer acquisition?
What is the projected lifetime value of a customer?
What is the typical sales cycle between initial customer contact and closing of a sale?
Progress in the Business
Companies that have some early traction will be seen positively and alleviate some of the risk investors deal with. Questions they might ask:
What early traction has the company gotten (sales, traffic to the company’s website, app downloads, etc., as relevant).
How can the early traction be accelerated?
What has been the principal reasons for the early traction?
Risks are inevitable in any business plan. Be prepared to answer the following questions:
What do you see as the principal risks to the business?
What legal risks do you have?
Do you have any regulatory risks?
Are there any product liability risks?
Intellectual property plays a major role in the success of a company. Questions they might ask:
What key intellectual property does the company have (patents, patents pending, copyrights, trade secrets, trademarks, domain names)?
What comfort do you have that the company’s intellectual property does not violate the rights of a third party?
How was the company’s intellectual property developed?
Would any prior employers of a team member have a potential claim to the company’s intellectual property?
Angel investors are looking for a return on their investment, the company’s current financial situation, and proposed future burn rate. Questions they might ask:
What are the company’s three-year projections?
What are the key assumptions underlying your projections?
How much equity and debt has the company raised; what is the capitalization structure?
What future equity or debt financing will be necessary?
How much of a stock option pool is being set aside for employees?
How much burn will occur until the company gets to profitability?
What are the key metrics that the management team focuses on?
Investors want to have a clear idea of how much capital an entrepreneur is raising, as well as related information. Questions they might ask:
How much is being raised in this round?
What is the company’s desired pre-money valuation?
What is the planned use of proceeds from this round?
What milestones will this round of financing help you achieve?
The questions we’ve listed are some of the most common questions you might expect if you pitch to angel investors. It’s always smart to go to pitch events prior to your pitch to get an idea of what types of questions angels ask in that area. Angel investors in different groups are different, and look in depth about different specific things.
RVC offers a number of educational workshops that prepare you to pitch in front of angel investors. If your company is looking to become investment ready, check out our Hyperaccelerator. The RVC hyper accelerator is a one-week ultra-intensive boot camp program based off the proved curriculum developed by Venture Capital for Dummies author, Peter Adams. RVC also offers a Pitch Academy to hone in on your pitch skills and prepares you to pitch in front of angel investors. Be sure to check both workshops out if your company is looking to become investment ready.
Source: Richard D. Harroch