Why should you ask questions to potential investors?
Investors are found for two reasons; Either you have a need for capital or resources (it can be knowledge, network, back office or the like), and often you do it because you have to grow your business. The investor can be found in many different versions for example; be one’s family and friends, it can be a professional business angel, VC fund or a company. It can also be people with special knowledge within one’s business area or a successful business person or entrepreneur – There are many different types out there. For better or for worse.
It is therefore very important that you find out if there is a strong match between you and the investor – Because it is after all your company, we are talking about here. But because of the dynamics – Either other people’s money, time or resources as you ask for – it is often also expressed in the initial phase and when you have to make an appointment. It is often the investor who asks all the questions, who is critical and who has to go through a “checklist”, but it is also very healthy to do the other way. We ourselves have been on both sides of the table, as an investor and as an entrepreneur.
There are a lot of investors out there, and certainly, not all of them are equally skilled or sadly, keep their promises. Also such hassle and drama you should avoid in a growth company. It can be important that you actually get access to what they promise – It can be premises, capital, networks and everything else.
Below we have collected the questions that…
1) We ourselves have asked over time (both when we have handed in pitchdeck or for interviews)
2) which we have been asked as investors
3) which we have asked others
4) which we regret we did not ask about.
Questions one can ask (the potential) investor
● Can you join the capital level we are searching for right now or does it require a co-investor?
● Can you participate in a follow-on investment?
● Is there a particular industry or geography that you focus on in your investments?
● What can you add besides capital?
● What is your most successful investment?
● What KPIs do you track when considering an investment?
● What is your typical investment size?
● Who do you typically co-invest with?
● What are your standard terms?
● Do you take board seats (when / if the company gets there)?
● Do you want to be personally involved in the company?
● How often should we meet if we close the investment?
● What can we do better in our pitch?
● What are your concerns for the company?
● What is your time horizon?
● What do you want with this investment?
● What has made your most successful investment the greatest success?
● What has been your biggest mistake investing?
● What is the first thing you would like us to focus on after closing the investment?
● Are there others who needs to approve a potential investment from you?
● When was the last time you made an investment? How long?
● How does the process from here to a closed investment work if we are a match?
● Why are you interested in this company?
● How long is your team strategy for companies? Is it there an exit period?
● What happens if we fail on your initial investment?
● Why have you become an investor?
● How do you choose your investments?
We live in a time where a lot of capital has gradually become available to entrepreneurs in Denmark. But capital is not everything – and it is an alpha omega that entrepreneur and investor are the right matches. Read on here and find out what type of investors there are and which ones to look for.
As you have read, there are many different types of questions – And the list is not even exhaustive, but it shows that you have to do your basic work properly before you know enough about the investor. Depending on who the investor is, you may also want to read up on the answer to some of the above questions.
Pro tip: Do not ask all the questions at once – Just take it as an ongoing process.
In relation to the various issues, not everyone may be suitable for the specific investor or situation. So make sure you are asked the questions that you think are important to you so that you can make the right decision.
Do you think we are missing a question? Or do you have any comments on the post, then finally drop me a message on LinkedIn right here.