If you’re a first-time entrepreneur trying to secure funding for your startup, you may be nervous about meeting with potential investors. Even if you wholeheartedly believe in your product and have a solid strategy for bringing that product to market, you still have to convince a venture capitalist (VC) why your startup is worthwhile. If you are unfamiliar with the process, you might not know any questions to ask a VC, let alone questions that will show your potential investor you’ve done your homework.
As with most things in the world of business, preparation is key to success. It helps to prepare a list of well-thought out and insightful questions to ask investors before your first meeting. Use the following list as a guide to get you started.
Venture capitalists are often professionally managed firms. As such, they like to know the detailed ins and outs of companies they’re interested in working with. However, don’t forget that you are interviewing them as well. Once you’ve presented your own side of the story, it’s time to get to know your potential investor on the same level so you can determine if the relationship is a good fit.
1. What is the VC’s approach to investing?
If you’re struggling to know what to ask a venture capitalist, it’s likely because you have some gaps in your understanding of what venture capital is and what a VC can and cannot do for a startup. Asking a VC about their preferred process can close these knowledge gaps and ensure you’re on the same page as your investor.
2. In which round(s) does the VC specialize?
Startups are funded in stages known as rounds or stages. Often times, VCs focus on particular rounds or stages of startups. Late-stage investors may have little interest in participating in seed rounds, and vice versa.
3. In which areas does the VC have significant background knowledge and expertise?
Think of a VC investor as a strategic partner in your business rather than a simple blank check. A highly specialized individual could have an extensive background in your field and may therefore be able to fill in the gaps when it comes to bringing your product to market. Similarly, a larger firm might have dedicated resources that can help with business operations and other complexities encountered by many startups. Still others choose to only invest in certain types of businesses, such as technology or commerce startups.
4. How much is the fund willing to invest?
Before you know if a VC will suit your needs, it is important to know the size of their fund. However, don’t be afraid to work with a specialized and knowledgeable VC even if their financial contribution isn’t enough to cover your costs. You can still look for additional investors, and the VC’s expertise may help in unexpected ways. In fact, it is a rare occurrence for one VC to cover 100% of a startup’s costs.
5. Does the VC have a robust network, and would they be willing to introduce you to some key players?
In the startup world, your network is everything. If a VC comes equipped with other strong business relationships, it’s an excellent sign. Even if this particular firm will not complete your funding goals for this round, they may be able to pull in other investors to nudge you closer to the finish line. Similarly, the VC may have worked with other entrepreneurs in complementary roles or even members of the press who can help get the word out and begin churning up hype for your startup.
5. How has the VC helped other companies in which they have invested?
Ask this question during the interview, but also be sure to do your own research into a VC’s history. How have their previous investments fared? Did they contribute meaningful help and guidance to startup founders, or did their contributions stop after signing the check? Has the VC maintained a relationship with previous startups? All these factors can give you clues as to the help you can expect from a potential VC.
When you’re knowledgeable about your finances, you can be confident presenting your business to investors. Here’s where Zeni can help.
Meeting with investors can be stressful if you aren’t certain of your startup’s financial situation. Let Zeni relieve the pressure by delivering real-time financial insights and daily bookkeeping support. With the knowledge generated by our full-service financial team, you’ll be able to navigate investor meetings with confidence and show a VC why your startup would be money well spent. Schedule a demo to see what Zeni can do for you.
Zeni Inc. provides back-office financial services which include Bookkeeping Services, CFO Services and Controller Services. Zeni Inc. is not a public accounting firm and does not provide public accounting services.