10 Questions To Ask Venture Capitalists During Pitch Meetings

You’ve finally got a pitch meeting with an interested VC lined up. Congratulations! However, before you get too excited, it’s important to remember that a venture capital meeting is very different from a regular business meeting. Therefore, you will need to prepare accordingly in order to make the most of your time with the venture capitalists. This includes preparing your pitch for potential investors as well as crafting questions to help you determine if this is a good fit for your company. This guide will provide you with tips and tricks for preparing for a VC meeting.
 

Tips For Preparing For A VC Pitch Meeting

As with all meetings, preparation is essential. But what do you need to do to prepare for a VC meeting with portfolio companies specifically? Below are a few tips:

1. Know Your Goals: Before you even start preparing your pitch or rehearsal questions, it is important to take a step back and think about what your goals for the meeting are. What do you hope to achieve? Are you looking to secure funding? Introductions to other VCs or industry experts? Feedback on your company idea? Do you want a managing partner, or a more silent investor? By knowing your goals, you can tailor your pitch and questions accordingly.
2. Craft Your Business Plan: While you may not need to go into great detail about your venture capital business plan during the meeting, it is important to have a solid understanding of your business model and how it will make money. This will help you answer questions from the VCs and show that you are serious about your business. Venture Capitalists are hesitant to supply investment capital to early stage startups, so be sure to document all of growth your startup has made.
3. Create A Pitch Deck: A pitch deck is a slide presentation that gives an overview of your company to the potential investor. It is important to have a well-designed pitch deck ready to go, as this will be one of the first things the potential VC will ask for. Make sure your venture capital pitch deck is clear, concise, and tells a story. You want to take your VC through the sales funnel, with the end goal being having them become investors.
4. Rehearse Your Pitch: Once you have your pitch deck prepared, it’s time to start practicing. This includes both your elevator pitch (a short, 1-2 minute overview of your business) and your longer pitch (5-10 minutes). Make sure you are comfortable with both, as you never know how much time you will have during the first meeting with potential VCs.
5. Ask Them Questions: While it may seem like the VCs will be doing all of the talking, it is important that you come prepared with questions as well. This not only shows that you are interested in working with them, but also allows you to get more information about their investment style and process. Below are some questions to ask your VC and determine if they are a good fit for your business.

 

10 Questions To Ask A Venture Capitalist During a Pitch Meeting

1. Why Are You Interested In My Business?

First off, you want to know why the VC is interested in your business. Is it because they see potential in the industry? The product? The team? This will give you valuable insights into their investment strategy and what strengths they see in your business.

2. What Is Your Approach To Investing?

This question will help you understand the VC’s investment focus. Are they looking for companies that are already generating revenue? Or are they willing to take more of a risk on a business that is still in the early stages? Knowing this will help you determine if they are a good fit for your business.

3. What Can You Offer Besides Capital?

In addition to money, VCs can offer a lot of valuable resources to help grow your business. These may include access to their robust network, industry expertise, strategic guidance, and connections to other VCs. This is an important question to ask, as it will help you understand what value they can bring to your business.

4. What Is Your Due Diligence Process?

Due diligence is the process of investigating a potential investment. This includes looking at the business’s financials, the management team, the competitive landscape, and more. Asking about their due diligence process will give you some insight into how they evaluate investments and what criteria they use.

5. Will You Join My Board?

If the VC is interested in investing in your company, they may also want to join your board of directors. This question will help you understand their level of involvement and what role they would play in your business.

6. Would You Buy My Product/Service? If Not, Why?

This is a great question to ask, as it will give you some feedback on your product or service. If the VC is not interested in using your product, it may be an indication that there is something wrong with it. However, if they are interested in using it, it shows that they see potential in the business. Their feedback will also show you the flaws in your product and how you can improve it.

7. Why Do You Think My Business Will Be Successful?

Asking the VC why they think your business will be successful is a great way to get some feedback on your business model. It will also give you an idea of their initial investment strategy and what they see as the key drivers of success for your business.

8. Why Do You Think My Business Will Fail?

If the VC doesn’t seem confident in your business, this is a great question to ask. It will help you understand their concerns and what they think are the risks of investing in your business. This information can be valuable in addressing these issues and alleviating their concerns.

9. What Do You Expect From Us?

VCs do not provide charity money; they are looking for a return on their investment. This question will help you understand what they expect from the business in terms of financial return, growth, and exit strategy. Knowing this information will help you align your goals with theirs and ensure that you are both on the same page.

10. What Is Your Timeline For Making A Decision?

Finding a VC can be a long and difficult process. This question will help you understand the VC’s timeline for making a decision. This information can be valuable in determining how soon you need to have everything in place and when you can expect to hear back from them.

 

3 Questions Venture Capitalists Will Ask You

Having finally made it to the presentation stage with a venture capitalist is a step in the right direction for you and your business. However, apart from evaluating your presentation, venture capitalists will ask you critical questions and evaluate how you formulate your answers. Three key questions a venture capitalist will ask you are:

1) How Much Venture Capital Does Your Business Need?

If you ask someone to give you money, oftentimes they will ask you what you need it for and why. The same thing will happen when you ask a venture capitalist to write you a multi-million dollar check.

The key to answering this question is to know your business inside-out. It is important that you have full mastery of your projected financial model and that you understand how every funded dollar will be used in your business. In other words, you need a deep conceptual understanding of your entire business idea.

It is common for VCs to ask you what you would do with less money. So if you wanted to raise $2 million, they may ask what you would do if you only received $1 million. This will reveal your top priorities and which milestones you would accomplish with less.

2) What is Your Business Valuation?

To some, this question may be considered a trick question, as there is no right answer.

If a VC asks you during your presentation how much you believe your firm is worth, don’t reply with hundreds of millions of dollars. He will think that you’re unrealistic and not ready to handle the tough reality of start-ups.

If you understate the answer, he will think that something is wrong.

Even if you manage to give a fair estimate of your firm’s value, it may come back to haunt you later in the actual rounds of raising capital. Giving out a fair value allows the VC to discount it and essentially limits your bargaining power when it comes to the actual funding.

Thus, the best answer is to tell the venture capitalist that you will let the market decide on your firm’s value. If you assure them that your company is going to be a success, VCs will create the market on their own. Ideally, they will bid against each other and raise the value of your firm.

3) What is Your Exit Strategy?

This question basically refers to how the VC will get its return on investment. Typically, an “exit” will happen if your firm gets acquired or has an IPO. Both of these are commonly listed exit strategies, although there are many more.

That being said, the best companies tend to have CEOs who are focused on building a successful business for the long run. Venture capitalists know this and look for those leaders willing to put in hard work for years to come.

To this point, Dick Costolo, founder of FeedBurner (acquired by Google) has a great quote – “Make a map of how you want to grow the business, not a map of what you want to happen to the company.”

His quote touches on the principle that successful companies will create their own exit opportunities as they grow. You should focus less on figuring out ways to exit your company, and instead build a great company with the ideas that you have.

 

Conclusion

When preparing to meet with a VC, it is important to know your goals, craft a strong business plan, and create a pitch deck that will capture their attention. It is also important to rehearse your pitch and ask them questions. Asking the right questions can help you understand the VC’s investment strategy, what they can offer besides capital, and what the investor’s expectations are. Knowing this information will help you determine if they are a good fit for your business and can help it succeed.