For an entrepreneur looking for startup venture capital funding, it is likely he or she will get plenty of opportunities to pitch their business idea. And each time an entrepreneur sits before a VC committee with the goal of raising startup capital, there will be question after question from VC firms who are expecting straight answers.

What are the most common questions from venture capital firms? Here are five of the most common but important questions the start ups should expect.

1. What is Your Business?

A simple yet deceiving question!  An owner of a start up needs to prepare the famous “elevator pitch” for this answer. Don’t spend too much time answering the question. It’s not meant to be a full detail answer. Instead, intrigue the interest of venture capital firms with a succinct answer.

2. Why Are You Raising Money?

Venture capital firms know you are in their house to access their money. They have a right to know why you want it. Be sure you have a prepared answer that tells them your growth plans and financial projections with the capital raised.

3. Do You Have a Marketing Strategy?

Of course, the answer you should give is yes!  However, venture capital firms are looking more for the details of your strategy. Do you have a chosen target market? Who is the target and why? What promotional activities have you considered? What is your timeline for your individual marketing strategies? Be sure to give confident, clear, and detailed marketing answers without spending too much time on them.

4. What is Your and Your Team’s Background?

Venture capital firms put a lot of emphasis on the experience of a start up’s founding team. It’s not enough that a team has experience.  What is it in each individual’s background that made you feel they were qualified for the job? Do any of them have previous start up experience? Have they been successful with other growth companies? Has any of your team led a company through an IPO?

Prepare to give your VC firm detailed and specific answers that will impress.

5. What Are Your Barriers to Entry?

No start up company has a yellow brick road paved before it that leads to success and riches. There are always obstacles and competition that must be overcome. Tell venture capital firms how you plan to find your niche in your industry, and your competitive advantage over similar companies.

In your quest to obtain startup capital for your new business, you will certainly have plenty of opportunities to present your pitch in front of venture capital firms. However, make no mistake - meetings with venture capital firms are not a 20-questions kind of interview. Venture capital firms expect you to present them with a brief yet detailed exposition about how you will make them make money.

What must you do to design a compelling presentation? Here are a few tips to keep in mind.

Design Your Slides

Your presentation will stand out with visual aids. The most common visual aid is a slide presentation using PowerPoint software. Amateur presenters will be tempted to create a plethora of slides using all the cool animated bells and whistles included with PowerPoint. But refrain from this temptation. Keep slides to a minimum, and don’t go overboard on the “effects.”

Here are a few additional tips for slides:

Stay with the main elements - Your slides should cover the main elements of your business presentation, including: use of proceeds, any special trademark, patent, or proprietary technology, market opportunities, marketing strategy, management team, financial projections, and exit strategy.

No more than 3 points per slide - Too much information one a single slide gets convoluted and confusing. Make your main point on a slide and use not more than 3 bullet points. 

Remember, a successful venture capital pitch is one where the investors remember you.  Chances are they won’t remember your PowerPoint, so think of the slides as just a simple supplementation to the main show: you!

Prepare for Technical Glitches

You want to be absolutely sure that your presentation runs smoothly. Time spent troubleshooting your computer and connecting cables is time you lose with VC decision makers. Like any Boy Scout, you must be prepared for any situation. Bring backup computers, cables, projectors, or any equipment that may break down. 

Practice For Time

Beginner entrepreneur presenters are often gung ho about their business idea, and many of them can talk for hours about their plans, dreams, opportunities, and projections.

However, know that venture capital firms want to get the basic idea of your business, and then they ask questions. Your prepared presentation should last no more than 15 to 30 minutes. Practice your speech and presentation transition so you get the flow perfectly and stay within the expected time frame.

Talk Freely

This doesn’t mean talk without ceasing. It means being prepared with answers to questions presented by venture capital firms. And it means having answers that are honest about your business, including the opportunities and the hurdles you face.

A presenter who has a prepared answer will gain much more respect, and more importantly interest, from VC firms.

Despite a period of shrinking venture capital activity during the recent recession, the venture capital industry experienced a good year in 2010. More start up funding was distributed among growing comp businesses and more small companies successfully exited from venture capital backing through IPOs and other strategies.

While the venture capital industry had a growth year in 2010, what is in store for 2011? According to the National Venture Capital Association (NVCA), the future looks bright. Here are a few important  predictions according to the NVCA and Dow Jones survey of venture capitalists for the coming year.

More Investments

During fiscal year 2009, the venture capital industry felt the pains of the national recession. The total number of VC investments in startup companies was significantly down compared to the tremendous growth of investments leading up to 2008.

However, 2010 saw increased activity in startup funding, and according to the NVCA survey, most VC firms expect increased funding in 2011, particularly with later stage investments.  About half look forward to expanding investments in expanding companies and seed development.

IT Will Be a Hit

In previous years, venture capital has found a haven in life sciences and medical technology. However, Information Technology is making a comeback. Startup companies focusing on digital media, consumer internet, and mobile technology will likely find a favored audience with VC firms. And more specifically, cloud computing is becoming all the rage and will likely be the “favorite child” with the most investment dollars.

Medical IT

But don’t think medical technology is on the way out. Technology in the healthcare IT sector will still be on the increase, particularly in medical devices and biopharmaceuticals.

Smaller Firms Favored

According to the survey, 70% of VC firms seem to favor smaller startup companies over larger ones. Perhaps it’s a matter of diversity. Splitting more dollars among a greater number of smaller startup companies protects a VC firm from over investing in unsuccessful larger companies.

Increased Exits

A successful startup company doesn’t stay with a venture capital firm forever. It hopefully exits with a lucrative IPO or acquisition deal. And according to the NVCA survey, about two-thirds of VC firms polled said they are confident that more start ups will go public, and 81 percent said that they expect more start ups to be acquired by private-equity or other public firms.

If you are looking to obtain money from a venture capital firm, you may be asked the question, “so what is your expected burn rate?”

The burn rate is simply a calculation of the amount of cash that a start up business spends each month. Usually, the burn rate is based on the assumption that a new business will spend start up capital at a loss for some time before profitability and positive cash flow occur.

The burn rate is a critical measurement of the potential financial health of a start up, as well as how much start up capital may be required before profitability begins.

Calculating the Burn Rate

A new business owner may simply want to say that the burn rate is an average of typical monthly costs. However, one needs to consider what other sources of cash (not necessarily revenue), are available as well.

Consider a burn rate to be in terms of negative cash flow. For instance, the following simple formula helps provide the monthly cash flow:

All sources of current and expected income or revenue (not current cash on hand) LESS: Monthly operating costs, including interest and taxes (but not including depreciation or amortization

= BURN RATE (NOTE: Cash flow will probably be negative for start ups)

If the start up does have some cash available, such as loans from family and friends or other angel investors, the “Cash Zero Date” is the date in the future when the cash runs out. For instance, if the burn rate is $50,000 per month, and there is $150,000 in the bank, the Cash Zero Date would be three months in the future ($150,000 / $50,000)

Managing Your Burn Rate

It is important to have the burn rate calculation ready to present to venture capital firms. Some firms will want to know all future burn rate expectations. For instance, when the product is ready to be promoted “live” to the public, you may be in a position to hire more people, causing an increase in the burn rate before actual revenue is expected.

Of course, it is best to learn how to control expenses and keep the burn rate as low as possible. Constantly monitor expenses month-by-month, and continually compare actual expenses to the predicted ones. If a venture capital firm knows that you are in control of your burn rate and have predictions in the future that protect their investment and lower their risk, you’ll have a much better chance of approval.