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.