“Be prepared, work hard, and hope for a little luck. Recognize that the harder you work and the better prepared you are, the more luck you might have.” –Ed Bradley
Searching out, pitching to, and bringing on investors can be a lengthy and involved process. You can make it smoother by being as prepared as possible. This article is the second in our series covering questions you can expect to hear from investors. We will include queries about your products or services, the competition, and customer acquisition. It is not a complete list, but we hope that it helps you prepare and have the smoothest process possible.
Your Products and Services
Your product or service is the core of what you are trying to get funding for, so now is your time to answer questions about what you created and are passionate about! Investors are looking to back something with a unique selling proposition (USP) that solves a particular customer problem.
- Why should people care about your product or service?
- What is different about your product or service?
- Are you first to market?
- Won’t a large corporation just build something like this?
- If you are first to market, why hasn’t it been done before?
- Were there earlier versions? If so, what did you learn from them?
- Do you have patents secured or pending?
- How do you plan on improving or adding on to your product or service in the future?
You will always have competition, even if you are first to market. If you cannot identify your direct and indirect competitors, you are likely to have credibility problems with potential investors. A good rule of thumb is to be knowledgeable about your top 5 direct and indirect competitors.
- Who is your company’s competition?
- Are there barriers to market entry?
- What competitive advantage do you have over your competition?
- Does your competition have advantages over you?
- Compared with other businesses in your market, how do you compete on price, features, and performance?
Marketing and Customer Acquisition
You may have the most amazing, unique, and desirable product or service, but if you have no way to market and acquire new customers, you are dead in the water. So investors are going to be very interested in how much research you have done on your target market and your strategies for making money through sales. If you haven’t released to the market yet, you will need to research similar companies and project based on the data.
- How much does it cost to acquire new customers?
- What is the lifetime value of a customer?
- Have you done focus groups? What did you learn from them?
- What are your social media and PR strategies?
- What is your marketing plan?
- Describe the typical sales cycle from initial customer contact through closing the sale?
- What is the client’s cycle? Are there opportunities for up-sales or repeat business?
The more you know which questions you will need to answer, the more prepared you can be for a successful round of fundraising. In our first article “Top Questions Investors Ask Part 1” we covered questions about the big picture of your company, the founder(s) and team, as well as your market. In our next installment, we will look at your company’s traction, the risks and threats, and your exit strategy.