Top Questions Investors Ask Part 4
“People who ask confidently get more than those who are hesitant and uncertain. When you've figured out what you want to ask for, do it with certainty, boldness and confidence. Don't be shy or feel intimidated by the experience. You may face some unexpected criticism, but be prepared for it with confidence.” Jack Canfield
Being prepared can help you answer investors’ questions with confidence and certainty. This is the last in our four-part series of common questions investors can ask. While this is not an exhaustive list, we hope that it will help you be better prepared to ask for what you want with confidence. Today we will cover intellectual property, financials, and your financing round.
Your Intellectual Property, Patents or Trademarks
The intellectual property (IP) of your business can include trademarks, patents, copyrighted designs, and confidential information. Your company’s IP is extremely valuable; they can set your business apart from competitors, be used as security for loans, provide a revenue stream if sold or licensed, and can be an essential part of your branding and marketing. Here are some of the questions you may get about your company’s IP.
• What key IP does your company have?
• How was your company’s IP developed?
• Can the IP be liquidated?
• Are you looking at infringing on the IP of another company?
• Would acquiring IP from another company add value to your company?
• What proof or confidence you have that your company’s IP does not violate the rates of a third party?
• Is it possible that any prior employers of a team member have a potential claim your IP?
Your Company’s Financials
When you get to this stage, be prepared to walk an investor through your financials including your profit & loss statement, balance sheet, and financial model. It isn’t uncommon for an investor to request a special session for the financials and bring an analyst with them. Here are some questions you might get asked.
- Which key metrics does your leadership or management team focus on?
- Are there factors that have been or will limit faster growth?
- How much burn do you expect to happen until the company achieves profitability?
- Are you setting aside a stock option pool for employees?
- What is the capitalization structure? How much equity and debt has the company raised?
- What are the company’s three and five-year projections?
- What key assumptions lead you to your projections?
- When do you expect the company to be profitable?
Your Financing Round
This group of questions helps the investors get a better idea of who the other players are. They want to know how much money has already been raised (if any) and where it came from. Knowing what the equity structure looks like is usually a key component.
- What will the proceeds from this round go to?
- Are there existing investors and will they participate in this round?
- Which round of funding is this?
- How much funding are you looking to raise in this round?
- Who holds equity and how much do they hold?
- Have you done crowdfunding before?
- Has anyone else invested in this round?
- Has an accelerator or incubator already committed funds?
- Does your company have any convertible loan notes?
- What is your company’s desired pre-money valuation?
While it’s natural to be a bit nervous when pitching new investors, the best thing you can do is to be as prepared as possible. While our series is not an exhaustive list of possible questions, it can be an effective tool. Making sure you have answers to the questions in our series is a great place to start. We even recommend you take some time and practice answering the questions. As Jack Canfield says so well; prepare, prepare, prepare so you can ask for what you want with boldness and confidence.