VC Meetings: Questions to Ask and to Expect

by Startacus Admin

We mentioned in our article about getting the most out of a meeting with a VC that you should expect some tough questions from them, and that there are some questions you should ask in return.

The meeting should not be one-sided - this is the opportunity to open a dialogue with someone who could be the key to your success, and to start building a relationship with them. Although the main objective of meeting with VCs is to get their investment, and therefore you want to impress them, it is also important that you take the opportunity to ensure they are the right VC for your startup.

What you might be asked

As we mentioned in the previous post, you should try to think of the toughest questions you can think of to ask yourself. Don’t shy away from questions you’re afraid of or don’t want to answer, because you’ll have little choice when they come up in a VC meeting - and these are things you clearly need to work on.

The only thing that can fully prepare you for any question the VC throws at you is ensuring your knowledge is all-encompassing - particularly since many will depend on your industry. Answer honestly, not based on what you think the VC wants to hear. If you and they don’t agree on the point, you should be able to explain and defend your views.

Expect to be asked questions ranging from the basic to the more difficult, such as:

• What is your strategy for scaling the startup? - If you can’t explain how the startup is scalable, you’ve already lost the VC.

• How are you different? - Every business has to know its USP, and you have to have a good one for the VC, because when this is followed up with a question about what’s stopping someone else from doing the same thing tomorrow, you want (need) to be able to say ‘this is why’.

• What is your business valued at? - This is a bit of a loaded question, as they want to see how you answer as much as they want to know the value. There’s no exact answer to this, and you don’t want to overvalue or undervalue.

• What do you think about X company? - By asking you about another company that may be competition, they can see if you have done your homework. You will have done, so if you aren’t aware of the company, tell them so and that it must have been dismissed as a competitor - but that you’ll look into it.

If you do get asked a question you don’t know the answer to, admit it. Honesty isn’t a substitute for knowledge that you should have, but it’s vastly preferable to trying to bluff or sidestep.

What you should be asking

Again, this meeting is about opening a dialogue and beginning the process of getting to know the other side of a potentially long term relationship. You should have done your research on the VC beforehand, and so make sure that your questions don’t entail something you should already know, or suggest that you didn’t do your homework.

There are plenty of things the VC’s website isn’t going to tell you, and you want to get a good idea of how they work and what they’ll be like to work with. Here are some questions that will help with that:

• What is your decision-making process? - It could be that you are talking to a billionaire investor who works alone, but there could be partners that need to be convinced. You may be talking to the most junior of them all, who has little decision-making power, or who might not like taking risks, or who might have had recent failures and needs to be redeemed. In short, knowing the basics of this person’s position is helpful.

• In what area have you been most valuable to current startups? - This is not about having connections and a big network, but in what specific areas are they likely to be able to help you. You should have discovered this in your research, but that’s theoretical - you want to hear how they are of use in practice.

• On how many boards do you sit? - Basically, you want to know how involved and engaged the VC will be. You may want someone who is basically a bank, but you probably want someone willing to put in some real time. Knowing the answer to this will help you gauge, and at the end of the day you can always out right ask how involved they will be.

• What businesses/founders have you worked with that didn’t work out? Why? - This will give you an idea early on if you and the VC might clash on a personal level, what they could be like to work with, whether their values and ideas match yours, etc. Ideally, you’d like to get an idea of what they are like under pressure, which there will surely be at times during your startup’s journey.

• How would you rate this opportunity on a scale of 1-10? This should be just about the last question you ask, but the answer should be interesting. It will give you a good sense of whether you will see investment from the VC, and their answer will open up the opportunity to ask a few specific questions, such as ‘Where did I lose points?’, ‘What could I have done better?’, etc. Just don’t push it - remember they aren’t there to help you improve your pitch for the next VC.

Asking the odd question that can open the door for more specific questions is good, but don’t turn into the Inquisition. 

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Published on: 1st March 2017