10 Things that investors ask to startup founders

Unless the investor is angel investor, maybe his drive was a trust or a vision or good feeling to see the founders success, but still as founders you need to prepare the right business plan since you will use investor money to realize founders vision and dream.

As a start I made some useful list that usually asked by investor during pitching session to startup founders:

1. The Founders Profile. Why do you think you and your team are the right team to develop and run this business? The founders setup, chemistry, experience and profile will help the company to convince the investors. This is make sure that the management have the initial skills to succeed and to know the team motivation, ambition and whether the founders get along or to see if the founders adaptable to change? The typical founders may consist of the Tech , Business/Commercial , Financial/Fund raising aspects. Since this is a team work and collaboration, single founders setup not preferable since in the beginning the startup needs to focus on product growth/UI/UX, technical development/solution and financial/fund/money to support the founders ideas.
2. Business and Product viability. Is there any genuine needs for the product/service? I like this fundamental question that sound like idea buzzer, but need to understand and sharpening the founders thinking. The next question like: Who are your user or segment of user? We will tell about the Total Addressable Market/TOM which is the entire possible market for a product or service if nothing held back customer acquisition, SAM/Serviceable Available Market which looks at the specific demographics being targeted with the TAM, all related to the market, who are your user, age, gender, demography. Share of Market or SOM which the business can realistically expect to enjoy. Founders to understand that the market potentials is huge and some business traction is needed to show that there are real user for the product and founder will need the initial fund to move the business from pilot into bigger commercial mode.
3. Business Competition Landscape. Who are your competitor and what differentiate your business to others? The founders need to be convinced that you know the competition, competitive advantages, your business strength and weakness. You have to know the business than the investor.
4. Business Model Canvas, such as What is the revenue stream, business model of the business? Mainly investor need to know, how the company make money? From subscription model or one time purchase or sales commission, franchise? Need to explain whether the business model and customer is B2C or B2B or B2G. Its useful if we know as details as possible about source of revenue, size, segment of model. How is the Life Time Value of subscribers or LTV compare to its cost of acquisition or CPA? Founders need to know/planned the business sustainability.
5. Financial. How much is your company burn rate? Founders need to explain about the company expenses, revenue source and plan, how founders going to use the investment and why. This is important as founder will use the investor money, they need to know clearly how the money will be used. The more detail plan prepared, reasonable approach, less-biased and thorough plan needed, beside the it is good practice for founders also help investor understand super better on the company plan. For example founders will use the money for office space rental, for having dedicated UI/UX or developers, running activation or conversion activities to get more subscribers beside the awareness campaign or to finish the solution for the application.
6. Business valuation. How the business valuation done? There are some valuation approach such as Berkus method, Cost based valuation, Stage Valuation or Discounted Cash Flow/DFC method
7. Business scalability versus Cost. The question like, is the business scalable? This is to find out whether when startup would like to multiply the revenue without significantly increase the cost.
8. Distinctive product defendability for sufficient period before copied by competitor. Out there, many smart, bright, talented person who may have same ideas or copies your ideas and they may also have sufficient fund and expertise, so the founders have to think further their product roadmap one or two steps ahead the competition before their ideas/product copied by the competitor.
9. Exit strategy. Even in the early stage, founders need to plan whether they will keep the company or they create a company to sell and make another business as some founder do? How the investor exit? Usually in the seeding or second round investment or IPO, the founders or investor can sell their share as the expectation of all stakeholders is to grow the business and to grow the company valuation, meaning that if investor inject the money i.e US$200,000 for 10% share meaning the business value is US$ 2.000.000 at that time, say a year later the company valuation become US$ 10.000.000 then the investor money grows five times.
10. Be honest, be trusted. Is there any facts or information that investor needs to know about the product or the startup setting? Not about personal thing but mainly about the ideas of the product, concept, aspiration, founders agreement, legal case if any or financial or loan issue if any.

Standardize investors slide deck template are widely available to be used and follow.

The investors will ask more questions but I think at least above list are essentials and founders need to prepare their answers as a business plan for their startup — I suggest the appointed CEO/lead founders needs to be stand out to show that the founders convincingly know what they are doing in realizing the business dream and vision. Good luck with the pitching!