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New business ventures require funding, and that funding often comes from outside sources such as early-stage investors or private equity (PE) firms. Meetings with potential investors must be well prepared. Seasoned investors are looking for more than just a polished pitch deck; You are looking for passion and knowledge. They look for a clear goal, with a well-developed plan to achieve it. As an entrepreneur and now running my own investment firm, I’ve been on both sides of the table. Here are the five key questions you need to prepare for.
1. What is your product or service?
Your product is more than just a product. It represents your drive to transform your industry. Investors appreciate that entrepreneurs are on a mission to create change. But all too often entrepreneurs allow themselves to be distracted. They discuss every imaginable facet of their product or service. Yes, you should have all this information at hand.
However, the investor also wants you to be able to succinctly tell the story of your company in less than five minutes. If you can’t come up with a concise elevator pitch, you’re probably reconsidering your ideas. Make sure your elevator pitch explains why your product is better than similar offerings already out there. Your pitch should reflect your clear purpose, plan and process to build your vision.
2. Who is on your team?
As an entrepreneur who has navigated numerous investor meetings in search of funding for my dreams, my team was certainly important to me. However, I wish I had known how important it is to potential investors as well. Very often, entrepreneurs preparing for these meetings spend too much time thinking about their product’s market potential and not nearly enough time thinking about their team.
Investors need to know that the management team behind the product is knowledgeable, knowledgeable and competent. Investors also want to know that the management team is closed. Any investor can tell you stories about infighting among founders that inevitably spells trouble for the company. Prepare to talk about how long the management team has worked together and how the team handles disagreements. When I meet with entrepreneurs, I want to see a team that is deeply and authentically committed to their vision.
See also: 6 steps to building a strong team
3. What are your obstacles?
When it comes to this question, entrepreneurs sometimes neglect to prepare. Investors don’t just want to hear about your early successes. They also want to know about your obstacles and early setbacks. Prepare to discuss the strategies you used to overcome these obstacles. Have you dusted yourself off from an early failure, got back up, and tackled the problem head-on?
As an investor, I like to see entrepreneurs have the flexibility to navigate the obstacles that all early-stage and growth companies face. However, I also want to know that entrepreneurs do not deal with these obstacles. The most successful entrepreneurs keep their goals in mind and will do whatever it takes to continuously lead the team and the company towards those goals.
4. Who are your competitors?
One of the things I would have liked to know as an entrepreneur was the importance of demonstrating control of your business and market by thoroughly understanding your competitors. Investors love unicorns – those business ventures that are truly disruptive. But no matter how disruptive your business is, you will have competitors. If you lack in-depth knowledge of your competitors and your markets and opportunities, your credibility can be questioned. You should be prepared to explain how your company and product are different and better than any competitor. Be specific, because investors are looking for specifics rather than vague claims. Offer investors a roadmap that explains how your company will differentiate itself from the competition.
See also: 5 Tips for Navigating the Entrepreneur-Investor Relationship
5. What are your finances and how is your business model structured?
Before you go to a meeting with potential investors, you need to remember the goals of the investors. Every time an investor finances a new business venture, they expect a healthy return on investment. Because of this, you should be prepared to discuss your business model and financial information at length. Bring your monthly financial plan for the first 18 months as well as your strategic plan that forecasts your quarterly financial model for at least the next three years. Note the items on every investor’s checklist: business potential, market size, uniqueness of the product suite, and potential returns.
Research each investor meticulously
Another thing I would have liked to know as an entrepreneur was that it is just as important for entrepreneurs to evaluate investment partners as it is for investors to evaluate entrepreneurs and their vision. New entrepreneurs in particular tend to be oblivious to this since securing funding is so critical to forward momentum. However, finding the wrong investment partner can be worse than not finding one at all. You need an investment partner who is inspired by your dream, who supports and cooperates with you and who shares your belief in the possibilities.
For this purpose, do your due diligence. You should carefully research potential investors to see if they might be a good fit before scheduling a meeting. This also contributes to a good impression. It is beneficial, if possible, to link some aspects of the pitch to an investor’s background. For example, if the investor has supported green business ventures in the past, you might want to explain how your own business fits into that mold.
See also: 5 things investors look for in your pitch
Properly preparing meetings with potential investors requires a lot of work. As you work out the details of your business model, finances, and competitors, don’t forget the intangibles investors look for: passion, vision, and clear goals with an actionable plan to achieve your mission.