Raising money for your business through private investors including angels and VCs is time consuming affair with many list of criteria and conditions to satisfy. It requires that you dedicate some early time in going over your business and its strategy to raise finance.
There are literally hundreds of questions you could get asked when going through the Fund Raising Process. The key areas you need to be ready with answers before you spend time trying to secure significant investment dollars from angel and VC.
These are typical self-check questions to be answered which will go a long way and pay dividends in your fund raising task by making yourself better prepared for the investor.
Unless you are able to answer all these questions, to yourself, with confidence, there is very low chance that you would be able stand the questioning of the investors.
What is your company’s / entrepreneurial mission? You can go “Crazy” here, consider the ultimate vision of what your business can become – Don’t pull back because you’re concerned about being considered crazy – Venture Capitalists like crazy, they invested in companies who have literally changed the world – having a BIG vision is not a bad thing!
Do you have a credible team to support your mission – experience and relevant business skillset in the right sector of business.
What is your legal structure? Will the investor have any issues investing legally in the business due to the legal structure? Is any way around possible? Are you willing to let go of majority / controlling stake in the business?
What are the products or services your company delivers? Is it a new product line? Is it in a Proof of Concept stage? Has it been tested in the market? You will need to be ready to answer many probing questions on the product and services?
How has the company funded its development so far? You need to be ready with both documents and facts for this?
How large is the market? How could it be made larger?
What is the value chain in the market? (Distributors / Suppliers / other key decision makers?) Where does your company fit in?
What are the market trends over the next 3 to 5 years? Who are the target customers? Which markets do you make most money? What are the upsides and downsides of the market (typical industry demand supply cycle)? Where do you currently stand?
How level has your company performed in the downsides and upsides? Equal attention is given by the investor while reviewing the market and your operations.
How do you reach out and get customers? How will you do this over and over again?
What prices do you charge? What prices do your competitors charge? What are your competitive advantages? Why are you better than your competition? How do you meet your main customers’ needs better than your competitors? What are the barriers to stop new competitors entering your market?
Who owns the company? How is your company shared between the various shareholders now and in the future?
Who are the key team members and what functions do they perform? Who manages the Sales / Marketing / Operations / Production / Administration / Finance?
What experience do your team members have?
What gaps do you have in the team and what steps are you taking to fill them?
What is the level of dependencies / redundancies among your team? How critical are these roles now and over the next couple of years?
Are there any members of the team critical to producing the products or services?
Be honest to yourself and make sure you have a plan for filling these gaps. Don’t try to avoid this one. This will turn up to be critical during the Investor Due Diligence.
If there are, what happens if they leave the company? How will you ensure knowledge transfer?
How are your products or services delivered?
How long does it take to create and deliver your products or services? How much do they cost to deliver?
What intellectual property is owned by your company?
What are the Investors actually investing in? How are the investments protected? Does the company own the intellectual property it uses? How do you protect your intellectual property?
Do you have competitive advantages within your operations? Do you have any bottleneck processes?
Are you struggling to expand or innovate in operations, which is limiting your market access or profitability?
Does your operations have scalability in the future to meet changing market scenarios?
Are you ready to change your team and operations, if required, after investment? Are you ready for interference by investors and their auditors?
What are the key financial performance indicators for the business? Have you been faring well in these in last few years?
What are your main causes for financial performance / non – performance?
Is your business cash driven (short term returns) or profitability driven (long term returns)?
How much will the company make and spend in the next 3 years conservatively? Do you have a plan for the same? Does the plan sync with the market and operations?
Of the money spent, how much will be invested in set up costs, developing intellectual property and other forms of investment versus just keeping the business running?
How much money are you looking to raise through external investors?
Do you understand the underlying responsibilities of taking capital? More reporting and less independence.