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#14 Vision- 3% of Questions
In this category, investors inquire about the future direction of a startup, its long-term goals, and plans for product development. These questions delve into the company’s vision, roadmap, and revenue prospects.
What are the upcoming stages of your product’s evolution?
Change is constant in the business world, and startups must have a well-thought-out plan for how their product or services will evolve to meet the dynamic market demands. Investors are interested in understanding the next steps and milestones in the product’s evolution, as well as the growth trajectory envisioned by the founders.
What is your product’s vision?
Founders should articulate a clear and ambitious vision statement that outlines the desired future state of the product. This vision should be supported by a realistic plan and include specific goals and key performance indicators (KPIs) to measure progress. For instance, "Our vision is to become the leading provider of drone food delivery services in the US, generating the highest revenue by 2026."
What is your timeline for achieving these goals?
It is important for founders to establish a timeline for reaching key milestones and goals. This timeline demonstrates the startup’s commitment to progress and allows investors to assess the feasibility of the proposed objectives. Founders should ensure that their goals are realistic and attainable, as setting unrealistic expectations can erode trust and credibility. By providing a clear timeline, founders showcase their strategic planning and execution capabilities to investors.
#15 Problem- 3% of Questions
While the Problem Slide in a pitch deck receives significant feedback from investors, it represents only 2.8% of the analyzed questions. In this category, the focus is on understanding the specific problem that the startup aims to solve.
What significant problem does the company address?
Every business exists to solve problems or fulfill market gaps. When addressing this question, founders should emphasize the magnitude of the problem, both in terms of the number of people or organizations experiencing it and the severity of the problem that motivates customers to seek a solution. Utilizing data to support the claim is crucial.
How do you gain insights into customer needs?
Successful startups actively engage in ongoing conversations with their target customers. They employ various methods such as surveys, focus groups, online forums, chat interactions, and market reports to deeply understand customer thoughts, emotions, and behaviors within their industry. Founders should rely on data rather than guesswork to comprehend customer needs.
Which individuals, groups, or organizations face this problem?
Understanding the target audience is vital for any company to effectively promote its products or services. Founders should have a solid understanding of their target market, where to reach them, and what messaging resonates with them the most. By answering these questions, founders can identify the segments within the industry that are most affected by the problem their business solves. Data-driven insights should be used to support these findings.
What are the existing alternatives?
Investors often inquire about the current alternatives that customers use to address their problem instead of adopting the startup’s solution. For example, a workflow automation tool’s alternatives could be manual spreadsheets or traditional methods like sticky notes and whiteboards. Founders should avoid speculation and instead provide data and factual evidence to support their claims.
#16 Legal- 2% of Questions
Ensuring legal compliance and addressing any potential legal risks is crucial to instilling trust in investors. Despite its ranking, this category holds significant importance in evaluating a startup’s legal foundation.
Is your legal formation in compliance with applicable laws?
Investors are cautious about startups that carry legal risks or have improper entity formation. Failed regulatory filings, associations with unaccredited investors in the US, non-compliance with employment laws, and similar issues raise red flags. Founders should be honest and transparent about the company’s legal status and compliance. Investors conduct due diligence, and any undisclosed legal issues may lead to a withdrawal of investment interest.
What legal or regulatory risks do you anticipate?
Founders should openly discuss any potential legal challenges they foresee. Transparency is crucial in this aspect. Investors conduct thorough due diligence, which can uncover any legal concerns. Failing to address these risks honestly may have adverse consequences for the investment process.
Will the funding cover all necessary preparatory licenses?
Obtaining necessary licenses and meeting regulatory standards often involves substantial costs and time investments. Founders should provide accurate estimates of the time and budget required to secure licensing rights, certifications, federal and state licenses, agreements, or any other legal paperwork that may be a bottleneck in business operations. Transparency regarding these financial and legal requirements is essential.
Have you incorporated or formed a legal entity (such as an LLC)? If so, where?
This fundamental question examines the legal entity under which the startup operates. Each state has its own laws and regulations that impact investor implications and operational procedures. Generally, investors prefer C-Corporations registered in Delaware. However, it is important to note that this information is not considered official legal advice.
By addressing these legal matters honestly and transparently, founders can demonstrate their commitment to legal compliance and minimize any potential legal risks that could impact investor trust.
The Bottom Line:
The Q&A session with investors presents a valuable chance to build trust and demonstrate credibility. Investing in a startup carries significant risk, and it’s inevitable that investors will have questions. Even if they show disinterest or refrain from asking questions, it’s important not to dwell on it.
Instead, take the opportunity to understand their lack of interest, make necessary adjustments if needed, and continue the pursuit. This guide aims to help founders prepare for the anticipated questions they may encounter during their pitch.
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