There is a crucial thing that only top founders know better than others: when you meet with VCs, don’t just fixate on getting their money — learn from them. So which question should you ask to gain the most from the meeting?
For any offered meeting with a VC, the possibility it will result in funding is between 1% and 10%. That means you have 90+% chance that you will not raise money from this person. So if money is your only goal for that meeting, you are wasting 90%+ of your time.
It’s better to consider the meeting as an opportunity to build your company using the information you get from the VC, not just the money you might get. This will give you a higher return on your time.
Remember that investors see 1000s of companies and have invested in 10s or 100s of them over their careers, which means they’ve likely seen different insights than you have. They see and hear things that you may not. This wealth of experience is sitting right in front of you. You just need to know what to ask, and how.
The right mindset for investor meeting
Come to VC meetings as an equal, not as if the VC is above or below you.
“Pitch” meetings are poorly named. They are better to be seen as strategy meetings.
As a Founder, your #1 job in building your startup is to learn quickly. VC meetings are no exception.
Use the first part of this strategy meeting to explain what you know about your business so far, not simply “pitching.” Then the vast majority of the remaining time should be spent asking the VC questions and engaging in dialogue as collaborators. For example: If you have 10 minutes, explain what you know about your business for 4, and ask questions for 6. If you have 30 minutes, explain for 8 minutes, and discuss for 22. It would help if you had a large appendix in your deck that you can refer to during the discussion.
The VCs you talk to are likely to give you different pieces of advice because there is no right answer and it also depends on the level of experience with who are you meeting. But over many meetings, you will cobble together the right advice. You’ll then be able to improve your business so that investing in your business becomes a no-brainer.
To help the founder get the best from this mindset, I’ve collected 30+ great questions that I’ve observed from others in the pitching meeting connected by Wiziin and James Currier from NfX. These are useful questions that every founder should ask to open up the dialogue and start building more authentic, open, and long-term relationships with their investor. These questions focused on
Getting an Understanding of How Your Company is Viewed
Know the downside
Competitive Landscape
Addressable Market
Level Up Your Fundraising Process
The Right KPIs
How Your Team Measures Up
THE QUESTIONS
Getting an Understanding of How Your Company is ViewedYou’re busy, and a lot of people want to see you. Why did you decide to take the meeting with me? What were you hoping to hear?When you look at my deck, do you think it good reflects the business as I’ve now described it to you?When you explain this to your partners, how will you describe this business?What are the negatives your partners will think of first when they look at this business? What initial concerns might they have?How much do you think location matters? How should I be thinking about location/geography?How can you see this company fitting in your portfolio?Are there challenges to this company fitting in your portfolio?
KNOW THE DOWNSIDEWhat is the one thing you think I’m underestimating or being naive about?What are the main obstacles you see to our success? What are the main concerns you have that could cause you not to invest?Can you see your partnership investing in this company?After what I’ve described, are there patterns you’ve seen in the past (positive or negative) that would apply to this business? E.g. ad tech is dead, hospitals are horrible customers, sales teams are great customers, etc.
COMPETITIVE LANDSCAPEHow many other companies have you seen that seem to be targeting the same sector?Have you seen somebody try this business and fail or succeed in the last ten years?How common is this idea in the world already? Have you ever seen anything like this before?Are there successful companies this startup reminds you of? Any good analogies? (e.g. the “Craigslist” of farming equipment)Do you get the sense that we’ll be able to defend this business once it’s up and running?Are there any companies you think it’d be natural for this company to partner with either now or shortly?Is there anything I’ve shown you that is on trend with other companies you’re seeing?Now that I’ve explained the business, what sectors would you categorize it in?
ADDRESSABLE MARKETDoes the way we’ve calculated TAM feel right to you?The way I’ve calculated TAM is on this slide. Is there another way you could think of calculating the TAM?Could we redefine our market to make it a bigger market? E.g. Airbnb TAM as home rentals vs. much bigger Airbnb TAM as hotels.What’s your opinion of the niche this company is targeting to enter this market? In talking this through, is there any sub-segment of the market where you think the fast-moving water will be?Can you see this being a billion-dollar company? Why or why not?What do you think are the biggest opportunities ahead of us in this space?
LEVEL UP YOUR FUNDRAISING PROCESSIf this company were to go public, what would you expect the fundraising history to have been? What would you expect about the future financing and dilution characteristics of this business?I’d like to fill in this round with a few smaller checks from angels and advisors. Can you think of anyone who would be dynamite to advise me on getting this going even if you don’t invest? (Make it clear that you’re not asking for an introduction.)Other than you, who would you recommend is the best type of investor for this type of business? Does anybody come to mind? I’m not asking for an introduction.If you had somebody else helping you evaluate this company, whose opinion would you trust?I understand that statistically, the chances of you investing in this company are only 1%-10%. I don’t want an intro, but I’m just curious, who else would you expect I’m talking to about raising capital?
THE RIGHT KPISWhat’s the main metric that would prove that this is going to be a great business?What sort of traction metrics would make investing in this business a no-brainer? Where does this company sit on the
ladder of proof based on what you know?What experience have you had with companies that try to distribute on the channel(s) that I’m planning to use? And what were your lessons with companies working with that channel?When this company is worth $2B and we look back, what do you think the likely path is that the business would have taken to get there?
HOW YOUR TEAM MEASURES UPOn a scale from 1 to 10, how much do you think we have
founder-market fit or founder-product fit?What attributes do we need to be excellent at to make this business work? What are the skillsets and expertise that we need to be world-class to succeed? E.g. Digital marketing expertise, being a supply chain guru, etc.Just meeting me, do I feel like the kind of person to make this business work?When you look at the team that I’ve assembled here, how would you compare them to other investments that you’ve invested in?Talk with me about the team you see here. What are the pros and cons of the team I’ve built so far?Who would you like to see me add to this team in the next year?What are the top cultural characteristics that this company would need to have to be successful? Being aggressive? Careful and frugal? Highly compliant? Breaking the rules? Sales-driven? Tech-driven?
Final words
VCs are a resource. They are pattern recognition machines that have been trained by thousands and thousands of data points from the startups they’ve seen. They’re a strategic wellspring of the startup ecosystem that is there for you to avail yourself of. If you ask the right questions, VCs can help calibrate your business, help you avoid costly mistakes, and ultimately get your startup to become the best version of itself and maximize your chances of success.
#StartupFundraising
