So, you’re thinking about putting your business in front of investors to encourage a cash injection.
It looks great… on the surface. New concept, obvious market, scalable… but apart from the brief, what do your investors really know about your business idea?
What questions will investors ask and need answered before they are truly confident of hitting the “invest” button? These are the first ten questions that we ask an entrepreneur before investing:
- What is the problem you are solving? What gap are they filling and how large is that gap? In other words, is the product or service unique and is it scalable? If it’s not, then you should scroll down to the next opportunity.
- Why are you doing this? What is their motivation? Are they truly passionate about this business or do they just see this as a potential money-making opportunity? It’s fine to think you can make money from an opportunity, but it’s hard to be successful and make money when you are not passionate about something.
- Who is your competition? Is anyone else doing what they are proposing? If so, what makes this proposition different… what is their competitive advantage?
- What are your biggest risks? What are the things that could stop this business from succeeding? If they can’t answer this, then they haven’t thought enough about their business.
- What is your total funding requirement? Do they have a funding plan that takes them past break-even stage and well into revenue generation? What happens when this first round of funding dries up? It’s no good funding something that doesn’t have a growth and further funding plan in place.
- How much have you invested into your business? What risks are they taking? Are they expecting you and the other investors to take all of the risk? Sweat equity is fine, but money talks! If they haven’t put anything into the business themselves, then why should you or anyone else?
- Who’s in your team? You need to know that the entrepreneur has the right people in his team to make this business a success. They can’t possibly do everything in the business to make it a success. They will need people with the right skillsets and experience to make this happen and make you a return.
- What is your track record? This is hugely important. Have they previously grown a business and exited successfully? If they haven’t but they have the passion and desire, do they also have someone in their team that has taken a business to a successful exit?
- Are you doing this full-time? You don’t want to be investing into someone who is not committed fully to the business. If they answer “no” to this, then walk away!
- What’s your exit strategy? How are you going to get a return on your investment? Remember, start-ups are not very liquid; so, it’s important the entrepreneur has thought about how they intend to deliver your return.
These are among the questions we ask before placing an opportunity on our platform. They are the questions investors should ask, every time they are consider investing into a start-up. Please click on the button below to begin answering Shadow Foundr’s questionnaire: