Whether asked in a Q&A or in a one-on-one interaction with an investor, impromptu questions can be the most important yet intimidating part your investor interactions. A prepared presentation is easy to give, but answering impromptu questions from potential investors is a far more difficult process. Even though many investor questions cannot be entirely predicted, there are questions that almost every entrepreneur can certainly anticipate. The answers to these questions should be researched and rehearsed by every presenter prior to investor meetings, pitches or events.
How well do you know your competition?
Every entrepreneur wants to present their company to investors as new and revolutionary in its area of the market. But many investors know that creating a company is easy, while creating a company that knows and can stand against competition is a different matter. It is important that investors feel that their money is safe with a company that has a product or service that is not easily intimated by a similar start-up or a more established competitor. Be sure that you have a researched and thorough understanding of potential threats to your company, and be ready to discuss these threats. Instead of finding that you paint an unrealistic rosy picture of a competitive landscape, investors prefer to see that you recognize challenges and are ready to overcome them.
What makes your team qualified?
In the early steps of creating your company, you should have already assembled a qualified and accomplished management team that can take your company to the top. It is important that you demonstrate to investors that your management team can effectively execute your company’s mission. In answering this question, do not be afraid to mention any past successes or any relevant experiences that showcase your team’s unique skill sets, knowledge and capabilities. If there are still roles on your team that need to be filled, ensure that you demonstrate that you have candidates for these roles and that you understand the costs of filling them.
What will you do with the funding you receive?
Understandably, investors want to know what exactly you’re going to do with the money that you will potentially receive from them. Many entrepreneurs make a serious error in overgeneralizing their plans for funding when speaking with investors. Show that you have a specific strategy you want to achieve for your company with the proceeds from each round of funding. When you are asked this question, discuss the current needs of your company that you are seeking to meet and why fulfilling those needs will ultimately lead to your company’s success.
How do you achieve liquidity?
An investor wants to be confident that they will see a return on their investment, and there are many ways that you can demonstrate that your potential investors can put their minds at ease. You should come to terms with the idea that you will need to sell your company or that you must have a plan on how you will do so through an acquisition, merger or initial public offering. Assure potential investors that you have a liquidity strategy that is timely and plausible.
“The question that you don’t know the answer to.”
More often than not, an investor will ask you a question that you didn’t anticipate. What do you say when you don’t know what to say? First, don’t pretend like you know the answer when you don’t. If you’re nervous and deeper questions are being asked into your answer, it will be easy to tell that you are uninformed or unconfident. Be willing to admit that you don’t know. Second, offer any bit of relevant information on the topic that the question addresses. Even if you don’t know the specifics of the answer, you can show the investors that you are knowledgeable and well versed in the issues in your field. Third, assure the investor that you will do the research necessary to answer the question and will contact them with this answer very shortly after your meeting with them. Be sure to get direct contact information and provide a timeline for them to expect an answer.