During an investment period, an investor or a VC will ask you as many questions as they could about your startup, wanting to know you better. But, it is equally vital that you understand the other party who is considering an investment in your company. It is obvious to have a pre-screening activity to target a few investors or VC firms after which, you want to gauge their interest & ability in investing.
Here’s a list of 10 things you should know from your investor.
1. Are you able to invest the amount we need?
Is your investor or the VC firm having enough funds to meet your expectations? Look into the ability of your investors to bring in enough funds you are seeking for your company.
2. What is your Industrial & Geographic focus?
Investors are keen on a few industries and geographies, generally due to their experience & expertise. Check if you fall into such target categories of your investor. If your company falls into the same loop, it is probable that apart from the funds, the investor will bring in value.
3. What are your Successful Investments?
Ask about their successful Investments and their role in that success. It will also open gates for you to know CXOs who have worked with this VC and others who can share their experiences of the same. It will help you percept over the contribution this VC can make towards you.
4. What metrics do you track, before investing?
Raising capital for a startup is not an event. It is a process. Typically an investment round takes place for months, and investors will be tracking your progress along the way. Knowing the metrics on which they base their investments will be helpful.
5. What is the Frequency & Size of Investments you make?
Frequency will tell you when your funding round might get the money. If you are looking for a lead investor for a $5 million investment round, then you probably need someone who makes investments in the range above a million.
6. Have you led any investment rounds?
Finding the lead investor for your investment round is essential to complete it. A lead investor(Generally VC Firms) invests a big chunk of the total money raised during the investment round. They also define most of the terms for the deal. Do not ignore any VC for this reason, but you must adjust your priorities accordingly.
7. Who are your co-investors?
Frequently, VCs want to co-lead funding rounds. They commonly maintain a network of other firms & VCs whom they work along often. This question will help you understand who might be coming in, during the funding round and how far your VC will be influencing it.
8. What are the standard deal terms you sign?
Deal terms are frequently just as important as your valuation. Sometimes more than that. Find help or a source from your network to understand the Standard deal terms in today’s market. Check if your VC expect any non-standard terms that could be a disadvantage for management and the founders of your company.
9. Will you take a position on our board?
This norm will be part of the deal terms or will come as a requisite of a VC. If a VC firm plans to take a board seat, make sure you know whom it is going to be. A senior partner will provide more value than the firm’s junior associate. The best people around the board table is always welcome.
10. How much will you involve with our company?
Not all investors that lead an investment round take a board seat. And at times, they can ask for two seats. Verify their domain expertise or network that can be helpful for you if they want to choose any key position in company management too.