As a founder, it can be a great idea to work with Venture Capitalist money to launch and grow your business. In some cases, it’s critical; if you’re working in a highly competitive industry, for example.
If you’re a first-time founder, this can be a daunting task. You want to focus on building your product and creating value for users. But, now you need to speak VC-language and find your way through the investor world too.
Most first-time founders focus more on preparing for questions that VCs will ask them, and forget to prepare some questions to ask the VCs. This is just as important!
But, don’t worry, we’ve got you covered.
Here are the top 5 questions that you should ask, whenever you’re meeting with a new potential VC investor.
1. How do you work with founders?
When a VC invests into your company, you’ll be working together with them for a long time. You should expect to be with them for at least ten years, assuming your company is successful.
So, like any colleague or partner you work with, you should make sure that you align on key things.
Ask the VC how they usually work with founders, to understand their style of operating. Do they like to have frequent meetings? Do they prefer to leave you alone to get your work done? Do they want to be involved and help?
Getting an understanding of this is critical. It will help to make sure you’re partnering with someone who matches with your style and your needs.
2. Do you have experience, or a perspective, on my industry?
VC firms often have a particular perspective or thesis on trends and industries. In many cases, they also specialize in certain domains, such as marketplaces or B2B SaaS.
When you’re starting conversations with VCs, it’s a great idea to ask them if they have any experience or perspective on your industry.
This helps you to know how they may support you in the future. Do they have great experience in the industry you’re operating in? That means they probably have contacts to connect you with, or great strategic advice to help you succeed.
3. Which stages will you invest?
Normally VC firms will have preferred stages that they invest. It’s common to hear them say that they usually only invest from Series-A onwards, or sometimes only pre-seed and seed.
This can happen for a variety of reasons. Usually it comes down to how much money they have in their fund and what non-monetary value they can bring.
Different VC firms bring different value to the table, besides money.
Some like to be involved very early, to help shape the product and the business model. Others prefer to come in later when there is already proven traction.
As a founder it’s important to ask this question early, to make sure you’re not wasting time in meetings with a firm who is not a good match for where you are on your journey.
And, as with everything, you want to choose a firm that can support you best.
4. What is your internal process like?
From the moment you have your first contact with a VC, until you have the contracts signed and money in your bank account, there is a process that needs to happen.
This generally involves a kick-off meeting, a pitch from the founders, internal meetings, and finally a term sheet.
It’s a good idea to understand how their process works, so that you can have full visibility of the timeline you can expect.
5. How will you support us?
Like with all questions, a very important thing you need to understand as a founder, is how the VC firm will support you and the company.
Aside from money, VC firms support in a variety of ways.
Some firms have large operational teams designed to help you fill any skills that you’re missing in your team early on. This can include things like finance, design, and sometimes even technical development.
Another way that most firms offer support is by making connections with other companies in their portfolio.
For example, perhaps your target customers are B2B SaaS, and the firm holds many SaaS companies in their portfolio. Gaining introductions to them from the firm is a great way to build up your early sales pipeline.
After you’ve had a few conversations with VCs, you’ll most certainly build up confidence. You will start to get a feeling for how to navigate the meetings successfully. Hopefully with these important questions, you’ll be even better prepared. Good luck out there!
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