Fund generation is the most crucial and nerve wrecking part of your start up journey. Therefore, it becomes extremely essential for the founders to prepare a solid pitch to make an impact on the investors when asking for funding.
Around 13% of the start ups shut down due to lack of funding. If you present the right information about your start up in the right way, you can position your startup business to avoid falling within that number.
In this article, we will discuss 8 of the most important questions that you need to answer (to yourself) honestly before answering the venture capital (VC) investors.
- What inspired you to create your product?
There’s always a problem behind a solution. Investors would definitely be interested to know the story behind the creation of your product and what motivated you to lay the foundation of your start up.
The problem could be personal, social or may have risen from the discovery of a market gap. For example, Peter Boyd of PaperStreet Web Design started creating law firm websites as he found the existing law websites were often out of date, poorly crafted or had a terrible user experience.
A compelling story behind the creation of your product and your brand will engage the audience and keep them tuned in to your presentation until the end.
- Is your business idea feasible?
A well conducted feasibility study of your business idea is essential to know the commercial viability of your product/service. It helps you to identify the obstacles that your business could face and also the amount of funding you will require for the smooth functioning of the company.
- What is the market size of your product/service?
Market size is the pivotal point that will determine the sustainability and growth of your business. It is important to know the stage of the business cycle. Is it emerging or plateauing declining?
A product with an emerging demand has a long way to go and is also an investor’s preferred choice. It will have less competitors and hence higher probabilities of growth and profits.
- Do you know how to go about all the legal formalities to run your business hassle free?
As a founder, you must be thoroughly aware of all the legal formalities related to the business structure (sole proprietorship, partnership, limited liability partnership, private limited company, public company). Legal considerations might include:
- Labor laws
- Business licenses
- Listing requirements
- Protection of intellectual property
To maintain the efficiency and growth of your start-up, it is necessary that you fulfill all the legal requirements. It will also portray you as a trust-worthy and conflict-free company in front of the investors.
- Have you designed your corporate governance policies?
This is an important aspect but often gets ignored by the founders in the initial stages of the business. A well laid corporate governance policy protects the interests of the management, investors and other stake-holders, which prevents the issues that might arise with issues like conflict of interest and misuse of resources.
A solid corporate governance policy that keeps evolving with the growth of the start-up plays a significant role in the sustenance and growth of the start-up.
- Are you equipped with the metrics related to customer traction, market demand and competitors?
You need to conduct extensive research to find out the market demand of your product, the competition it will face in the market, how will you beat that competition and your customer traction.
Also, make sure to prepare your findings from your review of the metrics before heading out to convince the investors. Your information about the real situation of your business will indicate the investors that you are ready to take the plunge. Investors will dig into these metrics as well, so don’t try to slip any false or exaggerated claims into your pitch.
- Are you ready to commit yourself into this start-up for the coming years?
It is quite possible that your dream may not come true instantly as growth takes time and you have to overcome many hurdles to put your business on a smooth road. Investors are deeply interested to know the commitment, motivation and vision of the founders as these factors will help them stick to their company in case of failures and slow-downs.
- Do you believe in your team?
A strong team is the energy that keeps the business running. A strong team thrives on both experience and passion of the team members, passion being more important than the experience. According to a study, 60% of the startups fail due to conflicts in team.
Investors will do the due diligence to measure the financial strength of your business but for evaluating the team, mainly rely on their gut feeling and intuition. Your team should have the knowledge, skills and collective passion to keep the wheels running.
Investors look for commitment and transparency in the management of the start-up. Therefore to make your pitch powerful and effective you need to have a clear vision of your business at your end so that you convince the investors that investing in your business will be a meaningful and profitable deal for them.
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