Answering the Tough Questions

So you have a company that’s generating revenue and you get a knock on your door; it’s a Venture Capitalist.  They are interested in making an investment into your company but you have to answer the tough questions to make them feel comfortable. The following are a few items that you must be able to address in your first conversation that can help you secure funding: 

Have a long term vision: Make sure that you can clearly articulate the long term goal of your company. Having a solid customer base and a healthy revenue stream are an excellent start, but you need a game plan to go forward. Explain your growth strategy and the milestones that will help you achieve them.

Know your weaknesses: Be able to speak about the areas where you are lacking and how you can improve on them; one of the mistakes that young entrepreneurs make is the inability to highlight what they are not good at. One way to address a weakness is to recruit an experienced CEO or legal advisor that can help guide the advance of your company. In order to move your business forward, you need to figure out what areas to improve and how to improve them.

Be open to criticism: Just because you get questioned or criticized about running your company in a specific manner does not mean that an investor doubts you. They are likely either attempting to help you or figure out how you will react if they want to change/improve on a specific aspect of your business down the road. Be open to questions and if you’re adamant about a specific topic, explain yourself.
 
Know your audience: Research the firm and the individual(s) paying you a visit. Get to know who they are, how they invest, and why it would be a good match to select them instead of another investor. At the end of the day, it’s a marriage; you need to know who you’re getting in bed with. Word of advice: contact a portfolio company and get their two cents on how the investor is to work with.

Where to draw the line: Have a general understanding of what you want and how much you’re willing to give up.  Venture Capitalists and other investors are in the business of making money off your idea and therefore will try to get the most bang for their buck. As the entrepreneur, it is important to have a rough estimate of investment size, willingness to give up ownership, and ability to walk away from the table if the terms are not what you have in mind.

Overall, having investors come to you is a great feeling and validation of your company, but, at the same time, it’s just the first step. Make sure you do your homework before speaking to anyone.

If you have any questions, be sure to send me an email or post a comment.

Ashkan

Ashkan[at]greenhornconnect[dot]com