Ace your investor pitch: What VCs really want to know

If you're starting a new company and looking for investors, it's important to be prepared for the questions they might ask. Venture capitalists (VCs) are people or firms that invest money in startups in exchange for a share of the company. They want to make sure that your business has a good chance of success before they invest.

1. Your team: who are you and your co-founders?

Investors want to know about the people running the company. They might ask:

• What's your background and the backgrounds of your co-founders?
• How did you meet your co-founders, and how long have you worked together?
• Why are you passionate about solving this problem?
• How do you handle disagreements among the team?
• How is the ownership (equity) of the company divided among the founders?

They ask these questions to see if your team has the skills and commitment needed to make the business successful.

2. The problem: What issue are you solving?

VCs need to understand the problem your company is trying to fix. They may ask:

• What specific problem does your product or service address?
• How serious or widespread is this problem?
• Who experiences this problem, and why does it exist?

Being able to clearly explain the problem shows that you understand your market and the needs of potential customers.

3. Your solution: How does your product fix the problem?

After understanding the problem, investors want to know about your solution. Questions might include:

• How are people currently dealing with this problem?
• What is your product or service, and how is it different from what's already out there?
• Do you have any unique technology or patents?
• What are your plans for developing your product over the next 6 to 12 months?

You need to show how your solution stands out and why it's better than existing options.

4. The market: Is there demand for your product?

Investors care about the size of your market. They might ask:

• Why is now the right time for your solution?
• How big is the market for your product?
• How many people need this solution?
• How much are people currently spending to solve this problem?

Showing that there is a large and growing market can make your company more attractive to investors.

5. Customer acquisition: How will you get and keep customers?

VCs are interested in how you plan to attract and retain customers. They may ask:

• Who is your ideal customer?
• How are you currently reaching these customers?
• How much does it cost to acquire a customer?
• What is your strategy for marketing and sales?
• How do you plan to get customers in the future?

Having a clear plan for gaining and keeping customers shows that you know how to grow your business.

6. Competition: Who else is in the market?

Investors will want to know about your competitors. They might ask:

• What makes your solution different from others?
• Who are your main competitors?
• What if a large company decides to enter your market?
• What advantages do you have over your competitors?

Understanding your competition helps investors see how you can succeed in the market.

7. Traction: How is your business doing so far?

VCs look for signs that your business is gaining momentum. They may ask:

• When did you start the company?
• How many customers or users do you have?
• Do you have any important partnerships or contracts?
• What are your revenues and profit margins?
• How engaged are your users or customers?
• Have you seen growth in sales or user numbers?

Showing progress can increase investor confidence in your business.

8. Fundraising: What are your financial needs?

Finally, investors will ask about your funding requirements. Questions might include:

• How much money have you raised so far, and from whom?
• How much are you looking to raise now?
• What will you use the funds for?
• What is your current monthly spending (burn rate)?
• Do you have a lead investor?
• What milestones do you aim to achieve with this funding?

Being clear about your financial needs and plans shows that you have thought carefully about the future of your business.

Conclusion: Be ready for investor questions

When meeting with venture capitalists, it's important to be prepared for their questions. Understanding what investors are looking for can help you make a good impression and improve your chances of securing funding. Take the time to think about your answers to these questions, and you'll be better equipped to convince investors that your startup is worth their investment.

For more tips on preparing for VC meetings, check out Elizabeth Yin’s full list of questions VCs may ask early-stage founders.

This guide is designed to help early-stage founders understand the types of questions they might face when seeking venture capital funding. By preparing thoughtful answers, you can increase your chances of success in securing the investment you need to grow your business.