10 Questions Investors Ask During Pitches💡
…what they are really asking, and what to consider in your response
Q1: Tell me a bit about yourself, your story, and how you started building your startup.
This question might seem innocent and is often the first question investors ask. Remember, investors aren't just asking casually; they want to know why you are the right person to build the startup. It needs to all come together logically from your passion, skills, experience, and how that helps you better make a startup like yours.
Statistically, many other founders and teams will try to tackle the same problem you're solving; investors want to know what about your background makes you likely better than them.
Pro Tip: When you kick off your pitch call, if you can, quickly demonstrate rapport. Break the ice, and make things more casual and a little personal. It helps to be likable and memorable, so being authentic here helps to build trust.
Be Impressive and Memorable:
Share impressive skills and experience you've gained that show they make you much better at solving the problem.
Share what will naturally help you outcompete other potential teams solving the same problem.
Demonstrate through your story how you have a deep understanding of the problem.
Use numbers as they are unequivocal and cut through the fluff.
Association and affiliation with relevant big-name brands also help, but your passion, hunger and desire should shine through. They also want to understand your motivation and understand exactly you are building this and not any other business.
Demonstrate why this is important to you. 🧡
Pro Tip: You should have a loosely scripted summary that answers all this quickly, say 2 - 5 minutes. It needs to flow, and like a story, it should make sense at the end of why you are building the startup.
Q2: What problem is your startup trying to solve?
Clearly and articulate this. Keep it 'stupid' and simple. Refrain from burying the gravity of the problem in unnecessary information. It would help if you nailed this.
Show How Painful and Big The Problem Is 😧: Show how complex and large the problem is and demonstrate a deeper understanding of the problem.
While trying to demonstrate the market size, refrain from quoting those extensive market research $bn market size stats. They are likely different from your actual serviceable market size. Focus more on people you can reach, for example, the number of people in your country who could need this solution. Make sure those numbers are sizeable.
Show how your solution makes it at least 10x better in an easy-to-follow way and what it helps your users achieve. Offer a demo to help investors visualize it.
If your problem is a 'painkiller,' show how painful the problem is and how much ease and relief your solution gives. Use visually expressive and tangible words about how difficult it is.
If it's a "vitamin," show how much it makes this better from its current state, what it prevents, and why people are motivated to use it. Also, show how short the "time to wow" is. On average, how long does it take a customer to get what you're trying to sell? After using it, how quickly can they begin to see results?
P.s a painkiller is a startup that solves a painful and urgent problem, while a vitamin solves a problem that's not as painful and urgent and often helps people prevent a sore and pressing issue.
Pro Tip: Only offer to show a demo if it's good enough. You want to avoid not doing well on a demo during a pitch.
Q3: When did you start building this? What's your progress so far?
You again need to bring out the numbers here. I quite like data and performance-driven founders. Do all the prior work so your response to this question is decisive.
Investors don't want to fund you to help you find customers; they want to see some solid initial signs of customer attention and then invest their capital to help supercharge your growth.
Mention the number of customers using your product and those on the waitlist; talk about your product; is it live or in beta testing? By how many people? Is there a pilot ongoing? What have you learned? How fast is it growing?
Is it solving the problem it intended to solve? Is it revenue-generating? What are the issues you're facing, and how does capital help you solve them?
Demonstrate that this isn't just an idea and that you have made some solid progress; further capital will supercharge your progress.
Pro Tip: It's not just about traction; it's about traction over what period because investors index on speed which is a signal for fast growth. You want to show you've done a LOT in a short time, and that customers are clamouring for more features from your solution, and you need capital to continue to build it out. It is sometimes perceived as a negative signal if you've been working on the startup for years and have yet to gain real traction. You want to explain why and clearly show quick and substantial progress.
Q4: What is your hook? Why do you think your early customers use you over alternatives?
It would be best if you showed that it is easy to sell your solution. One of the risks investors are trying to avoid is that you build something, and no customer wants it, much less wants to buy it. Or you make something and spend so much time trying to educate the customer as to why they need to have it, and because of this, you're unable to acquire customers quickly.
Demonstrate that your unique value proposition is strong, e.g., "we help customers make money in less time. What customer doesn't want to make money with less stress? That's a strong hook.
You also want to show your relative hook strength to the next alternative. Explain what your product does much better than the alternative. It needs to be logical or a no-brainer as to why the customers will use your solution instead of the other option.
Bonus points if it is difficult for your choice to replicate what you do - it means you have a moat. Be realistic about this, there are things the alternative is good at, but tell investors how you’re better and why customers choose you.
Pro-Tip: It helps to have a moat as a startup. A moat is a protective barrier that makes it difficult for people to penetrate and displace you. If you don’t, expect questions on potential competition and defensibility.
Q5: Do you currently replace or complement an existing product with your customer?
If you replace an existing technology solution, there are likely switching costs to move from the previous provider to yours. You also need to be much better or offer a strong incentive for customers to switch.
Also, your replacement will likely innovate to compete and match your offer. Most people don't like change and will often stick to something if it works well enough.
If you're complementing existing solutions, the question of how indispensable you are comes in. How strong are you in the suite of solutions, and what do you solve for?
If there were a constraint on spending, are you top of the list to keep because you solve a complex problem, or are you one of the first that'll get tossed? Can a larger competition build your solution as a feature and displace you, or do you intend to displace your competition?
Pro-Tip: As you respond, demonstrate unique (almost counterintuitive) insight on your customer behaviour showing a deeper than basic understanding of their needs and motivations to use your product. Show how this feeds into how you intend to build the product over time, say your next key features and how that helps you grow. Re-iterate why additional capital will help you with that.
Got any questions? Ask them. Send an email to afropitchprep@gmail.com
P.s Yes, i know i said 10 Questions. The next five will be in your inbox next week.
Speak soon.
Maria