Investors FAQ

Investors ask a wide range of questions when startups approach them for raising funds. As a startup that is seeking an investment , there are some questions for which we need to be prepared with answers. Being prepared also lets the founder  analyse if it is the right time to approach investors.

Satish Bala and Karthik Venkat, CoFounders of MyDreamStore  have had the opportunity to meet some awesome investors during their  journey so far and say that the questions they asked helped them in getting different perspective about the business.  My Dream Store is a technology platform that enables people to create and sell merchandise with zero upfront costs, They raised $320k in angel funding early this year.

Satish  has compiled a list of questions investors usually ask and things that startup founders should be aware of before approaching investors. The list is simply awesome and we are sure it will be of huge help to all those startups struggling to raise funds. Satish takes care of technology at My Dream Store.

• What is the problem you are trying to solve ?
• Is it scalable ?
• What are the bottlenecks to scale?
  • Manpower
  • Infrastructure
  • Setup / Hardware cost
  • Other industry bottlenecks / regulatory
• Is the market ready for this kind of service/product?
• Where is your MVP ?
• Who are your paying customers ?
• What do your customers say about your product/service ?
• How many similar consumers do you expect to come ?
• What is your revenue model ?
• What is the unit economics like ?
• What is the cost of customer acquisition ?
• What is the customer lifetime value ?
• What is the market size ?
• Market segmentation charts
• What is the customer segment you are targeting ?
• What is stopping you from scaling right now ?
• How much funds do you need ?
• How are you going to deploy your funds ?
• When are you going to break even ?
• When are you going to be cashflow positive ?
• What is the exit you propose ?
• What is the pre money valuation you propose ?
• How much are you willing to dilute ?
• What is the competition landscape like ?
• What is that you are doing uniquely that nobody else is doing ?
• Are you the first/early mover ?
• Why is that nobody else is doing what you are doing ?
• If it is a me too model, what is your mote ?  (Patents/any other killer advantage)
  • What if somebody else comes in with more funds into the market ?
  • Is it easily doable by anyone ?
• What is the brand building activity ?
• Are there any legalities/ risks in the model ?
• Is there any wastage/ refund/ return ?
• How do you ensure your service levels ?
• What is your team and skill set and background of founders and core members ?
• What is the composition of your team ?
• Do you have domain expertise ?
• Is there any people dependancy ?
• Are you having ESOPs for your employees, what is the structure ?
• What is the current CAP table ?
• What is the set up/ fixed costs ?
• Are you asset light ?  If so why / if not why not ?
• What are the NPAs (non performing assets) on your balance sheet ?
• How much cash is there in bank ?
• What is the current burn rate ?
• How many months do you have before you run out of cash ?
• What are the milestones for this funding ?
• What is the projected burn rate post funding ?
• What is the split of spend across operating cost / marketing / technology ?
• How long this money you are planning to raise will last ?
• What is your customer acquisition strategy ?
• What is your customer retention strategy ?

Behavioral questions :

• How do the founders know each other / how long they have been together ?
• What do the founders take care of ?
• What is the founder’s salary ?
• Who is the CEO ? / Whose decision is final in case of non resolvable issues ?
• What is your mission ?
• What excites you guys to do this ?

In case of internet products

• Who takes care of technology ? (Team )
• How scalable your platform is ?
  • How many concurrent users can it handle right now ?
• Is your platform stable ?
• Is the platform mobile responsive ?
• What is your technology stack ?
• Where do you host right now ?
• What is your mobile strategy ?
• Will users be interested in installing such app?
• How do you marketing plan on app installs ?
• Projections on app installs.
• Product mockups and details

Metrics :

• Users
• Returning users
• Bounce rate
• Transactions
• Ticket size ( Transaction value)
• Revenue run rate
• Gross profit
• Current burn rate
• Cohort analysis
• Customer acquisition cost
• Customer lifetime value
• Conversion rate
• Click through rates in advertising
• Testimonials

Termsheet stuff

• Internal rate of return
• Right to first refusal / Right to first offer
• Tag along / Drag along rights
• Liquidation preferences

Use this : http://www.investopedia.com/   to find meanings of words you could not figure out.

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