This article was originally published on December 21st, 2011. It was one of the most popular articles I’ve ever written, so I decided to update it for the upcoming year. This article was so popular that I wrote an ebook (170 pages) with the same title; 26 Fundraising Questions for Startups. You can see here for more information.
Setting the stage for 26 fundraising questions for startups
It’s been a crazy week. On Monday we announced that our project received funding. 50,000 euros from a member of the Croatian Angel Network – CRANE, Mihovil Barančić. We started to explore the possibility of getting an investment roughly a year ago. So here are some questions that we got during that time.
- Why do you need the investment?
- Why don’t you sell your house/company/whatever if you believe that much in your product? (At the time the other co-founder and I ran a web hosting business, so someone suggested we sell it. Which we eventually did.)
- Do you believe in your service?
- What does your service do?
- Why is that better than company x?
- What if some big company decides to copy your service?
- What if your competitor or newcomer decides to copy your service and offer it half the price?
- Is there any competition?
- Why don’t you start locally first?
- Can you see your company becoming a 100-million-dollar company?
A taste of high expectations from an investor
Even a decade after, I still remember hearing this question. I was taking a very short break and eating one of those mini buffet sandwiches. It was a Seedcamp event in Prague (Czech Republic), and I was pitching WhoAPI in front of about 100+ people. 20 startups, sponsors, press, organizers, and investors, it quickly adds up.
I hadn’t eaten all day, because I was preparing for one of my first presentations ever and connecting with organizers, press, and investors. While my mouth was full, this VC investor came out of the blue, and the first thing that came out of his mouth was “But can you see this becoming a 100-million-dollar company?”.
My mouth immediately dried up, and I could barely swallow the bite of a mini sandwich. This was a good thing because I could point to my mouth and pretend to chew and take some water. I bought a few seconds to think about what to reply. I replied, “Maybe not, but I can see it becoming a 10-million dollar company”.
This hasn’t excited him, and they never invested, but I honestly couldn’t see it becoming a unicorn or a 100-million-dollar company. We barely had any revenue at the time, and we had just launched our MVP.
- Why don’t you go global from the start? Since we were going global right from the start, we weren’t asked that question (but some probably will).
- Can you bootstrap?
- What experience do you have?
- How did you get your idea?
- Do you have a working prototype or a proof of concept?
- What is preventing me from hiring 1/2/3 freelancers and doing this project myself?
- Would you be willing to relocate to the capital city / London / Silicon Valley?
Watch your blindspot, prepare yourself
Whatever answer and statement you make, be prepared for questions about backing up that with facts.
- Do you have an executive summary / one-pager / deck / business plan?
- How are you going to get your customers?
- Who needs your service?
- Who is your target audience?
- What is your business model?
- Do you have an exit strategy?
- Are you prepared to give up 10%/20%/30% of equity?
- How much money do you need?
- Why that amount?
I am 100% positive there were more fundraising questions for startups, but these were the ones that first came to my mind. Good luck in finding the answers.
If you liked this blog post, perhaps you will like the 170 pages ebook
“26 Fundraising Questions for Startups”