When I was a founder I was completely clueless about fundraising and what investors would ask me. And also why they were asking certain questions. I don't think founders should ever be blindsided by the process. A thread -- read on >>
1) @hustlefundvc, we've put together a page on what you can expect from us and our process.
2) I've also put together a doc of questions I think investors will ask you just in general: https://t.co/YLYIvhxOc3 We've highlighted the ones that we tend to ask in blue.
3) I think it's worthwhile to talk a bit about why we ask some of these questions.
4) Tell me a bit about your background and your co-founder(s)’s background. This q is meant to understand: -how complementary is the team in skills? -have they worked together? -what motivates them to work on this? -what is the team's experience with this problem?
5) A lot of investors care about founder-idea fit. Does the founder know a lot about this problem from before? Has the founder faced the problem in a prior career/life? Is the founder well-connected in the space to give them edge?
6) If you can show this, that's compelling to many investors. However, we've also funded lots of teams who have done the opposite. Teams who are outsiders to a space but have LEARNED A LOT by doing cust dev. And, they have a unique angle / take on a problem as an outsider.
7) What is the specific problem you are solving? Why is this a problem? Who has this problem? Articulation of the prob is really impt. A really nuanced understanding of the problem as well as the day-in-a-life of the customer persona is compelling.
8) This shows that you have done your homework AND are really customer-focused. In this day and age, customer acquisition is generally the top problem that software startup founders have, so this is impt to demonstrate.
9) Why now? This is a q that lots of investors like to ask. I used to think it was annoying. I mean -- for most ideas, they honestly could have happened 5 years ago! or 3 years ago. Or last year.
10) That being said, you just need to roughly explain why this era makes sense. For ex, Webvan, which did grocery delivery in the late 90s died. Why? The unit ec made no sense.
10b) Grocery delivery today has more density which makes the unit economics better. And there's density because everyone now has a mobile phone + the internet. So this sort of business could really only have come about during the mobile phone era.
11) What differentiates your solution from other alternatives? Everyone has competition. If you say you have no competition, that basically means that your customer doesn't have this problem you're solving. Even paper & pencil is competition or manually doing somehting.
12) Along the lines of competition, you may learn through your fundraising process that you're in a crowded space. If that's the case, you may have to adjust your plans a bit in the worst case scenario.
12b) Competition increases CAC for startups. AND, downstream investors get conflicted out across a variety of companies. So it's more expensive to get customers AND there's less available capital.
13) These are just a few questions (many more in the doc). Feel free to add comments in the doc if you think I've left out critical questions that should be on there.