Your ideal investor is someone who is so enthusiastic about your idea that he’ll be happy to invest in your
venture based solely on his trust in your entrepreneurial talent and possibly his belief that your product has a significant market. Unfortunately, most investors aren’t like that. They’ll do their homework. They’ll come to a meeting with a list of prepared questions and they’ll expect detailed and grounded answers before they even begin to talk about money. Your seriousness is measured in part by your ability to provide accurate and quick answers to those questions. What can help? Knowing in advance what they’re going to ask, of course.
First, the investor will want to know who the founders are. What experience are they bringing to the table and why did they all decide to work together? The old story of a bunch of college/high school/workplace friends who just wanted to do something together no longer packs a punch. The high-tech market has matured. Many investors and entrepreneurs have already gone through several rounds in other projects. The search for a winning team has become more professional and rigorous and investors have less time and patient for trial and error.
Is your team complete? Does it still need to fill a key role? What important positions in a start-up can the founders fill and what are their special talents/ experience etc. that will make the investor want to invest in this team? You should know what it is and be ready to tell the investor before the investor tells you. You should also know how committed the founders are. Are they ready to go full-time when it becomes relevant? At what stage will they be ready? Under what conditions (e.g. if the company raises X or any other milestone)? Did you invest any of your own money in the start-up (which shows commitment and belief in your dream)?
If you do pass the personality test, the investor will want to know how much money you want to raise and how you plan to use it. Know in advance how much of the investment you want to spend on development, on marketing, on patent registration, on rent, on server maintenance, on employees and consultants, and so on. Prepare a budget that’s detailed and—no less important—realistic. What will your monthly burn rate be? How does that rate compare to other projects in your field at the same stage as you? You don’t want to appear either too wasteful or—just as vital—too optimistic and too thrifty.
What is your business model (if you have one)? If you do have a business model, do you have a revenue forecast? If you do have a revenue forecast, what did you base it on? Clearly, not every venture, in every field, at any stage, can create a serious revenue forecast (and you don’t want to offer a revenue forecast that’s not serious). But can you justify not having a revenue forecast? Some ventures are not build to create serious revenues (at least not during the first few years) and are focused on bringing a lot of users and creating value (usually with the purposed of getting acquired at some stage)? Is that your story? If so, you should tell the investor who might or might not be interested in investing in such a venture.
Be aware that that the better your business’s future looks in terms of its business model even though the revenue generation is unclear, the more important it will be for the investor to understand how you plan to market your product. How will you bring in users? What marketing channels do you intend to use (e.g., social networks, monetization tools, marketing partners, influencers, etc.) If your field has a generally accepted price for user acquisition (very common in fields like gaming, gambling, adtech, e-commerce, etc.) you should know that price. That last point emphasizes the importance of having in your team (either as a founder or as an external consultant) someone who knows the industry. Some areas are considered so complex that it will be very difficult to raise money without a real “industry expert.”
The first meeting with the investor is critical because you probably won’t get another chance. Do your homework. Take advice from anyone who can help. An exciting product, a big market and an impressive presentation are certainly important. But the knowledge and preparedness that the investor expects to see in you are just as important. Make sure you’re ready.
