Vijay Anand | The Startup Guy.

Questions to Ask your Investor.

Posted on: May 12, 2008

The truth of the situation is that there is way too much capital chasing too few good deals. So, If there was ever a time when you could be picky and be specific about wanting the best director and investor onboard, this would be it.

In an attempt to ensure that you dont come off as arrogant beyond reason, but as one who is sane and more logical, here are a set of questions to ask an investor to ensure that he is a right fit for your board.

1. How long have you been with this current firm that you are working with?

2. Hmm. What was your previous engagement? Have you always been an investment banker or have you had the pleasure of bootstrapping an enterprise yourself?

3. If You dont mind me asking, how many other company boards do you sit on?

4. So what is your first impression about what we do, and the market that we are aiming for?

5. How long have you been here in India? Do you have a lot of network and contacts here?

6. I’ve been through your portfolio companies (and you better have), and there are some interesting companies there. Do you envisage any direct synergies with any of them?

7. (If Yes to the above) Do you think you could put us both in touch so that we could probably do some preliminary discussions to see how far we could work together?

8. Lets theoretically say for a moment that you were in my shoes, and that your firm was investing in this company. What would you say would it take to take this company to a successful exit?

9. Are you in town quite often? We should certainly catch up again.

There are a couple of underlying reasons why you might want to phrase a set of questions this way.

Questions 1 and 2 help figure out if the investor has been with the firm for long, and if you are dealing with an entrepreneur or an overbloated MBA. If its the case of the latter, pick up the tab, pay for both of you and make a run for the door πŸ™‚

Question 3 about how many boards he sits on will give you an idea of what you could possibly expect out of him, and possibly could also use as a means to get some references out of those companies about what he and his firm bring to the table.

Question 4: This is a nice way to see how far he can stretch his analytics skills and give you a different outlook from his perspective. This is an area that most venture capitalists will ace in. This is also the part where you want to shut up, make as less noise as possible and listen.

Question 5: How many people does he know? How much time will it take before he picks up his phone and will make that call for you. All that matters.

Question 6: This will pretty much tell you whether they are serious and have done their homework or are just messing with you.

Question 7: If they were seriously looking at you, he’d leap at joy at you proactively asking for a meeting and opportunity to evaluate yourself. Oozes of self-confidence, and the ability to network and market yourself. You’ll get oodles of brownie points for this.

Question 8: This will give you a picture of how big they are thinking. Just like question 4, pay close attention.

Question 9: Make friends with such folks, if you’ve been able to bear with him for so long. They are worth keeping around. its not everyday you meet guys who understand what you do, what your market is, and also can think of an exit. You need to be in touch, and even become drinking buddies if possible πŸ™‚

Recommended Must Read: Befriend an Investor

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2 Responses to "Questions to Ask your Investor."

Nice writing. You are on my RSS reader now so I can read more from you down the road.

Allen Taylor

This is good. I think most people looking for funding are to focused on getting the funding that they do not understand they too need to do their due diligence just at the VC is doing.

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