Negotiating Investment: What will they ask?
Once you have made your pitch to the investors, you should be prepared to answer a variety of questions. It is impossible to know everything they will ask but there can be certain things you can prepare to answer in advance.
KNOW THINE ENEMY
They are going to ask about your competition. Who else in either the domestic or the global market offers similar products and services. Don’t be naive when researching your competition. It won’t be enough to simply state that your version is better. Find the specifics. What are the areas of the market they have failed to capture, and how will you differ? What works about your rivals models that you can replicate and what will be the ways in which you stand out and exceed? Is your version more ambitious for a fuller market share, or will yours be focussed on boutique services to corner a more profitable allocation of the audience?
BE HONEST
When asked about potential growth, be conservative in your estimates but confident in your ability to deliver. Be ambitious yet mindful of the pitfalls you could face along the way. Presenting problems in response to investor questions can show your secure understanding of the venture rather than an uninformed naivety. Be honest about your current position and expectations. You will be far better off exceeding estimates than falling behind each quarter.
You will likely be asked about the launch date and timeline, your sales pipeline, and how you will adapt it when it runs out. What’s the lead generation? What are your client acquisition costs, along with the process of client acquisition? Context is incredibly valuable in response to these questions; be sure to give a sense of how deep your well of opportunity has been and how likely it will be to generate future opportunities. Again, you should be honest and retain credibility with your responses. Too much ‘aspiration’ is likely to undermine their belief in your abilities.
Often people will be starting their new venture with a healthy client book built on decades of experience in their field which can make early numbers look healthy. Investors will be looking towards the next decade and you should focus your responses on how you can maintain growth beyond that initial boost. Presenting your clear and achievable plan for client acquisition is far more important than historic achievements that aren’t guaranteed to continue.
Other questions you should prepare for will be focused on scalability and most importantly for investors, when will their money start paying back?
You should have a solid plan for development focused on key hires. Key Hires are an important outline for the plans and growth trajectory. Key hires give a sense of the value you place within your organisation. How focused are you on outreach? How much value do you place on internal structure? Your plan for growth, particularly relating to staffing, gives one of the clearest pictures for the future of your business, so you should take time to consider the vision you are presenting and what it says about your company and its values.
MISCELLANEOUS
You may be unable to prepare for every question imaginable. If you do not know the answer to a question, you should never try and fudge a response. You should be prepared for the unknown and if you are ever unable to respond with credibility you should be honest. Acknowledge the value of the question and make a plan to explore further and respond at a future meeting.
COMMUNICATE WITH CARE
Your attitude when responding to questions is equally as important as the answers themselves. When facing questions, you should be cautious not to become defensive or combative. It can be difficult when you have worked towards something to handle questions designed to penetrate the weaknesses in your outline not to be overprotective of your plans. An investor may be asking tougher questions than they feel necessary simply to see how you respond under fire. Working with a communications coach is a great way to steady your nerve in these situations. A strong grasp of your communications skills will give you tools required to keep cool-headed in tough and challenging circumstances.
If you can respond to a series of tough questions and retain your enthusiasm and confidence in your vision, you will give the investor the best impression of your business and earn their trust in your ability to lead the company to success.
