Some of our companies are kicking off financing processes in the next several weeks. At a strategy session with one of our companies yesterday, the team and I crafted the outline of the pitch deck. They asked me what questions a venture investor might ask in the initial meeting.
Distilling the mental investment analysis into a small number of general questions is challenging because of the diversity of businesses we see. In any case, I gave it a crack and came up with the following questions I would ask a startup to answer in an initial meeting.
- [Value prop] What is the problem and is it worth solving?
- [Team] Does the team have the vision and the wherewithal to build this company?
- [Go to market] What is the competitive angle (competitive barrier to entry and/or go-to-market)?
- [Sales effectiveness & product validation] Which customers have used the product and how have they received it?
- [Product distribution] How does the company acquire customers cost effectively?
- [Revenue model] Does the company have the revenue model to build a big (>$100M annual revenue) business with good margins (gross ~ 50 to 60% / net ~15 to 25%) under reasonable assumptions?
- [Market size] Is the SAM market share required to build a $100M business less than 5%? Alternatively, is this product in a quickly growing market or riding a disruptive wave?
Other risks including legal risks, technology development risks, value chain implications and so on may also be important. But when building a generic fund-raising deck, answering these questions in your pitch deck will serve as a great starting point.
And as always, it’s important to unite these points with a single theme or story to sell the dream.