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Carrie Dunham

What are the top questions an entrepreneur should ask a potential investor?

Asked August 22, 2012, Edited February 11, 2014 by in Financial Planning

I've seen a lot of great advice here on how an entrepreneur can prepare their pitch to investors and what investors expect from entrepeneurs, but what are the top questions an entrepreneur should ask potential investors?

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Pablo Gagliardi

Pablo Gagliardi August 23, 2012

False expectations may be the main problem you have with an investor. I would suggest three questions:
What do you expect from the business, what you expect from me (the entrepreneur) and what will you do about it.

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Ali Ahmed

Ali Ahmed August 23, 2012

It is usually difficult to be very expressive and open with angel investors in an early startup, especially since the founder needs to be constantly allaying fears and convincing the investor to invest. They often don't want to ask hard hitting questions since they're afraid of any tiny thing that might change the fickle investor's mind. (Bear in mind, startups with immense traction with oversubscribed rounds tend not to have this issue and can be a lot more picky in choosing the right investors. If you're one of these guys you're probably not on MosaicHub though :P).

However, I think some of the best questions that a founder should ask an investor are:

1. "Let me know your doubts, feel free to be completely open with me" (usually gives on-the-fence angel investors the opportunity to have a more open discussion with you, which will help you allay their fears and convince them their doubts are misplaced. This is the biggest issue I have with VCs, they don't take the time to have a debate/discussion like angels do. It is either a yes and move straight to due diligence or a no with some misinformed reasoning).

2. "Will you be able to open doors? (Be specific with them here, ask specifically what value they can add, i.e. introduce to X, get X to join the investment round, etc. The more specific your request the more likely they will follow through post investment).

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Gordon Freedman

Gordon Freedman September 18, 2012

My main question of every investor (seed, VC, public) is the same: what is your risk tolerance. A seed investor with conservative values will consume a lot of your time when you get bogged down in the details of the business (you are not hitting your targets) as often does happen. Ensuring that your investor has a risk appetite for your venture is important. In mining, it is often referred to as "mad money" because it is an investment you leave and look at later, in manufacturing it is an inventory cost which has a completely different risk.

Aligning risk tolerances helps allay the effort required to manage your investors and lets you listen to their feedback, instead.

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Dan J Mustefa

Dan J Mustefa February 11, 2014

I'll ask,
1)Are you excited about our start-up?
2)How much return would you expect from us?
3)Are you planning on an exit?If so,what milestone you are targeting?

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Ashok Rathod

Ashok Rathod August 22, 2012

Interesting questions

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Rumen Filkov

Rumen Filkov August 23, 2012

At the very least you need to make sure that your investor will be with you long enough and in the hard times ahead. Here is a couple of questions to ask:

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To be Removed

To be Removed August 23, 2012

The Top Questions anyone has to ask investing in a company is; do I have the faith my trust in the investment is build on my own observations. Going with the flow of someone else is taking risk. Also nice but not for investing for growth.

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Justin Call

Justin Call August 24, 2012

I'm not a fan of "dumb money" - that is, an investor who brings money to the table but nothing else. A truly valuable investor has money AND connections in your industry to help break down barriers to sales, etc. Trust me - the connections are almost always worth more than the money. So I would ask questions about their network, experience, etc.

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Magie Girgis

Magie Girgis August 24, 2012

Hi Carrie, first find out if your investor shares the same VISION as yours. If yes, put together a proposal and discuss it in details. Be very selective with who you want to bring on board. Consult your mentors and other business professionals. Take the time to assess. Goodluck!

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Simon Sundaraj-Keun

Simon Sundaraj-Keun September 28, 2012

Points to know is what the investor brings like financial commitment, the duration of the investment, what are their risk, and how much do they want to be apart of the product.

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