Tuff Questions VCs Ask #2

“Make sure you know how to answer some of the toughest questions VCs will throw at you or you’ll wind up feeling very embarassed & rejected”.

From Alley Watch.com 05/13 enhanced by Peter/CXO Wiz4biz

Do You Know (Competitor)? Why Not?“
Anytime a VC throws out the name of a potential competitor that you don’t know or haven’t looked into, it can throw you off balance for a minute. The fact is, it may be a company that you don’t think is a “viable” competitor, so you don’t know much about it. The best way to tackle it: Tell them the truth, “We looked at our key competitors and that company did not meet our criteria. But we’ll look into it further after this meeting.” The key is to maintain control of the conversation because it shows you can handle a curveball. “

What Is Your Plan To Grow?
“The most difficult thing to explain to an Investor is your plan to grow. They want to know how you’ll out-do, everything you’ve already done. Prepare by picturing your future: What staffing or product creation will help you have the business you want to have?”

Why haven’t you gotten any Traction?
“The best way to handle that question is by not approaching VCs until you have achieved Traction – when your Product or Service starts to grow rapidly and is accelerating. Venture capital should be looked at as an accelerator for existing success, not as a runway extender to get it right.”

Debt or Equity?
“Many investors will know going into a deal whether they want Preferred Stock or a Convertible Note. Sometimes, however, they will leave it up to the company. Angel Investors, in particular are likely to leave it up to the company as the more sophisticated party. For the company, this is an opportunity to maximize the value of the investment, but they must also be wary of getting off on the wrong foot with the investor, by being overly aggressive or appearing un-informed. A crash course in VC deals and a good Deal Lawyer will make sure you maximize the former and mitigate the latter. “

Comments: Do you know any other tuff Questions that VCs or Angels ask?