Make sure you know how to answer some of the toughest questions VCs will throw at you.
from NYC’s Alley Watch.com 05/13 enhanced by Peter/CXO Wiz4biz
Q1. What Is Your Weakness?“The classic VC role is that of an interrogator, trying to break you for a key secret. But it doesn’t have to be that way. Folks who watch the TV show “Shark Tank” know this feeling. Time after time, a well-rehearsed entrepreneur goes through his pitch, and everyone loves it. But the Sharks (as VCs) keep poking at the Founder until they finally find a weakness. Maybe the company has zero revenue, a poor growth strategy or a weak CEO. Know your weaknesses better than your strengths. Do a SWOT analysis (Strengths, Weakness, Opportunity, Threats). Before your first VC meetings, have your Tteam sat down and ask each other “VC-type” questions until you are all experts.”
Q2. How Are You Different?“With proper due diligence & competitive analysis, you should be able to make a case for how you differ from your Competition in the marketplace. How can you prove that you have a truly unique “Value proposition? What is it about your offering, your approach, your technology and your team that makes your company able to achieve and execute on this opportunity? “
Q3. How Much Is Your Company Valued at?“The reason why determining the valuation of your company is so difficult is, because there is no right answer. On the one hand, you need to be realistic, but on the other hand, you do not want to under-value your company, as the VC may think something is wrong. The best way to handle this question, and most others that arise when negotiating with a VC, is to do all you can to have several VCs interested in your company. Like in most negotiations, if you have several interested parties, they may bid against each other, which will allow you to obtain the best terms for you and your company.”
Q4. What’s Your Customer Acquisition Cost?“The best way to tackle this question is to show reasonable estimates for customer acquisition, using well-researched numbers & reasonable conversion rates. If you can’t explain how you are going to acquire customers for less than what you sell them on average, at a fundamental level, you have failed to explain your business.”
(Questions 5-10 continued in Premium Content)