Tuff Questions VCs ask

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

Q5. When are you Paying Me Back?
“There are many entrepreneurs with amazing ideas. Ideas are a dime a dozen, but “execution” is everything. Every investor will ask you when and how he will recoup his investment. What experience do you have? What is your track record? Before going into a meeting with a VC, make sure to tell him about your experience, your track record and, most importantly, how you will recoup his money. Lots of people pitch the idea before the finances. Pitch the finances and how the VC will make money; if he asks you a question, then you got him to bite — now it’s all about your elevator pitch.”

Q6. Why won’t a Huge Corporation build Something like this?
“VCs will ask, “Why won’t a huge corporation build something like this and use their existing customer base & capital to capture market share?” The best way to defend against this is to have technology & intellectual capital that the company will want to acquire, rather than destroy. “

Q7. Why Hasn’t this Worked Before?
“Zaarly raised $14.1 million in a Series A in fall of 2011. But it was a question earlier that spring from Marc Andreessen in our pitch meeting that gave our founding team the most pause, “Why do you think this hasn’t worked in the past?” We didn’t have a great answer — more of a hunch really that mobile technology didn’t exist to allow distribution of information in real time previously. But the question forced us to examine our predecessors who had tried and failed to learn what landmines to avoid. Our lesson: Know your landscape and learn from prior failures and success. “

Q8. How do you define Success for Yourself & your Company?
“VCs want to invest in founders who are dedicated to “hitting a home run.” If you’re satisfied with building a small company, that’s a big red flag for VCs. As we’ve all heard, a number of founders have said yes to exits their VCs wanted them to say no to. Other founders have taken the middle ground by cashing out some of their shares to secure their personal finances, and then continued to go big. Either way, VCs want to invest in founders who are focused on a disruptive, game-changing product/idea. This is a vital point to keep in mind as you consider whether funding is right for you.”

[ Do you know your Competitors? What Is Your Plan To Grow? Why Haven’t You Gotten Traction? Do you prefer Debt or Equity? ]