Do you know the top 13 questions you should ask an investor before accepting a check? What many entrepreneurs forget is that meeting with the investor should be a two-way street: it’s an opportunity to interview the investor and get insights into their process as well.
When getting ready for a meeting with investors, most entrepreneurs likely focus on how they are going to present themselves and their company—getting the business plan ready, making sure financial documents are available, practicing the key details of a pitch deck.
Every entrepreneur will be tempted to take the first check that is offered, but capital comes at a cost—you’re giving up a piece of your company to me or another investor, so you’re in it with us for the long run. You better believe that we investors do our due diligence and dig into your background before offering an investment, and you should do just as much digging to understand what baggage comes with the investment.
In addition to gathering essential information, having a list of questions to ask investors will say a lot about you to the investor as well. By having the important conversations, both you and the investor will be able to understand whether your business styles match and if it will be a good partnership for the long run.
Table of Contents
13 Questions to Ask Your Investor Before Taking Their Check
How These Investor Questions Will Get You Ahead
- How much do you normally invest?
- What is your top concern about our company, team, or product?
- How do you feel about our timeline so far and moving forward?
- How often do you like to meet with the founders you invest in?
- How do you see this investment playing out and how involved do you get in your investments?
- We have this issue that we’re struggling with—do you have any insights into how we can solve this?
- Will you be our lead investor?
- What will you do to help us get to the next round of funding if we need it?
- How do you expect this investment to help your portfolio?
- What if we fail?
- Why did you become an investor?
- Are you interested in investing in my company? What are the next steps?
- Do you have any references?
Before saying “yes to the check,” make sure to ask the right questions — I have the 13 questions you should ask to kick the relationship off right.
13 Questions to Ask Your Investor Before Taking Their Check
- How much do you normally invest?
- What is your top concern about our company, team, or product?
- How do you feel about our timeline so far and moving forward?
- How Often Should We Expect to Meet After Funding?
- How do you see this investment playing out?
- We have this issue that we’re struggling with—do you have any insights?
- Will you be our lead investor?
- What will you do to help us get to the next round of funding if we need it?
- How do you expect this investment to help your portfolio?
- What if we fail?
- Why did you become an investor? (there’s no right answer here)
- Are you interested in investing in my company? What are the next steps?
- Do you have any references?
Related video:
How These Investor Questions Will Get You Ahead
How much do you normally invest?
It can be a tough question to ask, but getting the financial details out in the open from the beginning is important when you’re chatting with investors. Getting an idea of what a typical check size the investor typically writes when they make an investment will help you get an idea of where this investment would fit into the bigger picture. If you’re looking to raise a million-dollar round and the investor usually writes $10K checks, you’ll know that you’ll have a lot of work to do to round up these smaller checks. Not to mention, founders often have to give up a little more equity with the first investments because these investors are taking the biggest chance, so you’ll need to make sure you’re not diluting your equity early in the game.
What is your top concern about our company, team, or product?
This question gives you an opportunity to quell any objections that the investor might have from the get-go, while also giving you an opportunity to reiterate all the positives of your proposal again. Founders may be averse to bringing up any negatives, but it’s better to get them out in the open and rebuffed before an investor can say no.
How do you feel about our timeline so far and moving forward?
Being on the same page about the timeline at every step is essential. Whether it’s the investment timeline, product launch timeline, or company growth timeline, it’s important to be clear on where you think your runway lies and find out if the investor is comfortable with the timeline. It could even be useful to look far into the future and talk about what you think the company may look like 5 or 10 years down the line and what an exit might look like so you both know that your long term expectations are aligned.
How often do you like to meet with the founders you invest in?
Communication styles could be the make or break of an investor/founder relationship. If you expect your investor to communicate regularly but they’re stretched too thin, you will not be happy with your relationship. On the other end, if you’re expecting your investor to be hands-off, but they drop by your office or expect phone and email updates regularly, you may feel like you bit off more than you can chew. You want to have the right amount of interaction for your business, and asking this question will give you an idea of what to expect.
How do you see this investment playing out and how involved do you get in your investments?
Angel investors often include a board seat in the terms, so that’s expected, but some investors are more involved than others in the day-to-day or strategy of an organization. If you’re a founder that is looking to tap the expertise of their investor, you’ll want someone who is willing and interested in being involved on a regular basis. Some founders would rather their investors be more hands-off. In addition, every investor may have a different point of view on how things play out down the line. Should the company be working toward going public? Becoming an acquisition? Asking the questions and getting insight into the investor’s expectations will assure that you’re on the same page once the time comes to move forward.
We have this issue that we’re struggling with—do you have any insights into how we can solve this?
This question is beneficial from two sides: first, you are signaling to your investor that you value their opinions, and that you’re open to suggestions and feedback. This shows investors that you are a good partner and that you will be able to work with them when the time comes.
The second benefit is that asking this question will give you a peek into the investor’s brain: you can see what their process is like, how they work, and what they can bring to the table.
Will you be our lead investor?
Every business looking for investment needs someone to lead their financing rounds, and the lead investors have the benefit of setting the pricing and terms for the round. You shouldn’t discount investors that aren’t interested in leading, but you do have to know where the investor stands and where they will fit into the bigger picture before agreeing to take their money.
What will you do to help us get to the next round of funding if we need it?
Some investors follow on and invest more money into companies, some don’t. That’s why this is an important question to ask, especially if the startup is in early stages. Seed investments aren’t often only one check, but some smaller investors don’t do second checks or have very strict criteria to earn it. This might mean you will have a hard time raising a second seed round. Make sure to gather all the financial facts of what future rounds of funding might look like so you’re not in a bad place when the time comes.
Even if the initial investors don’t follow on, they may have a network of investors that they can introduce you to that would be interested in investing in a second seed round or later-stage funding.
How do you expect this investment to help your portfolio?
Of course, every investor is interested in a return on their investment, but most investors are in it for more than that. Investors are strategic: they may be looking to expand their portfolio, offer their guidance and mentor new entrepreneurs, or bring growth to a particular industry. Understanding their motivation will help you get a picture of how you will fit together.
What if we fail?
Investing is a risk, every angel investor knows that, but asking this question could give you insights into how “in” the investor is. If the business fails, will it end the investor’s career? Are they skittish when asked this question? Angel investor Jason Lemkin says:
“Ask every VC re: next round what happens if they lose the entire check they may write If they look too nervous, find another This includes your existing investors Maybe most especially.”
He’s not wrong, if your investor is nervous about this question, they may be nervous about the investment in general and may not be ready to pull the trigger—which means you’ve spent a lot of time and energy without a return. Not every investor will be interested in investing, and you won’t want an investment from every investor. It’s better to know this early on before you invest too much time on something that’s not worth it.
Why did you become an investor?
This is a great question to ask investors because it gives you insight into their motivation and what drives their investments. , More so, it tells the investor that you’re interested in more than just their money. There’s no “right” answer that the investor can give here, it’s just about getting to know the person you might be getting into a relationship with, and about showing them that you respect them and value them outside of their check. Dive into what got them started in investing and find out which of their investments get them the most excited because that will tell you if your business aligns with their passions.
Are you interested in investing in my company? What are the next steps?
If you want to close the deal, don’t leave your meeting with the investor without making the ask. Be direct and ask whether they will invest in your business so you know where you stand and what you need. Even if you don’t get a direct answer at the moment, you will get some idea of the investor’s interest and likely steps on what to do next.
Do you have any references?
Meeting with your investor should be like a job interview, and the best way to understand the realities of how an investor works is by talking to people who have worked with them before. Ask the investor about the investments they felt were most successful and least successful and what they feel contributed to that. Then ask if they’d be willing to connect you with another founder they’ve worked with, it’s a great way to get insights into what the process will look like.
Conclusion
Here’s what I want to leave you with ” Ask Your Investor Questions Like Your Business Depends on It—Because It Does”
A few things to remember when meeting with your investor:
- Having a list of questions to ask your investor doesn’t make you look weak—in fact, it’s quite the opposite: the right questions can make you look sharp and prepared, and asking them makes you look like you deeply care about the outcomes of your business relationships.
- You shouldn’t depend on their money. Taking their check is your choice, and you should be smart about making that choice if you don’t think your partnership would be a good fit.
- Investors do their due diligence and dig deep before choosing to invest—you should do the same.
Asking questions at a meeting with your investors will set you up for a favorable negotiation in the future. More so, meeting with an investor shouldn’t just be about impressing them, it should be about diving in and learning about them so you have all the information you need to make the best decision for your business. Investors and founders are partners, and it’s essential that you know what you’re getting into when getting into a relationship with your investor. The decision to take a check from an investor is a huge one: you’re trusting them with a piece of your business, and your success will depend on that relationship being successful.
If you’re looking for more tips on how to build great relationships with your investors, get great tips and insights from my blog including articles like the latest one: How to Write the Perfect One Pager Investment Teaser.
About the Author
Jonathan Hung is one of the most active angel investors in Southern California, his mission is to drive value creation within each portfolio company. In support of this mission, he serves as Co-Managing Partner at – Unicorn Venture Partners.
Jonathan and his team target investments in US companies that have global market potential with a focus on long-term growth expansion to East Asian markets.
Jonathan developed his investing prowess as a Managing Member for his family office fund, J Heart Ventures, which made investments in start-up companies such as Gyft, ChowNow, Miso Robotics, Clover Health, Bitmain, to name a few startups he funded.
Jonathan has various degrees from the University of Southern California, London School of Economics, Massachusetts Institute of Technology, and The Wharton School at the University of Pennsylvania.
Very well articulated Jonathan.
Thanks so much Debasis, I’m glad you found it informative.