Raising money from VCs is an important step in the company building process. It marks the beginning of a long-term relationship that can last longer than a decade. In my experience investing in and advising countless founders, company building is not rainbows, unicorns and lollipops. Startups are filled with adversity, challenge and struggle. That’s why it’s critical to find the right investors who are going to support you when times are good and have your back when the shit hits the fan. It likely will at some point on your journey.
Fundraising should be viewed as a two-way dialogue. Each side should interview the other. While I understand and appreciate the desire and pressure to quickly raise and get back to work, taking enough time to really get to know your partners is a good investment of time and effort. This goes for both sides. If the VC you’re meeting with doesn’t want to spend the time or directly answer your questions, that should be a telling sign. Going into any long-term partnership with eyes wide open is just a smart strategy. Remember, all relationships are complicated. The healthiest ones are built on shared values, open communication and mutual respect. That’s why it’s worth spending the time upfront and understanding who your investors are before they write the check.
So how do you cut through the VCs sales pitch and really get to know the investors during the fundraising process? It starts with asking thoughtful and targeted questions. Be curious. Your objective throughout the process shouldn’t be to interrogate and incriminate but rather to find the right fit and long-term partner(s) for your business. Go for a walk with them. Grab a meal or a coffee. Really get to know them.
If you’re unsure what to ask or what is in bounds, you’re in luck! I’ve created a fairly exhaustive questionnaire that you can reference while you’re on the fundraising trail. Most of the questions are relevant if you’re talking to an institutional VC while some might not be if you’re talking with angels. Know your audience. I recommend doing some research and trying to answer as many as you can before the meeting so you can focus on the most important ones. You won’t have much time so choose carefully.
I hope you find this to be a useful resource before or while you’re on the fundraising trail. Remember, don’t settle or rush the process even if you have ample options. Having the right investor, who is not only a good fit but also will have your back, can be a difference maker. Godspeed!
The Juicy Ones
What makes you uncomfortable about our company? What do you like?
Who in your partnership is going to push back? What are they going to say?
How do we fit your investment thesis and / or align with your worldview?
On a scale from 1–10, how good do you feel about our company right now? Why?
Where are your blind spots with respect to our opportunity?
Can you name a time you stood up for your company in the face of opposition from your partners or other investors?
How have you / the firm handled companies that have underperformed relative to expectations? Can you share some examples?
How would your founders describe you when you weren’t in the room?
Do you engage or disengage when things get difficult?
How do you handle the pressure?
About The Fund
Can you tell me a bit more about Acme Capital and your current fund?
How many partners do you have? Are they generalists or sector-specific experts?
What is your ideal stage?
What is your average check size and do you reserve for follow-on investments?
Do you lead and take board seats?
How does your firm define a “core” investment? Would we fit into that camp?
What are your return expectations?
How large is your current fund and how many more investments do you have left to make?
How does the firm think about bridge rounds or extensions?
Do you have any category or geographic limitations?
What are the last three investments your firm closed and what got you and the partnership excited?
Who are some of your favorite and frequent co-investors?
How can the firm help us build the syndicate for our next round?
The Partner / Investor
What experience or perspectives do you have that are relevant to our company?
What’s your superpower?
What are your core values?
Why did you become an investor?
How many board are you on? How much time do you have for each company on a monthly basis?
Have you ever fired a CEO? What happened?
How long does it take for us to schedule a meeting and / or get on a call?
Do you believe in the partner or the platform?
How would your founders describe you?
What’s your style (hands-on, data-driven, etc.)
What are two or three examples of how you’ve added value to your portfolio in the last month?
Are you running point or will someone else take the baton?
Can you describe your investment process in detail?
Do you have the authority to lead investments or do you work with a partner?
How does the firm make decisions?
How will I know where I am in the process?
On average, how long does the process take from first meeting to close?
What are some lessons you’ve learned from your portfolio that you could apply to our company?
Which companies in your portfolio could we learn from?
Who in founders or operators in your portfolio would be good for us to know?
Do you have any conflicting or tangential companies?
How do you think you could help us?
What’s the firm’s philosophy and strategy on support?
How have you supported companies like ours?
Do I get you and/or the firm? Can you explain?
How do you work with your companies?