By Fernando Berrocal

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An important task regarding the future success of your organization is to ask relevant questions to your potential investors. In this post, we will outline relevant questions to ask your investors to ensure they align with your vision and will benefit the development of your new business.

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You should use these queries to decide if an investor will meet your demands. Before launching your business, it's crucial to know what inquiries investors should make. Once you're in a contact with a Venture Capitalist (VC) or selling them a share, you should ask them the following questions:

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• What else do they invest in? Ask prospective investors whether they have any incentive to invest in a particular sector or geographic region. This enables you to ascertain whether your business is a good fit for them and if they are capable or willing to provide counsel on your efforts. It's crucial to determine what benefits they may provide (other than money). Inquire them about the VC´s history of successful investments and the achievements of other businesses previously supported. The investor should also be questioned about their most gratifying investments. Finally, ask them about the fund's influence on the business's success. Request references and have a conversation with the executives of the business that the VC invested in.

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• How do you decide which investments to make?  Investors have access to a variety of investing strategies. After only one meeting, investors may already have a decision. Ask about the investor's procedures and remember that your time is worth more than just listening, a no can sometimes be preferable to a yes. For founders, fundraising may be a full-time job. You may have to prepare for the investing process by first understanding it.

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• What did you most recently invest in? Seed-stage investor´ VCs must make regular investments. It's possible for investors who haven't invested in the past few months to have lost money or wasted their time. Even if they lack the resources, many VCs will nonetheless show up to the meetings.

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• How do you pick the most profitable investments? You have to decide on the right investor. Find out what measures they employ while making investments. This will assist you in better understanding how they operate and assist you in deciding which areas to concentrate on when obtaining funding. It's crucial to find out the size of the VC as well as their regular yearly investment. It's possible that their funds were allocated to other initiatives.

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• What are your terms? It's critical to understand what your business is worth to investors. The investment terms are even more crucial. A knowledgeable lawyer can guide you through the procedure and explain the ideal investment terms. Investors choose to carry out all transactions under a certain set of terms. If the words are in line with industry standards, a lawyer can assist you in determining this. Unfair or outrageous terms that make it impossible to collaborate may repel investors.

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• How much equity do you usually take? Investors can invest their funds in a variety of ways. Some investors make investments between $25K and $100K on a business, while others make payments up to $250K. Before you squander your time or the time of an investor, find out the typical investment size.

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• How is your fund doing right now? It's critical to determine whether or not the investor has the capital to invest effectively in you. It's also important to determine both the status of the fund and the quantity of liquid capital that the investor possesses. Investors that lack the capital to support your venture will be unable to assist you. It is crucial to verify the fund's accessibility and whether there are enough resources for new contributions. Finally, it's critical to identify the assets investors contribute to your business in addition to financial assistance.

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• How does my business fit in your portfolio? The simplest question to check before the meeting. It could come as a shock to you that there isn't a comparable business in their portfolio. If this occurs, be prepared to meet right away. If there are businesses equivalent to yours, you may have competitive disputes. Typically, you want to locate the portfolio that best aligns with your business model. Where you share characteristics with other firms but don't have any direct rivals.

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• What happens after you have invested? Investors vary in their level of involvement. While some will, others won't disclose contacts in their network. Every investor is different, that's why you must have a thorough understanding of the kind of relationship you are joining. Remember that your investors will be your long-term partner, so making sure investors comprehend your business concept is very important to startups. It's critical to evaluate potential investors to make sure they align with your objectives.

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• How can you help us advance to the next round? Some investors make investments in many different businesses. This is the reason it is crucial to ask this question, especially if the business has only recently incorporated. It's not necessary to make a "Seed Investment" with a single check. Smaller investors might not be capable of investing second checks or may just be unwilling to do so. It could be challenging to raise further seed funding as a result. By making sure you have all the financial information for the next financing rounds, you may prevent finding yourself in a difficult economic scenario.

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Ready to bring your startup to the next level? Apply to MassLight’s next batch. MassLight supplies capital and a dedicated tech team. We take equity in return. Have questions? Refer to our FAQ page.

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