At a presentation, often investors fail to take the opportunity to talk to or grill the founders standing right in front of them. Looking founders in the eye and asking them tough questions about their business, listening to their passion, evaluating their knowledge and expertise, and seeing them operate under pressure are all things that are done best in person. Far too many investors barely engaged with the founders. Instead, they walked up, asked the founder to email them a “deck”, the slide presentation every Start-up has to help attract investments, and move on. But evaluating start-ups is an art and a science. You can’t get all the information you need from a deck. So, if you get the opportunity to talk to founders and ask them some questions, you should take advantage of it. As investors, your job is to gather information and challenge the founders to defend their vision and plan. How founders respond to your questions will reveal a lot about how well they know their product, their company, their market and their path to success.
Here’s what investors should try to do when they talk to founders:
Challenging the Vision
1. Dig deeper into the founder’s background and skill set. In many ways, this is an extended job interview. It’s your chance to see if the founder is capable of leading a start-up to success. Ask about the founder’s team too. This is information you can’t get from a deck.
2. Question the problem they’re trying to address. How big is the problem they’re trying to solve? Is it worth solving?
3. Question the solution. Do they really solve the problem? Have they solved the problem in a way the market will respond to?
4. Dig deeper into their monetization path. Will customers really pay for their solution? Have founders maximized the monetization potential of their product?
5. Push back on claims of traction. Are these just letters of intent, or are they real customers/partnerships?
6. Understand how the technology or product works. If something doesn’t make sense, ask. Depending on the sector, understanding how the product works is critical to evaluating its potential for success.
7. Push for details on how they’re going to spend the money they’re raising. Good founders have spent countless hours thinking about this. If they can’t answer beyond generalities, that’s a bad sign.
8. Ask the founders to address what you see as potential weaknesses. How they respond will go a long way toward determining whether their company’s worth investing in.
9. Ask for their deck. It should provide some of the hard information and details you need to help making your decision.
As for investors, just because you’ve been investing in or working in a sector for years doesn’t mean you have everything figured out. Remember, everything can be disrupted. Many of the best investment opportunities are disruption plays. And if your mind isn’t open to new ways of thinking and solutions, you’re going to miss out on truly great investment opportunities.
Sven Franssen