Top Seven Questions that Investors Ask Start-ups & How to Handle Them

Source | Entrepreneur : By Suresh Rajan

A start-up pitch with investors inevitably leads to a specific set of questions. From the investor’s perspective, the objective of these questions is to determine whether this new venture fits their investment portfolio and will yield lucrative results. These questions are crucial to your pitch and will influence an investor’s decision. To ‘make the cut’ entrepreneurs must be prepared to articulate and answer the following questions.

1. What are the Benefits of Your Product and What Market Needs Does it Fulfill?

In-depth understanding of the product or service that you plan to sell is essential to your pitch with the investor. The market gap you plan to fill or the solution you provide must be clearly defined. It is essential to highlight your target audience, their needs, why a buyer would choose your product over others, and what they would pay for it.

It is important to understand your target audience’s interests, behavior, buying patterns and more. For start-ups, the process of gathering this information can take time and research, but cannot be ignored. It is ideal to create your niche while defining your target audience.

To develop your understanding of the market and audience, gather data and research, and based on your findings determine your service or product’s validity, longevity, and scope.

2. Are your Calculations Realistic?

Reflect on the market dynamics and share your start-up’s expected growth numbers for the future. For any pitch to succeed, it must present realistic calculations. Does your product/service provide an incremental value in the form of revenue and profitability? The investor will be particularly concerned with your business’s longevity and sustainability. Investors usually look for proposals with high returns and a clear exit strategy.

3. What Differentiates your Product?

Spend time explaining your unique selling proposition (USP): product quality, features, positioning and of course the team’s core strengths and achievements. Highlight key differentiators that set your product/service apart from what is already available in the market. The start-up should lay down its plan for scaling-up with timelines that indicate their growth strategy.

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