Top 10 Questions to Ask Investors

1. What sets you apart from other investors?

It is not uncommon for startups and new businesses to fail, and who you partner with ultimately makes or breaks your business as it grows. To make sure that your company has a chance for success, seek out investors with a special skill and/or network that can be used to support your brand in addition to the funds. As an example, a consumer goods company from the beauty industry will benefit more from working with an experienced investor with knowledge and connections in the beauty space rather than one with a software industry background.

2. What was your best investment, and why?

By asking this question, you get a better sense of the motivations of the investor. Are they just looking to make a profit, or are they genuinely interested in the company and willing to become part of the team to change the business for the better? It is crucial to learn more about the investors journey and what they are looking for in a company before making an investment decision.

3. How do you go about making investment decisions?

This is an important question to ask that will allow you to find out how investment decisions are being made. Does the investor have discretion over investments, or do they act as a fund manager that needs approval from investors that need to be convinced that your company is worth investing in? Having less decision-makers involved in running your business will also greatly affect how you’ll be able to run your business in the future.

4. Would you be able to lead a financing round?

You want to find an investor that has experience leading a financing round to ensure that your fundraising goals can be achieved. The investor will act as the lead investor and will be highly involved in the round. They will also have a significant amount of responsibility throughout the capital raise process, being particularly active when negotiating the round.

5. What is the current state of your fund?

This is one of the most important questions to ask potential investors, as it will help you understand the size of the fund. By asking this question, you will get a better understanding if the fund is large enough to make sizable investments and how much liquid capital is available. This is especially important if you are anticipating that additional investments may be needed in the future.

6. What is the most important lesson you’ve learned as an investor?

It is crucial to learn more about the investors journey and what they are looking for in a company before making an investment decision. Understanding more about how the investor has turned a negative situation into a positive one will allow you to understand how they’ll act when things get tough.

7. What are your expectations for us?

Issues often arise when expectations are unclear, and asking this question will help clarify what the investor expects from you as well as the expectations that you have for the partnership. This will avoid future conflicts and sets the foundation for a good working relationship.

8. What if we fail?

There's always risk involved when it comes to investing. This question enables you to get a sense of how convinced the investor is that their investment into your company will be a success. If they seem to get too nervous when asked what will happen if the company fails, they are most likely very nervous about the investment and may not be ready to make a decision. By knowing this early on, you might be able to put your time and energy into meeting with another investor that might be a better fit for your business.

9. What is your vision for this investment and how hands-on do you get with your clients?

Some investors are more hands on than others and will want to have a seat on the board. If this is the case with your investor, you’ll want to figure out if you can have a good working relationship with them. If the investor wants to be on the board, ask them about their prior experience with companies from your industry that they can bring to the boardroom.

10. Would you be willing to share contact information for three founders you’ve already invested in?

Just like interviewing candidates for a new role within your company, asking for references can help you get insight into working relationships with the investor from fellow founders and how their partnership evolved over time.

Hard times often reveal real friends. Getting along is easy when things are going well, but you want to understand how the investor will behave and support your company when times are tough.

By asking the right questions, you can get a better understanding of how the investor thinks, acts and if it is a good founder-investor fit.