Entrepreneurs Corner: 10 Questions VCs Will Ask and What They Mean

(This article is part of a series by our resident SocialTimes entrepreneur, Ellie Cachette. Cachette is the founder of ConsumerBell and also writes on topics covering Consumer Web. For more articles by Ellie, click here )

VC’s are easy to spot: usually at some tech event, sometimes they will wear a black REI vest to “blend in” or other times even rocking jeans but you can find them. Back in a corner wearing a Facconable shirt, there is usually a pretty belt and slacks to match. Shoes are a big give away too: are they shiny, leather, or very unique? Yet despite all the exterior indicators the biggest way to spot VCs are by the questions they ask. Often you can also gauge how mature your own start-up is by the questions being delivered. If you are getting questions about global growth and retention you are most likely past a Seed phase where you have a working prototype and customer base. If questions center around your idea, you most likely haven’t launched a working product or prototype that really explains the solution or entices users. As soon as VCs start asking your company valuation, run. They know how much you are worth and odds are if you are the founder, you don’t understand how valuable your concept really is. In the meantime picking up on the hidden meanings of questions can be vital to understanding your own pitch.

Here’s 10 questions you might get as a founder and what they mean:

1. Where did you get your idea?

Translation: if your simple idea is so great, why hasn’t anyone else done it?

Most people think this question is for deeper insight into a founders thought process but actually it is a measure of how replicable your idea is. If you thought of this idea while eating Nachos, odds are someone else has too.

2. Are you funded?

Translation: does anyone believe in you?

Even if its $10k from your grandma or a termsheet from a Seed fund, what is really being asked here is if you can rally others and sell them on your idea. Selling is more than half the battle with founding and growing an idea. Can you convince others?

3. What is your monetization strategy?

Translation: great idea but can it make money?

Great ideas happen all the time but does that make it a business? If you are getting asked this question the VC or investor is probably clueless and unimaginative. Most people do not quit their day jobs to not make a living and many successful companies went years without revenue to build big and profitable products.

4. How big is the market?

Translation: okay you can make money, but how much?

This question is interesting because many start-up create markets or exploit a gap between two industries. Unless your idea is to make waterbeds for disabled hamsters in one particular region of Costa Rica, your idea is more likely than not to be common and applicable on a broad scale.

5. How do you ___________ to ensure ___________?

Translation: there are risks involved, have you thought of them?

Of course you have thought of every risk possible including your website getting hacked to a natural disaster affecting servers. You have Google alerts for all your competitors and lie awake at night in bed contemplating doom. Either the VC underestimated your conviction or they are trying to get some of your secret sauce or intellectual property. The less you say the better.

6. Have you heard of __________?

Translation: your idea isn’t unique, I know of a competitor that you don’t.

Usually though the company mentioned is not a competitor and once you explain that, the questioner will start to understand what you really do. What’s good about this question is it gets you thinking outside of the box and you might get a few intros because the VC is flexing their network knowledge hence name-dropping.

7. How big is your team?

Translation: how much money are you spending and could I replicate your team quickly?

This is a trick question. If you say too small then your product might get less credit, if you say a larger number you are not running “lean” or cost-effective and if you are a true start-up you have contractors in every which corner of the world ready to work at any time, so your resources are optimal. Find a number you are comfortable with or pick the number of people that have business cards.

8. What is your exit strategy?

Translation: could we take you down as CEO?

Sometimes a company needs a seasoned leader or someone with more experience to take your start-up to the next level. What investors want to know is if you are open to it. Of course exits usually imply getting bought, but most acquired companies didn’t know when they launched the ultimate buyer. Are you open to having someone else run the shop?

9. Where are you from?

Translation: Sorry I grilled you for 20 minutes, tell me something personal about yourself.

Obviously any person knows where they are from, this is a good opportunity to ask questions back, figure out if the VC has family or a sport they like. This is where the real conversation builds up and generally more can come from it than a numbers rundown.

10. What did you do before?

Translation: What skillset, if any, do you have?

Launching a start-up is tough work. You have already proved your insanity and passion to pursue a dream, are you organized, connected, or can you code? There’s no magic answer for your past experiences, just pick what you want to highlight. This question is usually a filer to figure out how you ended up on the path of entrepreneurship.

Related Stories
Mediabistro Course

Podcasting

PodcastingLearn to develop, create, and launch your own podcast! Starting October 23, Steve Belaner, the host of the weekly podcast The Gamut, will teach you how to determine the goals of your podcast, perfect your concept, contact and book guests, market your podcast,  and get your show up and running in just a few weeks. Register now!