When you are ready to raise money to begin or expand operations for your startup, you cannot just ask and wait for money to pour in. Today’s investors are savvier than ever. They need to understand the value you create, for investors and for the market your company will serve. You need to understand your business model thoroughly, but you should also prepare concise answers to the questions any smart investor will ask.
1. What Market Do You Serve?
If you do not have a target market, you are not ready to do business. By the time you begin fundraising, you must know who you will serve. This means you should be able to identify your potential customers by their demographics and by their needs. In a few sentences, be ready to tell investors where their pain points lie.
2. How Do You Solve the Problem?
It does no good to anyone if you can identify problems but cannot solve them. Your customers have a need, and you must demonstrate how you can fill that need. Competitors likely exist, so you must show where existing market remedies fall short and how you exceed what currently exists.
3. Why Is the Time Right?
Needs do not exist in a vacuum. You must be ready to answer why your customers need a solution now, rather than last year or next year. If the pain point has existed for a long time, have your customers found acceptable workarounds? If it is new, why is it urgent? Concise answers show that you provide value critical to the market.
4. What Is Your Pricing Model?
You should know that economic forces will change your pricing over time. Still, put thought into what you will charge for your product or service, both to earn business and earn a profit from your labor.
5. How Will You Use the Money?
This may seem obvious, but you should have a plan for the money you seek. Know what you will purchase and why, and how the funds will allow you to reach your next milestone. If you can answer this, investors are more likely to see their own growth opportunity.
Investors want to understand how you will put their money to work and deliver what your customers need. Showing what and how you deliver, and how investment will help you do so, gives them a reason to help you succeed.