The 5 questions you need to answer to raise money!
I attended a meeting of the local Angel investor group that I am a part of here in Louisville. They are a great bunch of people. There was a ton of money in the room. Three hopefuls entered to tell their story and get backing. Only one of the three companies answered the magic five questions and not surprisingly it was the company that got the most buzz afterward. So what are the “magic” five questions? Well here you go:
- Who are you? – What an investor wants to know is the management team’s background and do I as an investor believe that the team has integrity, knowledge, and experience.
- How much money do you need and what will you spend it on? – This is vital this helps frame the risk of the investment. It also allows the investor to see your plans for their money. One group that presented had not worked through how they were going to spend the money they were hoping the raise. That begged the question so how do you know you need the money?
- How and when do I (the investor) get my money back? - This is crucial. I am not giving you money, I am investing and I have to know what the expectation should be to get a return and when.
- What do I have to believe to feel good about this investment? = What are the key assumptions that I must agree with in order for this to be a good investment.
- Why should I believe that the management team can deliver on the key assumptions? – This is the absolute must answer question. If you the management team can convince me that your team can deliver on the key assumptions then I will invest.
These are the five simple questions that 90% of the companies pitching don’t answer. If you want to look and sound sharp – answer these five questions and you will get your money.