When meeting with a potential investor, it’s important that entrepreneurs come prepared for any questions that may arise. You’ll likely spend hours preparing your answers, but even then, tough questions may be posed that, without good answers, could damage your confidence.
Therefore, to help you avoid being surprised during a pitch, 10 Young Entrepreneur Council members each shared the toughest question they’ve ever been asked during an investor meeting and how they recommend you prepare for it.
Young Entrepreneur Council members discuss difficult investor questions.
Photos courtesy of the individual members.
1. What plans do you have in place to scale quickly?
Investors are interested in businesses that have the potential to grow quickly, but they want to know that you’re prepared for that growth. They want to know that you have a plan in place to meet growing supply demands, bring on employees, build your infrastructure and do everything else that comes with scaling a company. Keep in mind, they don’t expect you to have all the answers, and depending on the type of investor, they’ll likely work with you and have their own ideas for scaling. However, they want to know you are savvy enough to have a plan of your own in place. – Jonathan Prichard, MattressInsider.com
2. How will you measure success apart from revenue?
Often, we are so focused on the revenue aspect of the business when pitching it to investors that questions about other success factors can throw us off. The question “How will you measure success apart from revenue?” almost did that to me. I would advise new entrepreneurs to think hard about what building a successful business really means to them. Would helping to solve your target customer’s problem be enough of a success factor in itself, or do you also need to consider other aspects? Being prepared and able to sell every part of the business to investors will help you answer unexpected questions. – Benjamin Rojas, All in One SEO
3. Who are the biggest inspirations in your industry?
Your inspirations say a lot about what you believe in, what you follow and what strategies you use to grow your business. It can be tough to answer, but it’s important to think about who you look up to and how you learn about new trends happening in your niche. – Stephanie Wells, Formidable Forms
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4. Why should I care?
“Why should I care?” and its many variations is the toughest question I’ve had to answer during meetings with investors. No matter how much effort you make to research your investor audience and connect their previous efforts with your product, there will inevitably be cases where their vision completely fails to align with yours. If you’ve done your due diligence and can make a convincing case, the people who can be convinced will be; but if they still won’t come around to your point of view, your energy is better spent finding someone who will. – Bryce Welker, Testing.org
5. Why will your product outdo so many other competing products?
One of the most unnerving questions an investor can ask is, “Why will your product outdo so many other competing products?” People seeking funding don’t realize that this question is posed to test your ability to think on your feet and to gauge your understanding of the market and what your product can do. Someone new to pitching to investors may get immediately discomfited because they’re suddenly scrambling to figure out just why their product should be better than anyone else’s. When faced with such a question, be calm and do an analysis of your competitor’s offerings. Point out differences and gaps where your product fills the gap. Highlight your knowledge of your customer base and speak with confidence. You don’t have to give a perfect answer, just a reasonable one. – Blair Williams, MemberPress
6. Do you have a month-to-month growth projection?
This is one of the toughest questions I’ve been asked. On the surface, this question seems easy to answer. For example, it’s easy to say “I think we’ll be at X in two years.” However, it’s not so easy to show a multi-year projection that shows growth month to month. You have to take seasonal sales and budget into account, which is quite challenging to do. One way to prepare for a question like this is by trying to create a 24-month projection first. This helps keep the overall goal in perspective while not losing sight of the steps it will take to get there. A month-to-month projection is a very powerful way to indicate movement and trajectory to any prospective investor. – Shu Saito, Fact Retriever
7. What’s your contingency plan if you run out of cash?
Investors can ask you about your cash runway. Cash runway is the amount of time a business can remain solvent without needing more funds. If you do run out of cash eventually, what’s your contingency plan? Your answer to this question will tell investors if you have a clear idea of your finances and whether they’ll need to come up with more money in the future to finance you again. However, this question has a fairly straightforward answer. You need to look at your everyday expenses and your reserves. Divide your expenses by your reserves and you’ll know how long your business can survive. This question helps you and your investor understand what your business needs to do to become profitable in the future. – Syed Balkhi, WPBeginner
8. What are your company’s weaknesses?
This is one of the toughest and most unexpected questions. As you prepare your pitch, of course, you go over every detail of what your company has to offer, what its strengths are, what you offer that no one else does and your biggest advantages over the competition. But it’s easy to overlook one of the most thought-provoking questions of all: what your business needs to do better. No one wants to focus on shortcomings, whether individual or in business. However, knowing the answer to this question tells investors a lot. It shows that you’re open-minded, dedicated to improvement and willing to do whatever it takes for future success. – Blair Thomas, eMerchantBroker
9. How are you going to do all of that?
This is always the toughest question. The basis of a pitch is essentially demonstrating that you have the elements to be successful, you’ve done something valuable already, but mostly that you’re going to do a lot more in the future. Any good investor is going to challenge you on your assumptions and you need to be able to demonstrate how you’re going to deliver. Anything you put in your deck should be defensible and you should have a well-thought-out answer to respond to any of these objections. – Andy Karuza, Base64.ai
10. How do I know I’ll get a return on my investment?
This is the ultimate tough question from an investor. You may have statistics and marketing strategies but, in the end, it is a risk. You answer the question by taking the light off the risk and turning it into a belief in you. The right answer is that you can’t guarantee they will get a return but you are going to fight like hell to make it work so that everyone gets paid. In the end, you are going to have to sell yourself more than the investment opportunity. People will invest because they like you or they have a good feeling about you. Sure, they may like the product and they may like the presentation, but at the end of the meeting, it all boils down to whether they trust you. – Baruch Labunski, Rank Secure
