Questions Angel Investors Ask: Everything You Need to Know
The questions angel investors ask, and the answers that you provide, will determine if you will receive the investment that you need to start your company.3 min read
2. Questions Investors Will Ask
The questions angel investors ask, and the answers that you provide, will determine if you will receive the investment that you need to start your company. Generally, angel investors will want to know the plans that you have for your company, as well as how they can benefit from their investment.
Preparing to Pitch to Angel Investors
If you are an entrepreneur who is preparing to pitch your company to angel investors, you must be aware of the questions these investors may ask. Failing to prepare answers to these potential questions means you may lose out on an investment that is necessary for your company's future success.
Don't make the mistake of putting all of your hopes with one angel investor. You should meet as many investors as possible so that you can fully fund your startup. Not every investor that you meet will provide money to your startup. The more you pitch, however, the more comfortable you will be talking to investors and answering their questions, making it more likely you will receive an investment offer.
Every angel investor will have questions about your startup, and the questions that investors ask can help you develop a clearer view of your company so that you can refine your pitch. Likely, you will hear some questions over and over. Take note of these repeat questions so that you can prepare strong answers that will impress your potential investors. Giving weak answers to investors will decrease your chances of receiving an investment offer.
Questions Investors Will Ask
Angel investor meetings will include a large number of questions. Some of these are general, while others are very specific. For instance, at the beginning of your meeting, you will normally be asked what your business actually does, why the investor should be interested in your business, and why investing in your company could result in a big return.
Your first priority should be concisely describing what your business is about, which is sometimes called the elevator pitch. In a short amount of time, tell the angel investors the most important information about your business, including some of the ways you plan to achieve long-term success.
Your elevator pitch needs to cover a few crucial facts about your business:
- What makes your business unique?
- What problem was your business formed to solve?
- How large is the potential market for your business?
- Where is your business located or where do you plan to locate?
Location is a particularly important discussion point, as most angel investors will prefer to put their money into businesses located in large cities such as New York.
You should be sure that you spend time discussing the market opportunity for your business. In addition to identifying your market, tell the angel investor the market percentage you expect to capture and how long you believe this will take. You should also explain why you believe your business has a high potential for growth.
Angel investors usually want to know if you have attracted any customers or if you've contacted potential customers. Investors aren't likely to provide their money to a company that hasn't yet gained any market traction. If you're able, contact potential customers before your angel investor meeting and see if they have any interest in your company. Using these customers as a reference during your meeting can be a good way to get the investor interested in your business.
Showing that you've already attracted customers will give your investor an idea of your company's market and will also make them more comfortable giving you their money.
Most angel investors will ask you to describe your marketing strategy for your business. Answering this question may be difficult if your company is just starting, but you should give it your best show. Angel investors want to know that you have a strategy in place for attracting customers and growing your brand.
Avoid using broad terms when describing your marketing strategy. Although your main focus is likely getting your company up and running, make sure you're able to describe some specific ideas for marketing your business that will interest the angel investor. Offering a timeline for acquiring customers and describing future marketing events can be a good way to answer this investor question.
If you need help with questions angel investors ask, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.