Following on from my recent post regarding Venture Capital investors, I thought it might be helpful to put the boot on the other foot. Before you go to speak to venture capitalists, the Six Minute Strategist has prepared a little check list of 36 questions to ask YOURSELF about YOUR business.
This list is not exhaustive but will hopefully put you in their shoes and get you thinking the way they do (yes, thinking is the right word here!).
I don’t want to depress you at this stage but let me explain the odds here. It is not unusual for a VC firm to review between 500 and 1,000 business plans in a year.
The same firm will probably make no more than 5 to 10 investments in the same period. Hey! the odds are way better than buying a lottery ticket (not a bootstrapping strategy I would recommend) but you really need to work hard to make yourself standout to get to that top 1%.
As ever, using the Six Minute Strategist Magic Hexagon structure, I have prepared SIX groups of SIX questions for you to discuss with your management team. If you come up with more questions I would really like it if you could share it with me and my other reader – we will do the same for you!
The Six Catagories are:
1. Situation Report
4. Cash Flow
5. Business Plan
Here are the questions – don’t forget you are now sitting on the other side of the table.
This addresses the current position of the business.
1. How much money do we have?
2. Do we have revenues?
3. Do we have unique intellectual Property?
4. What milestones/value inflection points have we achieved?
5. What is our cash burn rate?
6. How many more months money do we have left?
Venture Capitalists invest, above all, in Management Teams. This component is critical.
7. How strong is my management team?
8. What expertise do we not have in our team?
9. How much of the equity is held by management and employees?
10. How much cash has the management team invested in our business?
11. Have management led a successful start up before?
12. Can you provide references for the management team?
New investors coming in will want to know the background and history to your existing shareholders so that they can judge their relative position accordingly.
13. What does our existing capitalisation table look like?
14. What is the pre-money valuation this time? What has changed?
15. What is the position of our exisiting investors regarding this funding round?
16. How many other institutional investors are we speaking to this round?
17. How many more funding rounds do you think you will need?
18. How much do you think we will need to raise in total in the future?
Cash is the lifeblood of an early stage business – you should know your cash position on a daily basis. If you run out of cash, either the business will die or the rescuing investors will make you pay a VERY heavily penalty for saving the business with new cash.
19. Do we carefully watch cash flow?
20. Specifically what do we need the money for?
21. What value milestones will this take us to?
22. Would a greater amount of cash now enable us to get to market faster?
23. When will we reach breakeven/cash positive?
24. Do we have a contingency amount? How much is it?
You must have a detailed business plan prepared. This will take a considerable amount of time to put together but don’t skimp here.
25. Do we have a detailed business plan?
26. Do we have a detailed 5 year monthly P&L Account, Balance Sheet and Cash flow model
27. What are the key underlying assumptions?
28. What is the key unique selling point of our business?
29. What is our monetisation model?
30. What is our exit strategy
You must be able to communicate the key business messages to investors. This will need to be done formally and informally and everyone will need to be on message.
31. Do we have a management presentation?
32. Do we have an elevator speech?
33. What is the USP about our business?
34. Have we rehearsed the management team presentation?
35. What can we do to help investors to say yes?
36. Why might investors say no?
Well! Ready to go now. Great.
Are You Ready to Master Startup Fund Raising and Pitching?
You will benefit from:
- A STARTUP BUSINESS PLAN TEMPLATE
- A STARTUP FUNDRAISING FINANCIAL PLAN TEMPLATE
- A DETAILED STARTUP CHECKLIST FOR INVESTOR READINESS
You Will Learn…
- How to Communicate The Startup Founder Vision
- How to Prepare a Startup Capital Business Plan
- How to Prepare a Startup Fundraising Financial Plan
- What is important in Startup Pitching
- The Detailed Art of Startup Pitching to Investors
- What is Important to Investors who invest in Startup Capital
You will also also get a PDF SlideDeck Notes for Every Lecture!
Startup Founder – Share with your whole Startup Team and you can then teach them!