Venture capitalists have a hard job. The good ones have to pick a small number of investments from a large pool of opportunities, often with minimal "data".
If I were a VC, I'd look at a lot of the things that VCs look at today and ask some of the same questions. What's the market opportunity? Who's on the team? What do you think your sustainable competitive advantage is, or will be?
In addition to some of these common questions, I'd also ask some uncommon ones. I think it's these uncommon questions that often reveal the heart and soul of a startup. If I were investing my own money (which I do on occasion), the answers to these uncommon questions would be as important to me as some of the common ones.
Uncommon Questions For A Startup
1. What is the longest debate the team has had in the last 30 days? How long did it last? What did you decide? How did you decide it?
Motivation: Any great startup team is going to have a set of issues/questions at any given time to which the answer is not obvious. How a team goes about identifying the tradeoffs and getting to an answer (even if it's not the right one) is revealing.
2. If your equity/salary was based completely on the accuracy of your projections, what would your forecast be?
Motivation: Drawing the classic "hockey stick curve" (for users, traffic, revenue, profits, whatever) is just too easy and doesn't tell me anything. I'd like to know what the startup really thinks it's going to do. Yes, all forecasts are guesses, but some guesses are more practical than others.
3. What's the biggest surprise you've had in the business recently?
Motivation: There should always be surprises. Startups should be experimenting and trying new things constantly. Especially in the early days when lessons are the cheapest. No startup has it "all figured out" (and those that do, aren't experimenting enough).
4. If you knew with 100% certainty that you weren't going to be able to raise (more) funding, what would you do?
Motivation: Sure, it's good for startup teams to think about how to break beyond current limits to build phenomenal companies. But, great entrepreneurs also work well within constraints that are unavoidable. The mother of all constraints is a fundamental scarcity of resources -- like cash.
5. If you could pick only one non-financial metric to measure the success of the business, what would it be?
Motivation: Revenues and profits are a great, fundamental way to measure a business. But, looking at non-financial metrics can often be very revealing. Shows what people care about.
6. If you could fix magically fix one, specific problem with the business today what would it be? What would the likely impact be?
Motivation: All startups have problems. It's interesting to know what problems a startup has and how fixing it might create another, non-linear improvement in the business.
7. What will you do to find and retain the best people possible for the company? What do you
Motivation: More than anything else, the quality of the early team will likely influence the outcome. I'd like to know what uncommon things are going to be done to draw in the uncommon talent.
If you were a venture capitalist and investing in startups, what uncommon questions would you ask? If you've raised capital before, what's the best question you've been asked by a VC?
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