7 Uncommon Questions I'd Ask A Startup If I Were A Venture Capitalist

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7 Uncommon Questions I'd Ask A Startup If I Were A Venture Capitalist

 

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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Posted by Dharmesh Shah on Mon, Mar 24, 2008

COMMENTS

It seems more like something I would expect out of the mouth of William F. Buckley...loves to hear himself think how smart he is!

posted on Monday, March 24, 2008 at 12:05 PM by Charles Wegrzyn


Hi, great list. Along with lists like this...i have found that tidbits or learnings from other startup people have been most helpful to me in my startup life. I put together a list of 100 things that I am wondering if you would have any more?
http://blogs.jobdig.com/wwds/2007/12/10/a-complete-list-of-100-attributes-off-people-who-start-companieshow-you-can-be-one-of-americas-entrepreneurs/

posted on Monday, March 24, 2008 at 12:05 PM by gl hoffman


Here's one (a 3-part question):
"What are your three most likely scenarios for how your market segment is going to evolve? What will be your responses to each? What is your early-warning system that tells you as soon as possible which path the market is taking?"
Motivation: We all make the mistake of thinking that the external world is a constant. It's not. It's dynamic, changing in response to many things including our own actions. If a startup's strategy is static in a dynamic world, it's in a heap of trouble!
This myopia is not confined to startups. Dr. Rich Adler of Decision Path Systems (itself a startup - check outwww.decpath.com) has developed modeling software that helps an organization project the consequences of various responses to market scenarios. It's startling how many well-established organizations (that is, most of them) don't see the value of such a tool!
--Carl

posted on Monday, March 24, 2008 at 2:32 PM by Carl Strathmeyer


Regarding:
"4. If you knew with 100% certainty that you weren't going to be able to raise (more) funding, what would you do?"
I would ask the opposite question. =)

posted on Monday, March 24, 2008 at 11:38 PM by Nivi


Nivi: Fair point, but "use of proceeds" is not really an uncommon topic of discussion.

posted on Tuesday, March 25, 2008 at 12:00 AM by


I would not ask uncommon questions but I'd only listen. What I would be listening for is passion. Are these people passionate about their vision and will they deliver value to their customers. That is what I would look for in a startup.

posted on Tuesday, March 25, 2008 at 11:40 AM by TJGodel


Dharmesh,
Not use of proceeds. What would you do if you knew the next round would be no problem? And the next round after that?
What is your real vision?
Entrepreneurs often lack one or they don't tell you because they're afraid you will think they're crazy.

posted on Tuesday, March 25, 2008 at 5:16 PM by Nivi


Nivi: SOLD!
Stated that way, I'd add that question to my hypothetical list.

posted on Tuesday, March 25, 2008 at 6:50 PM by


Question: I think your company has some interesting technology that would benefit another portfolio company. Would you be interested in merging?
Motivations: First to learn how the entrepreneur defends his technology and company, and second to determine how flexible or open they are to potential exit opportunities.

posted on Monday, March 31, 2008 at 4:55 PM by Paul Steinberg


People read this blog to learn, Mr. Wegrzyn.
If you don't like what's being taught, do the rest of us a favor and just don't come to class.

posted on Thursday, April 03, 2008 at 10:44 PM by Anonymous Guest


I love the post. In fact, I just started a CONTEST for peoples crazy ideas, and put my own money in for the $1000 prize.
Check it out: http://www.rockthetaskbar.com
let me know what you think!

posted on Monday, April 07, 2008 at 5:15 PM by Andrew Kinnear


weired (=long) questions tend to turn red-lights in the entrepreneurs blowing mind,
for example: ...if someone ask me what do I do with no Money, I'll immediately suspect he will starve me, if needed.
adding the fact that no startupist likes to work with a "cheep-SOB-investor"
obviously, the rest of the conversation will certainly be influenced by that say.
remember your questions are reveling your cards

posted on Tuesday, April 22, 2008 at 10:40 AM by millo avissar


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