Thinking About Investor Funding? Ask These 10 Questions First

Angel investors, venture capital firms, strategic investors and equity crowdfunding investors offer money and connections. Some may also expect faster business growth, more involvement or a larger ownership stake in the company.

When someone invests in your business, they usually expect ownership, input, information and a return on their investment. Before you start pitching, know what you need, what you’re offering and how much control you’re willing to share.

Ask yourself these 10 questions first:

1. How much money do I need?

Don’t walk into an investor conversation with a vague number. Know the amount and what it covers.

2. What will this money pay for?

Know exactly where the money will go, whether that’s hiring, inventory, equipment, marketing, product development or expansion. Investors will ask.

3. Do I have proof that people want what I’m selling?

Revenue, users, repeat customers, pilots, deposits and early sales all help support your case.

4. Can I explain how the business makes money?

If you can’t explain the revenue model in plain English, practice your elevator pitch before approaching investors.

5. Which type of investor fits this business?

Angel investors, venture capital firms, strategic investors and equity crowdfunding investors back different kinds of companies. Know your lane and best options.

6. Am I willing to give up ownership?

Equity funding means someone else owns part of the company, so know how much of the business you’re willing to sell.

7. How much input will the investor expect?

Some investors want updates, while others want a board seat, veto power or a say in major decisions.

8. Could this limit future deals?

Investors may ask for exclusivity or limits on future partnerships, so read the terms before you agree to anything.

9. Do I know what kind of investor to avoid?

A good investor should fit the business you’re building, not just the bank account you’re trying to fill.

10. What happens if the business changes direction?

The best businesses are rarely stagnant. Before you take investor money, know how much flexibility you’ll have if your product, pricing, market or growth plans evolve over time.

Bottom line: Outside investors don’t just write checks. They buy a piece of your business and everything that comes with it. Know your number, your terms and how much control you’re willing to give up before you walk into that meeting.

From The Business Money Blueprint: How to Fund Your Business From Self-Funding to Investor Capital