Top 10 Questions to ask Entrepreneurs

During an interview with a Venture Capital firm, you may be asked "Imagine you are a VC investor. What kind of questions would you ask an entrepreneur that has come to present his business to you?". Or again, if you have started a business yourself, what kind of questions should you expect from a VC investor. Here is our compilation of the most likely questions you will face:

1. What is the potential total market size for your product today? and what is its growth rate?

This is one of the most important question you will face. If the market is too small (let's say, below $1bn), or if its not growing much, then it might not be worth investing in it. Also, this question checks whether the entrepreneur has a good understanding of its market.

A follow on question will be: how did you calculate this?

2. What potential market share can you achieve?

This goes hand in hand with the previous question, and gives you an idea of the potential of the company, and also test whether the assumptions are realistic.

Again, follow on questions: how did you estimate this?

3. Why will people buy your product? (and not something else?)

What will make people buy this product? What need does it address? What will people buy your product instead of buying something else from the competition or a substitute?

4. What's is your competitive advantage and why can't it be copied? ("what are the barriers to entry")

Is there a first mover advantage, do you have copyright or IP protection, special knowledge, lower cost of production, etc.

5. Why do you think your team is the best placed to deliver your business plan / forecasts?

Its important to see that each team member is critical to the business and understand what each of team can bring.
6. What risks are you facing?
This question will test the honesty of the entrepreneur, and also checks that the entrepreneurs have done their homework.
7. Who do you sell to and how to you get customers?
You need to understand who are the end users to know what drives their purchase decision. Also, distribution is another key point - you may have a great product but to grow fast you need to be able to distribute it quickly.
8. Why will customers stay or do repeat business with you?
This also ties in with the barrier to entry question, but what is also important to understand is how "sticky" customers will be. Will it be a one off sale or repeat business? Will customers go somewhere else once others start to copy your product?.
9. Have you considered any alliance / partnership?
Useful question to test the market knowledge of the entrepreneur and see what opportunities may arise.
10. What are your cashflow projections? when will you breakeven? How much investments will you need?
Every serious entrepreneur will have done some cashflow and forecast analysis and should be able to answer those questions very clearly: how many people will they need to hire, how much they need to spend on R&D, equipment, etc.
 

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