Last week, I mentioned in a blog post that evaluating a potential venture capitalist is not unlike sizing up an employer during a job interview.
And during any job interview, you’re also expected to ask serious questions about the position and the company in addition to fielding questions about your own qualifications and potential.
But when push comes to shove, what kinds of questions are appropriate to ask an investor? Here are four questions to get you started.
What are your expectations for a return on your investment?
Managing expectations is a big deal when it comes to your clients, customers, employees, and partners, and investors are no exception. Find out what kind of a return the VC is looking for and how that plays into your long-term goals.
Do you have the time to make a serious impact on our company?
If the investor you’re courting sits on 17 boards and advises another dozen companies, he or she probably won’t be able to come up with enough time to devote to the investment the firm makes in you.
Do you have the contacts we’d need to pursue another round of financing?
If your company is going to continue its success, you’ll likely need another cash infusion down the road. Seed-stage and Series-A-round investors know this. How will they react if you opt for a different firm to lead a subsequent round?
What are your team’s areas of expertise?
You’re looking for more in a VC firm than capital – or, that is, you’re looking for kinds of capital beyond the initial monetary investment. You’re after their reputation capital and their experience in the industry. So what else do they bring to the table? Do they have particular expertise or connections in the world of marketing for startups? Are they experienced in scaling companies on a national stage?
Most importantly, do your research on the firm up front; you shouldn’t be asking questions that a two-minute Google search would answer. And don’t hesitate to talk to leaders at companies the firm has already invested in. It’s a great way to get a clear picture of what the firm will be like to work with.
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Brad is the founder and CEO of BodyShopBids, which provides free online estimates for auto body repair. BodyShopBids launched in June 2011 in Chicago.
