The top questions investors ask early-stage startups

One of the most nerve-wracking aspects of pitching for investment is facing investor follow-up questions. Luckily, we’re here to help you prepare.

After you’ve given your startup pitch, investors will spend anywhere from five minutes to an hour asking questions to learn more about your business. These questions tend to cover a wide range of areas, including financials, traction, market opportunity and team experience.

It can be difficult to predict what questions you will be asked, which makes it tough to rehearse answers before your pitch. As a result, many founders find themselves taken off guard or rambling during this question stage.

We hosted seven national pitching events for The Pitch last year. At each event, early-stage startups pitched to a panel of investors and then faced five minutes of questions about their business.

The judging panels featured over a dozen investors, including:

Darren Westlake, co-founder of Crowdcube
Tom March, founder of Redrice Ventures
Ezechi Britton MBE, founding member of Impact X Capital

In this article, we’ve included the top questions from investors, grouped by topic. At the end, you’ll find the five most common questions – the ones that investors asked startups time and time again.

Want the chance to pitch your startup to investors? Visit our applications page for more information.

The top questions that investors ask startups

These questions were aimed at early-stage startups that had been trading for less than three years.

Business model, product and market

What is your business model?
What is your unique selling point?
Do you need regulatory approval or any accreditation?
How is your business different from the market leader?
Have you got a working prototype?
What does your product look like at the moment?
What competitors do you have?

Customers and traction

What traction do you have so far?
Who is your target customer?
How are you finding users?
How many users do you currently have on your platform?

Finances, funding and pricing

How will you make revenue?
What is your average order value?
How did you decide on your pricing model?
What sort of margins do you make?
How quickly could your business become profitable?
What are the cost economics?

Team and experience

Who is in your core team?
Who do you need to join the team?
Why is the problem you’re solving a pain point for you personally?
What makes you the right person to be doing this?
What is your academic/industry background?

Vision and growth

What is your long-term vision?
What’s the growth potential of your business?
How could you innovate to make your product more accessible and affordable?
Is your business just for the UK or could it work overseas?
How can your business scale efficiently?
What’s the biggest bottleneck for growth?

Sales and marketing

Why the name for your business?
Who would be your perfect influencer?
How do people find out about you?
How do you get to £10 million sales in the UK?
What are you doing to acquire customers?
What one marketing trick will take your business to the next level?
What motivates commercial partners to get in touch with you?
How do you plan to keep commercial partners on board?

The five most common investor questions for startups

The five questions below were asked by investors at almost every event.

While there’s only so much information you can get into 90 seconds, many of these cover fairly fundamental parts of a business. If you haven’t already touched on them in your pitch, make sure you’ve got an answer ready for the (almost inevitable) follow-up question.

1. How do you make money?

This is a common question from investors, because most startup pitches focus heavily on the solution and value they provide for customers. This isn’t a bad thing, but be prepared to answer plenty of follow-up questions about your business model, margins and profitability.

2. What do you need that you don’t have?

Asking this question not only pushes founders to reflect on their areas of weakness, but it gives investors insight into what is holding a business back.

Investors aren’t solely there to provide funding – angel investors can also offer mentoring and contacts to help startups grow. They may be able to help your startup in ways you hadn’t considered, whether it’s securing access to specialist equipment or providing an introduction to the right contact.

3. What’s the point of difference – why can’t anyone just do this?

As writer Mark Twain famously wrote: “There is no such thing as a new idea. It is impossible. We simply take a lot of old ideas and put them into a sort of mental kaleidoscope.”

This rings true for startups, unfortunately. Even if you think you’ve got a new idea, the likelihood is that someone else in the country has had exactly the same idea.

Investors know that, which is why they want to ensure they’re putting their money into a defensible proposition. If your business has a clear point of difference, it doesn’t matter if someone else has had the same idea – they can’t do exactly what you’re doing.

Your point of difference could be:

A patented product design
Specialist skills and experience on your team
Leading advisors or investors backing your business
A strong community and brand loyalty

4. How much are you raising and what would you like to do with it?

This point should be addressed in the closing 10 seconds of your pitch, where you outline your ask. Be specific – investors want to know that you’ve carefully considered how much money to raise and that there are clear steps for how and when it will be spent. For example:

“We’re raising £250,000 to finish developing our app and bring marketing expertise onto the team, with a view to launching in Q2 of next year.”

5. Tell me like I’m stupid – what is it you do?

The main point of your pitch is for investors to understand what your startup does. If you hear this question, it’s likely for one of the following reasons:

The pitch jumped too quickly into the detail, without clearly outlining the basics
There was too much jargon in your pitch (remove the word “holistic”)
The presentation was too fast or mumbled and they couldn’t hear parts of it
The pitch had a confusing structure that made it hard to follow

If you find yourself in this situation, head back to the drawing board and follow our short guide to writing an effective elevator pitch.

Once you’ve got a new draft, pitch to five or six different people who know nothing about your business or industry. Get them to tell you what your business does and provide any other advice on presentation or pitch content.

It goes without saying, but avoid close friends and family who will only tell you what you want to hear. Good luck!

The Pitch is a nationwide competition that provides the stage for startups looking to raise investment. The top startups get the chance to attend one of our free pitching workshops and pitch their business to a panel of leading investors and entrepreneurs. Visit our application page to find out more.