[Fundraising for Startups] Lesson 18: What should you ask for in an investor meeting?

You know, we've spent all this time preparing you for all the things an investor is going to ask you... but we haven't talked about what you should be asking of the investor.

Don't worry, I got you fam. 💁🏻‍♂️

If you're going to ask any questions of the investor, your goal is to uncover two pieces of information as soon as possible:

1. What drove their decision to invest in their last company?
2. What do other entrepreneurs think of them?

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Pro tip: you don't want to be anyone's first investment, trust me on this.

In the best case, they'll call you every single day trying to be "helpful." In the worst case, they'll FREAK OUT the minute things don't go well. Either way, what you'll quickly learn is that the size of an investor's check is usually inversely correlated with how painful they're going to be.

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When you're making small talk with the investor -- preferably before y'all sit down or get into your presentation -- it's a good idea to say something like, "I saw on AngelList that you invested in [COMPANY]. I know you probably can't share details but, I'm curious, was there one or two specific things that influenced you to make that decision?"

As soon as you ask the question, STOP TALKING.

More often than not, investors will tell you the things they felt were most important in the decision-making process.

"I really loved that the founder focused the conversation on [TOPIC]." <--- now you know you need to bring that topic up in your pitch

"I liked that they really understood their customer's pain points." <--- you know what you need to say

You still with me?

K, good. Ask the question, listen to the answer and use it in your pitch.

Next up, let's talk about investor reputations.

Entrepreneurs can often label investors as "slow to respond" or "hard to reach" or "doesn't write checks often" but those aren't necessarily bad (or good) things. What you're really trying to uncover in an investor reputation is whether the investor has (or hasn't) been transparent and fair with entrepreneurs.

Let me say that another way: you need to diligence your investors as much as they diligence you.

The fact of the matter is that you're usually only going to speak to your investor when things are going well or when things are going terrible -- you'll rarely call them in between. (Trust me, I know this -- it's true.) So what you really need to uncover in your investor diligence is how the investor behaves when you're on the extremes.

As with most diligence, you should do half of it passively and half of it actively. On the passive side, you should be Googling them. Digging them up on Crunchbase and AngelList. Make note of any positive or negative comments. On the active side, ask the investor if you can speak to two or three of their founders. It's ok if they don't want to connect you until you've agreed on terms but it's probably not a good sign if they get defensive.

Make sense?

Cool.

I knew y'all were smart. 😀

OK, this one's getting long -- I'll end it here for now. Talk to you tomorrow.

-P