Bure Valley Group is an investment brokerage business which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.
When it comes to startup investing, so much hinges on the pitch. After all, this is the chance for angel investors to get to know the company, forensically examine its potential and decide as to whether the startup is a worthwhile investment. Yet, as an investor, you have potentially dozens of questions you could ask and only a limited amount of time. How can you ensure you focus on the most important ones and get the answers you need?
At Bure Valley Group, we specialise in joining angel investors with high-potential startups to find mutually-beneficial partnerships. We offer this short guide of six crucial questions to ask startup business owners during their pitch.
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#1 What problems does your business solve?
It is tempting to start with the question: “what does your business do?”, yet this often elicits a vague answer. The startup often tends to drift to what they do and how they do it, rather than addressing the customer pain points they address. Instead of outlining an unfixed, urgent and widespread problem which is not currently being addressed and how they can provide a unique solution, the conversation can become stuck on features and benefits.
These are important, of course, so it’s important to tease these out in the question if they’re not fully explained. Yet a focus on customer problems and solutions can be much more effective, helping angel investors grasp how new products and services might be developed in the future to provide better solutions.
#2 What competitive barriers are we talking about here?
This can be a useful question because there are at least two ways of answering it – both of which are important for the angel investor to understand. First of all, it alludes to the current competitive landscape faced by the company. How many other companies are currently offering similar products and services to the target audience, and can they do this better/cheaper? If not now, could they do so easily and quickly in the future? Secondly, it alludes to the barrier to entry for potential new entrants in the future. Would it be easy for other companies to suddenly spring up into the company’s competitive landscape, or would it be prohibitively difficult for them?
#3 Who is the target market and why?
If the startup company has a clear idea of who they are looking to sell to, their distinct needs and pain points, then that’s a good sign. However, they should also show an awareness of how viable the segment is. In particular, is the market big enough and is it likely to grow in the future? Are there other markets that the company could move into should it ever dominate this one?
#4 What’s your sustainable competitive advantage?
Many startups can run the risk of appearing as “just another tech company” with little awareness of what makes them different from alternatives. Are the defining features they mention (e.g. the design of their brand) as important to the customer as they seem to be to the business owners? What proof can they offer to support their claims? If they seek to compete on price, will this be a competitive advantage that can be sustained into the distant future if others bring prices down?
#5 What is your marketing strategy?
An awareness of marketing strategy is a key ingredient to startup success. Unfortunately, many business owners get stuck on marketing “tactics” by answering that they will use Facebook, email or another tool to get their message out and acquire new customers. Yet this does not go far enough to satisfy an angel investor. For instance, is the strategy market penetration over the next 0-5 years or will there be a shift to market/product development? Is market diversification an option in the future?
#6 What will you use the funds for?
This, of course, is key for the angel investor to understand. Will the money you hand to the startup be used on purposes which stand a realistic chance of growing your investment? Are they intending to use X percent on R&D, Y percent on recruitment and Z amount on marketing? What justifications can they give for this allocation of the resource, and the time period over which this will occur?
Of course, there are dozens of potential questions that you could ask a startup business owner as an angel investor. Other questions may be more pressing, moreover, depending on the nature of the company, the business model and the amount of funding they require. This guide is simply to suggest some of the most pressing, common questions we tend to see within our network here at Bure Valley Group.
If you are a successful investor looking for EIS investment opportunities, or if you are a business owner looking for funding, then we’d love to hear from you. Get in touch today to start a conversation with our team, and discuss some of the great investment memorandums we have available:
+44 160 334 0827