Startup: 5 questions to ask investors

Startup: When a venture capitalist offers you funding, it can be hard to say no. Andrés Fleischerassociate director of Ripio Venturesoffers 5 questions to ask investors when raising funds for your startup.

Is this your first time organizing a fundraising campaign? Are you considering accepting financing? Before you say yes, there’s something important you need to keep in mind: your worth.

Ultimately, your startup will generate rewards for your investors. Therefore, you need to consider several things before choosing your lenders. Here are some questions that should help you in your thinking.

Question 1: What will we receive besides the money?

When choosing an investor, especially if you have multiple offers, you need to ask yourself what each of them can bring you besides money. So, rather than accepting the first proposal or choosing the highest bidder, ask yourself: is this funding strategic?

In fact, good investors have a lot more to offer startups than money. They can also offer connections and advice that will help you grow. Never be afraid to ask potential investors what they can offer you besides money. And if possible, analyze the strategy of each of the venture capitalists. The more targeted and specific, the better.

Knowing where an investor’s money comes from and ensuring that their vision aligns with your startup’s core values ​​is also very important. In fact, the slightest misalignment can cause problems in the future.

Question 2: Do you have relationships with other investors?

A good investor should also be able to connect you with people who will help grow your startup in the future, including other venture capitalists.

Simply tell the investor that you would like to know more about your relationships with other investors. You can also view funding rounds from other companies in the venture capitalist’s portfolio. Has he collaborated with other investors? Is there evidence of consistent collaboration? If possible, contact some of these companies directly to learn more about their experiences with the investor in question before making your decision.

The right investor may also have other types of relationships that can help you grow. For example, if you want to expand your startup in Asia, a venture capitalist with government connections in that region can help. Or if you need partners within the green energy sector, choose an investor who works with this type of company.

Question 3: How will this contribute to your startup’s growth?

This happens all too often: the investor promises to contribute to your startup’s growth process, but as soon as you sign the contract, it disappears.

It is essential to determine whether the investor is able to provide sufficient advice and assistance. You absolutely need to know if he’s telling the truth about what he can do. This, regardless of the importance or notoriety of your brand.

The best way to know how active the investor will be is to talk to other startups in his portfolio and get real feedback from people who have worked directly with him. Analyzing the investor’s past history and experiences can also be helpful. If he’s already helped startups grow, that’s a good sign.

Question 4: What is the investor’s reputation?

A venture capitalist who has a good reputation can go a long way. If you advertise a fundraiser with a high profile investor, it will generate a lot of interest from the media and other investors.

However, even if investor notoriety is important, it is not enough to get your startup off the ground. For example, if your investors are well-known but don’t offer enough advice and support for your startup, it would be better to choose small venture capitalists who are ready to help you.

Question 5: Will he be a good partner?

When you want to launch a startup, you need to think long term, not just the next 6-12 months. Also think about your goals for the next two years: where do you envision attracting opportunities from and what types of projects would you like to get into?

So when choosing an investor, it’s important to think about how your relationships and core values ​​align with your startup’s vision.

Startup: choosing the right investor is not an easy task

Know that it’s not just about money. You must therefore take into account several factors to choose the most suitable investor for your startup. In fact, making the right decision from the start can save you a lot of problems later on.

Don’t hesitate to ask investors about their strategies and relationships. Try to talk to as many entrepreneurs and business partners as possible that they’ve worked with. This is certainly a job that will take your time and effort, but the results are worth it.

About the author

Andres Fleischer is Associate Director at Ripio Ventures, where he designs strategies to support emerging fintech startups in Latin America and around the world.

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