The art of 2-way relationships with investors in Africa: Ask these questions
www.africanaccelerationism.com
I received feedback that you wanted to know what questions to ask investors in your pitch meetings. Here are some ideas for you.
For some background, a "pitch" to an investor is a misnomer. It's a two-way street where the entrepreneur needs to vet the investor as much as they need to vet you. Do they add value? A great way to do this is to ask questions. Not only that but asking questions is THE most important sales skill.
If you remember one thing from this article
…everyone has a problem. And they usually are afraid to tell you. If you can figure out what their problem is you can help them solve it. And if you solve the problems of people who control lots of money they will give some of that money to you.
An investor’s problem could be:
They got burned by a company that was also in your sector. Now they are wary of the whole sector.
Their partner complains they always bring b2c deals instead of b2b startups.
The only way to find out what their problem is is to ask questions.
Questions at the beginning of the meeting
[based on research I did before the call]: I understand your fund is $100m, with a target ticket size of $5m+ for agribusiness in East Africa, is that right? (Then they can correct me. This is more efficient than saying “So, tell me about your fund.” An open-ended question will make them go on tangents, wasting time. And will also look like you haven’t done your research.)
You’re busy. Why did you decide to take the meeting with me? What do you like about our biz? (This helps me know what aspect of our biz to focus on. It also creates consistency bias: if they say something nice about us they will tend to reinforce that in their behavior, subconsciously.)
Questions during/after pitching
How can you see this company fitting into your portfolio? Are there challenges? (for example, if they backed a competitor already)
What is the one thing you think I’m underestimating or being naïve about?
Do you look to add more value than money? (They will likely say “yes” to this.) Great, since your fund adds more value than money, where do you see your fund adding value for us? (This leads nicely into an opportunity to ask for advice later. In a follow-up email, you can say, “I know you said you’re value add is in helping with expansion. We are thinking of expanding to Uganda. Have you worked with companies expanding there? Based on what you know about our business, what advice do you have about a, b, c and 4?” Then you get to see how thoughtful their responses are and if you’d want to work with them.)
Have you seen somebody try this business and fail or succeed in the last ten years?
Are there any companies you think it’d be natural for this company to partner with that you could make intros to?
Do you think the niche we are targeting is a rising tide?
How do you assess the exit opportunities for this business? (they can’t invest if there is no way to exit)
Which of our traction metrics are most/least compelling?
What experience have you had with companies that try to distribute on the channel(s) we use? And what were their lessons learned?
On a scale from 1 to 10, how much do you think we have founder-market fit and founder-product fit?
What are the skillsets we need to succeed?
Just meeting me, do I feel like the right kind of person to make this business work?
What is your experience investing in [my sector]? Which investments worked out? What are your lessons learned?
How long is the fund? Typical deal size? Fund Size?
What are your investors/LPs like? And what are they looking for?
What sectors or trends are you excited about now?
At the end of the meeting
Is it ok if we add you to our investor newsletter so you can stay up to date with our growth and notable achievements?
What’s the process from here?
Do you need any more info from me?
Can we schedule another meeting? (Ask to schedule a follow-up meeting the same time next week/month/quarter depending on your fundraising timeline.)
[If you do get a positive indication]: What’s your decision-making process like? Do I need to meet the other partners? What’s the next step?
General guidelines for talking to investors
Be transparent and honest. Investors will not invest if they pick up signals of lack of transparency or honesty. This is part of the risks that they’re trying to reduce. Be careful with games (like “round closes today”) or small exaggerations (like “we have a meeting with a senior partner” at a fund where you’re about to meet with an associate). Don’t be afraid to admit what you don’t know.
Show speed and commitment: Return emails fast, provide requested data immediately, be persistent during the fundraising process, and be available to physically meet if possible.
Show seriousness and professionalism. Answer questions seriously, and provide the research you conducted when relevant. Make sure everything you deliver leaves a great impression.
Be calm. Accept all questions with love. Don’t complain about the process — if you don’t like it, disengage. Don’t tell them what you think about the process. Be nice when you get rejected, because it could matter when you meet them again.
Don’t be arrogant. This can happen when things are going well, but it’s important to stay grounded and be nice. Remember that all startups have ups and downs, and you will need the investors tomorrow.
A book that might be very helpful to you on how to ask questions to uncover hidden information is Never Split the Difference, about a technique developed by an FBI hostage negotiator.
The art of 2-way relationships with investors in Africa: Ask these questions
The art of 2-way relationships with investors in Africa: Ask these questions
The art of 2-way relationships with investors in Africa: Ask these questions
I received feedback that you wanted to know what questions to ask investors in your pitch meetings. Here are some ideas for you.
For some background, a "pitch" to an investor is a misnomer. It's a two-way street where the entrepreneur needs to vet the investor as much as they need to vet you. Do they add value? A great way to do this is to ask questions. Not only that but asking questions is THE most important sales skill.
If you remember one thing from this article
…everyone has a problem. And they usually are afraid to tell you. If you can figure out what their problem is you can help them solve it. And if you solve the problems of people who control lots of money they will give some of that money to you.
An investor’s problem could be:
They got burned by a company that was also in your sector. Now they are wary of the whole sector.
Their partner complains they always bring b2c deals instead of b2b startups.
The only way to find out what their problem is is to ask questions.
Questions at the beginning of the meeting
[based on research I did before the call]: I understand your fund is $100m, with a target ticket size of $5m+ for agribusiness in East Africa, is that right? (Then they can correct me. This is more efficient than saying “So, tell me about your fund.” An open-ended question will make them go on tangents, wasting time. And will also look like you haven’t done your research.)
You’re busy. Why did you decide to take the meeting with me? What do you like about our biz? (This helps me know what aspect of our biz to focus on. It also creates consistency bias: if they say something nice about us they will tend to reinforce that in their behavior, subconsciously.)
Questions during/after pitching
How can you see this company fitting into your portfolio? Are there challenges? (for example, if they backed a competitor already)
What is the one thing you think I’m underestimating or being naïve about?
Do you look to add more value than money? (They will likely say “yes” to this.) Great, since your fund adds more value than money, where do you see your fund adding value for us? (This leads nicely into an opportunity to ask for advice later. In a follow-up email, you can say, “I know you said you’re value add is in helping with expansion. We are thinking of expanding to Uganda. Have you worked with companies expanding there? Based on what you know about our business, what advice do you have about a, b, c and 4?” Then you get to see how thoughtful their responses are and if you’d want to work with them.)
Have you seen somebody try this business and fail or succeed in the last ten years?
Are there any companies you think it’d be natural for this company to partner with that you could make intros to?
Do you think the niche we are targeting is a rising tide?
How do you assess the exit opportunities for this business? (they can’t invest if there is no way to exit)
Which of our traction metrics are most/least compelling?
What experience have you had with companies that try to distribute on the channel(s) we use? And what were their lessons learned?
On a scale from 1 to 10, how much do you think we have founder-market fit and founder-product fit?
What are the skillsets we need to succeed?
Just meeting me, do I feel like the right kind of person to make this business work?
What is your experience investing in [my sector]? Which investments worked out? What are your lessons learned?
Do you have any competing investments?
How is your fund structured? (worth reading this on VC funds and investor psychology)
Who makes the decisions?
How long is the fund? Typical deal size? Fund Size?
What are your investors/LPs like? And what are they looking for?
What sectors or trends are you excited about now?
At the end of the meeting
Is it ok if we add you to our investor newsletter so you can stay up to date with our growth and notable achievements?
What’s the process from here?
Do you need any more info from me?
Can we schedule another meeting? (Ask to schedule a follow-up meeting the same time next week/month/quarter depending on your fundraising timeline.)
[If you do get a positive indication]: What’s your decision-making process like? Do I need to meet the other partners? What’s the next step?
General guidelines for talking to investors
Be transparent and honest. Investors will not invest if they pick up signals of lack of transparency or honesty. This is part of the risks that they’re trying to reduce. Be careful with games (like “round closes today”) or small exaggerations (like “we have a meeting with a senior partner” at a fund where you’re about to meet with an associate). Don’t be afraid to admit what you don’t know.
Show speed and commitment: Return emails fast, provide requested data immediately, be persistent during the fundraising process, and be available to physically meet if possible.
Show seriousness and professionalism. Answer questions seriously, and provide the research you conducted when relevant. Make sure everything you deliver leaves a great impression.
Be calm. Accept all questions with love. Don’t complain about the process — if you don’t like it, disengage. Don’t tell them what you think about the process. Be nice when you get rejected, because it could matter when you meet them again.
Don’t be arrogant. This can happen when things are going well, but it’s important to stay grounded and be nice. Remember that all startups have ups and downs, and you will need the investors tomorrow.
Information in part from NFX and Verdant
A book that might be very helpful to you on how to ask questions to uncover hidden information is Never Split the Difference, about a technique developed by an FBI hostage negotiator.