decoding questions investors might ask you as a startup

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Decoding Questions Investors Might Ask You as a Startup.

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Decoding Questions Investors Might Ask You as a Startup.

Portfolio Fit.

Portfolio Mix

Individual Application

• Do phase and industry fit to the investment strategy of the investor? Meaning: Does it fit what the VC has promised to their limited partners, who provided the money the VC is investing?

• Does it increase or decrease systemic risk of the portfolio (does it mean putting “all eggs in one basket”)? Meaning: Does it increase the risk of losing all investments? Example: If Apple decided to allow AdBlockers on iPhones, all players who rely on mobile advertising suffer a lot. It’s a systemic risk.

Strength of Application.

Portfolio Mix

Individual Application

• Is this better than other investment options we as investors have?

• Does this have the potential to earn back money that we will lose on other investments in our portfolio? Meaning: can this become really big?

Elements to Consider.

Portfolio Mix

Individual Application

Market

Product

Team

Market Size.

Market

Product

Team

• Is the market big enough?• How many buyers need it and could

realistically be reached through the distribution channels?

• Which amount of money could they (budget) and would they (value for them) spend?

Example Question on Market from Y Combinator Application.

Market

Product

Team“How do or will you make money? How much could you make?”

• Is the market big enough?• How many buyers need it and could

realistically be reached through the distribution channels?

• Which amount of money could they (budget) and would they (value for them) spend?

Product Value Added.

Market

Product

Team

• Would it make some people extremelyhappy? Meaning: Can you sell this to earlycustomers?

• Does the happiness exceed the cost to produce it? Meaning: Will it make or lose money?

• Is it a two-sided or multi-sided market? Any example for a two-sided market is a job platform, where you need both job seekers and companies with vacant positions.

• If two-sided: Would it make both sides extremely happy?

Example Question on Product from Y Combinator Application.

Market

Product

Team

“What is your company going to make?”

• Would it make some people extremelyhappy? Meaning: Can you sell this to earlycustomers?

• Does the happiness exceed the cost to produce it? Meaning: Will it make or lose money?

• Is it a two-sided or multi-sided market? Any example for a two-sided market is a job platform, where you need both job seekers and companies with vacant positions.

• If two-sided: Would it make both sides extremely happy?

Fit of the Team.

Market

Product

Team

• Is this team in a better position to lead this product to success than other teams that might work on similar ideas?

• Can they cover all roles needed, from building the product to selling it?

• Will the be able to grow this company together for the next two or three years, and overcome obstacles?

Example Question on Team from Y Combinator Application.

Market

Product

Team “How long have the founders known one another and how did you meet? Have any of the founders not met in person?”

• Is this team in a better position to lead this product to success than other teams that might work on similar ideas?

• Can they cover all roles needed, from building the product to selling it?

• Will the be able to grow this company together for the next two or three years, and overcome obstacles?

Further Elements to Consider.

Portfolio Mix

Individual Application

Market

Product

Team

Can they do it?

Want to do it?

Cultural Fit

Example Questions on Team from Y Combinator Application.

Can they do it?

Want to do it?

Cultural Fit

“Please tell us something surprising or amusing that one of you has discovered.”

“Why did you pick this idea to work on? Do you have domain expertise in this area? How do you know people need what you're making?”

“If you've already started working on it, how long have you been working and how many lines of code (if applicable) have you written?”

Example Questions on Team from Y Combinator Application.

Can they do it?

Past Achievement

Good Thinking

“Please tell us about an interesting project, preferably outside of class or work, that two or more of you created together. Include urls if possible.”

Example Questions on Team from Y Combinator Application.

Can they do it?

Past Achievement

Good Thinking

“How will you get users? If your idea is the type that faces a chicken-and-egg problem in the sense that it won't be attractive to users till it has a lot of users (e.g. a marketplace, a dating site, an ad network), how will you overcome that?”

Comments, Corrections, Further Questions?

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