VC Questions You Can Expect Raising Startup Capital

I was having a great conversation with a founder yesterday who became a VC. (A group of Valor’s investors, and our first investor years ago, David Cummings, are founders-turned-VCs.)

One of the things this founder wanted to know is how to refer Valor a lead for a great investment. We discussed Valor’s screening process and the VC questions we ask. Her feedback was, with angel investments, she’d observed more questions around the founder and the founder vision–and as a founder moves into more institutional capital, like Valor’s seed round, the earliest questions include more taps into the business model.

Valor’s screening questions are public on our web site on a Google Form under “Contact Us.” Answering these questions is the best way for a founder to set up a high priority meeting with Valor.

So what kinds of VC questions are we asking?

Here they are:

VC QUESTIONS ABOUT BUSINESS MODEL AND MATURITY

1. What are your revenues going to be this month? What do you think next month’s sales will come in at?
2. What’s the quarter over quarter sales growth rate look like?
3. Let’s look at last month. You had X paying customers, lost X customers…so the churn rate is? (We hate churn, too.)  How many customers do you lose a month, as a percentage of total customers?
4. Who are three potential customers we might be able to intro for you? (Did you take a look at our Innovation Council?)
5. Taking a look at lead generation: how many potential customers contact you in a month? (Top of the funnel)
6. What percentage of your revenue is your largest customer? (Risk spotting)
7. For every 10 leads you get, how many actually sign up and pay you money? (Conversion rate)

1. What does your marketing stack look like right now? (Here’s more information on how we think of early scaling, sales, and marketing hires.)
2. How are you automating lead generation and conversion, or how would you like to? The essence of what we’re trying to learn is, what have you learned about what it takes to close new revenue in your market?

1. What does your tech platform look like right now? What’s your database, your web services layer, your secret sauce gluing it all together?
2. What’s the coolest thing about your technology? Like, any embedded AI engines, machine learning algos you’re testing, a patent?
3. How are you updating your code? Is one of your cofounders a developer? (Do you want some help sourcing a technical co-founder?)

1. What are the top 2 challenges growing this business right now? Please be specific as possible–this is where Valor gets a sense of whether or not we can add value above and beyond the capital.
2. How much money (in convertible notes, etc.) have you already raised?
3. If we invested in you, what would you use the money for?
4. How did you find out about Valor and what we do for startups? (If it’s a person, name them and we’ll say thanks!)
5. Is there anything else you’d like Valor’s investment review team to understand?

Raising money for seed capital

As you can tell from the questions, we’re best suited for post-product, post-revenue–but pre-profitability.  By sharing the information about where you are in your business, we know if we can help. When we know we can help, we move forward in our diligence process. Speaking of that, we have a investment and diligence process post, too.

Valor plans on making 8-10 investments next year in ambitious software companies primarily based in the Southeast and disrupting finance. If you should be one of them–please contact us.