5 Questions the Right Investor Will Ask You Look for someone who will help in ways beyond providing money and become a long-term partner.
By Miles Jennings Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
There's no doubt that finding someone interested in investing in your business can be tough. In fact, raising money can feel like trying to scale Mount Everest with your hands tied behind your back.
To make it even harder, you also have to find the right kind of investor for your business. You shouldn't take money from just anyone. You need to find someone who will help in ways beyond providing money and become a long-term partner.
It might sound like I'm talking about marriage rather than business but how you know when you've found the right investor might be answered in part by the questions asked.
My company, Recruiter.com, is in the middle of seeking a seed round of funding and I can tell you that my comfort level has varied, depending on the investor.
Based on my experience, I'm sharing below the types of questions that you'll want investors to ask:
Related: Founders Are From Mars, Capital Providers From Venus
1. What's your story?
Meeting with the wrong investor will feel like you're back in college writing a thesis. The questions will center around projections, the size of the market and the client acquisition plan and, of course, you must have answers to these items nailed down.
But the right investor will evaluate your ideas about these questions quickly and then focus squarely on you and your team. Meeting with the right person will feel more like a job interview, almost more personal than professional. You want a potential investor who cares about the things that matter the most.
2. Can you hire?
Finding the right employees for your business is a critical element for growth and success.
If you're an entrepreneur, you're likely passionate about your business. But can you inspire other people to be passionate about the company? Do you love your industry and find meaning in it?
The right investor wants to know that you can find and nurture strong talent because he or she knows this is an important predictor of a strong outcome.
3. Can you fire?
Not every employee hired will work out. In a startup environment, you can't afford to have any dead weight. Do you have what it takes to let go of people who aren't working out? The right investor looks for guts -- not just wild enthusiasm. He or she knows the realities of managing employees and wants to make sure that you're up to the tasks ahead.
Related: 10 Mistakes to Avoid When Pitching Investors (Infographic)
4. How do you get along with X?
Looking at it from the outside, a business can resemble a set of numbers and projections. But regarding it from the inside, it's a web of relationships and personalities. If there's bad blood or personality conflicts between founding members or key employees, you can forget about success. The right investor wants a strong, mutually beneficial relationship with your business and demands a healthy rapport with every partner.
5. What happens when you're not around?
A lot of small business owners never delegate tasks for day-to-day operations. The effect of this is that the business is overly dependent on the work of the founder. If you don't move away from this dynamic, the business lags in creating value.
Your business is your baby: You should push it to walk on its own. The right investor will encourage you to work on your business not in it. He or she understands the function and role of your labor in the business.
A very successful and experienced businessperson once told me that when he looks back on the handful of really great partnerships that he has had over the years, he realizes that it wasn't the little things that mattered.
Although it's good to have strong agreements and terms, the details of an arrangement are not what makes a great business. It's the people.
Perseverance, shared values and a strong commitment from all partners are what will ultimately drive the success of your business. Look for an investor who can serve as the right kind of partner for you.
Related: Want Angel Investors? Here's What You Need to Know Right Now. (Infographic)
