10 questions we ask founders before we invest in their startups

We meet lots of still founders operating out of their bedrooms. And that’s great. We respect the #hustle. But if we meet you for coffee, it’s not just a friendly chat (always be intentional!). Be prepared to answer some hard questions during the course of our time together.

They’re questions that:
– help us get clarity on your team and where you’re currently at with your idea
– help you think of aspects of the business that you may have not considered before this, or have trouble condensing into something useful to you

1. Is your idea big enough?

The core competence of a startup founder is the ability to sell a dream. Make us want to be part of it. The bolder, grander and incredibly ambitious the dream is, the better.

Everybody has ideas, but only the special crazies have the audacity to invent the future.

2. Who is your team?

We’re strong believers in the super ability of teams to make magic happen. We’ll ask you about the other folks that have believed in your vision and have decided to join your merry band.

Don’t think you need a co-founder for the sake of ticking a box. But it says a lot if you’ve managed to share the creation of your dream with another person. It says a lot about your leadership potential.

If you’re invested in your people, you’ll know their backgrounds, skills, and current roles by heart. How did you rally everyone together? How might you fill gaps in your dream team?

Can you lead them to the Champions League?

3. How annoying is the problem you are solving?

We want to know if you think your product is a painkiller or a vitamin. Either is ok by us, as long as the problem you are solving is really annoying for a lot of people. The bigger the pain point the more valuable your startup will be to a lot of people. Even better if you know you’ve got a special advantage — whether it’s your personal expertise, experience, or some cool proprietary tech.

Take us through the customer journey and help us understand how you’ll solve a problem nobody else can.

4. What have you actually built so far?
There are investors that back ideas on paper. We don’t, generally. Unless you’re Elon Musk. We want to see the early version of your product.

Don’t impress us with the beauty of your pitch decks, rather, focus on the utility of your Minimum Viable Product.

Take us through some early user validation, just because we can talk about testing your assumptions till the cows come home. Nobody wants to build something nobody will use, no?

5. Where is the money?

We don’t expect you to have significant revenue at this stage. After all, you’re early-stage. Pre-rev is fine, but potential pathways to revenue and profitability are great. Tell us how you think your product will make money and who might pay for it.

6. Is there a market in the gap?

Well done, you’ve found a gap somewhere. But now, can you show us there’s a market in said gap?

It’s a total addressable market question. Is your market big enough for venture investment? Is your product the solution for a slice of the pie, or does it make a bigger pie?

A lot of this is fluff — we know as well as anyone that stats are stats, and numbers can tell whatever story you’d like to tell. However, figuring out how you guesstimate something helps us understand your thought process — and that’s good enough at this point.

7. How fast are you growing, DoD, WoW (not the game), MoM (not your mom)?

Growth > Revenue

As a startup, you start at baseline zero. It’s a pretty powerful position to be in. Leverage this, grow fast.

As the months roll by, we’ll start to look at retention as well as acquisition. Your retention rates signal your ability to keep breathing when the tide of cheap money recedes, and it will.

However, if your monetisation model is dependent on critical mass at scale, you’ll need to show us eye-popping early adoption and retention metrics for us to get interested. We love nothing better than sitting at the edge of our seats if you can achieve sick (good sick, not bad sick, of course) growth with limited resources.

8. How might you scale this…in the future?

At the beginning, you can do things that don’t scale

Your startup’s ability to grow and scale quickly is a valid competitive advantage. We want to know your vision and thinking around how you intend to grow and dominate your market. It doesn’t mean you’ve got it all figured out, but rough plans with a pencil help us figure it out with you.

9. Who/what is likely going to eat your lunch?

Interesting markets, hot spaces = lots of competition.

Don’t dismiss competition as non-existent.

Your analysis of how your product is positioned in the competitive landscape is very important to us. It demonstrates how responsive you might be to inevitable changes on your journey to that elusive thing: product-market fit.

10. How much do you need?

Assuming you’re really not just meeting us for a cup of coffee, we may be talking about potential investment in your startup. Let us know how much you’ve raised in the past, how much you want to raise now, what you plan to do with it and the length of the runway it’ll buy you. We’ll pull a face like Nick Hewer from the UK Apprentice if you’re asking for a lofty valuation that your current traction, team or market opportunities cannot justify. Just saying!

If you’ve got some or all of the answers to these questions, or if you need help figuring some of this stuff out, we’d like to meet you over coffee. Your best chance of getting a meeting is by filling out this form.

Happy hustlin’.

About Potential.VC

Potential VC is a syndicate fund backed by over 150 accredited angel investors and VCs from the US and UK.  We invest between £100k - £500k in early stage startups addressing opportunities in large verticals that can scale globally.

Investors - join our syndicate

Startups - apply for funding