75 Common Questions Venture Capitalists Ask Before Investing in a Startup

Essential questions startup founders should expect to answer in a pitch meeting with potential venture capital investors.

Key points

• Expect questions from investors during and after your pitch, including ones that are meant to throw you off, and prepare thoughtful, concise responses.

• Focus on the fundamentals by using the T’s Framework to hone your points: Team, TAM, Tech, Traction, Timing

• Investors are seeking assurances that your startup plan is not only solid, but that you’re someone they’ll want to partner with you for the long term.

 

Pitching your startup to venture capitalists can be both exhilarating and nerve-wracking. It’s your opportunity to showcase your vision, strategy, and potential for growth. However, to secure a deal, you must be prepared to answer a myriad of questions that deep-pocketed investors will undoubtedly have. Understanding the key areas they will probe can significantly enhance your pitch and increase your chances of success. 

To that end, we spoke with five successful VCs who’ve backed hundreds of tech startups across North America—three of whom RBCx backs as a limited partner (LP)—to distill what persuades them to sign on, and what leaves them skeptical. 

Questions investors ask startups 

 

When it comes to pitches, Sid Paquette, Head of RBCx, wants to know three basic things: “What’s the problem, what’s the size of the prize, and why are you best suited to solve it. I think if you can articulate those three things concisely and compellingly, then you are in a good spot.”

“Tell me the problem, the size of the prize, and why are you best suited to solve it. If you can articulate those three things concisely and compellingly, then you are in a good spot.”

Some startup investors may press fledgling founders on other areas to uncover the weak spots in their story. For the most part however, their questions can typically be categorized into what’s known as the four Ts: Technology, TAM (total addressable market), Traction, and Team. For the purposes of this article, we also threw in Timing and Terms. 

And while each category holds significant importance to the potential investor (depending on factors like your sector and startup stage), with every single question and interaction, investors are forming an opinion of you. Through careful preparation and a clear understanding of their expectations, you can answer any tough question that comes at you—and position your startup for success.

Download our list of over 75 common investor questions entrepreneurs should be prepared to answer during an investment pitch.

Startup investor questions about tech

It goes without saying that as a startup founder, the technology you’re leveraging is a big deal. Investors are interested in understanding the unique aspects of your product, its potential for disruption, and how it sets your company apart from competitors.

Questions within this category may focus on the proprietary technology, intellectual property (IP), or innovative solutions that have been developed. You should also be prepared to explain how your product addresses a significant market need or pain point and why it’s superior to existing solutions. Demonstrating a deep understanding of the technology landscape and your startup’s competitive advantage can be compelling for investors seeking innovative opportunities. 

That said, there’s pretty much a hundred per cent chance you’ll get asked about your competition, so preparation is paramount. Do not try and fake your way through this. Startup investors have an acute understanding of the competitive landscape across various industries by dint of their portfolio focus, extensive research in the space, and board of directors work (to say nothing of the sheer volume of pitch decks they’re inundated with). 

Jamie Rosenblatt, General Partner of Toronto-based Golden Ventures, usually asks founders who they consider to be their biggest competitor along with which company keeps them up at night. “I like that question because they’re often different and it shows me who I should be digging into or how passionate and interested they are in the market,” he explains. “I shouldn’t be able to uncover a really great competitor that they’ve never heard of. If this is your baby, you should be obsessed.”  

Sample questions:

• What makes your solution unique or innovative? How does your technology differentiate you from competitors and create barriers to entry? 
• Does your solution disrupt existing markets or create new ones?
• Can you highlight any proprietary technology, intellectual property, or strategic advantages?

Startup investor questions about TAM

The total addressable market (TAM) represents the potential revenue opportunity available to a startup within its target market. VCs want to understand the size, growth potential, and dynamics of the market your startup is addressing. 

Questions in this category seek to quantify the market opportunity, identify key market segments, and assess your startup’s strategy for capturing market share. Be ready to speak to market research, industry analysis, and competitive assessments that support your TAM estimates and go-to-market strategy.

“Founders need to know the questions investors have about your company or plan, and focus on providing comfort on those things rather than areas where people already believe you.”

And while preparation is essential, Rosenblatt suggests not to make it your focal point. “There’s an old expression: Quit selling when the prospect is already sold,” he says. “Founders will do all this work on market research, but as a VC, we already know this market is really big. Don’t spend time on it—I believe you, move on. Founders need to know the questions investors have about your company or plan, and focus on providing comfort on those things rather than areas where people already believe you.”

Sample questions:

• How do you plan to target specific market segments and capture market share 
• Can you provide insights into the growth potential and trends within your target market?
• What are your strengths and weaknesses over your competitors?

Startup investor questions about traction

Traction refers to the momentum and progress that a startup has achieved thus far. VCs are keen to understand the milestones you’ve reached and the trajectory for future growth. Questions in this category often revolve around the company’s progress towards its objectives, customer acquisition strategies, and plans for future growth. 

Paquette, however, is quick to emphasize that traction varies widely depending on the stage of a startup’s journey, with particular emphasis on product-market fit: “At the earlier stages—so if you are pre-seed, seed, even Series A—you may not have product-market fit yet because you are often still in a testing phase,” he says. “As the startup moves along that spectrum, I’d ask questions, like how many sales have you made? Is anybody using it and if so, what’s their feedback? I’d dig into why a customer bought this solution, who else were they looking at as well as what they think the startup is doing well, and what they are doing badly.” 

At later stages, Paquette adds, startup founders should be prepared to present concrete data and metrics that demonstrate market viability, such as user growth rates, customer retention metrics, and revenue figures. Additionally, outlining future milestones and the roadmap for achieving them (including team capabilities) can provide investors with confidence in your ability to execute the business plan and deliver results.

Sample questions:

• What significant milestones has your startup accomplished to date and what are your future milestones?
• Can you provide details on your approach to acquiring and retaining users?
• How do you plan to scale your operations and increase revenue in the coming months and years? 

Startup investor questions about timing

There’s an old saying among startups: Being early is the same thing as being wrong. Market saturation is, of course, a major concern for investors but being first-to-market is far from a guarantee of success. Indeed, for every startup that achieved unicorn status, there are countless young companies that launched prematurely (RIP, Friendster) or imploded simply because they couldn’t hold off later entrants (sayonara, Atari). 

Michelle McBane, Managing Director of Standup Ventures, a Toronto-based firm that finances early-stage startups led by women, knows this from personal experience. “I had a founder who had really great insight and saw something so far forward but the market just was not ready for where they were going,” she recalls. “You don’t want to be too late or too early to the game.”

Which is to say, timing is often the difference between success and failure. VCs are acutely aware of this reality and will inquire about why this is the most opportune moment for your venture to flourish. To wit, ‘why now?’ is a go-to question for San Francisco-based VC Angela Tran, General Partner at Version One Ventures. “We have to understand and feel conviction around the urgency of a buyer,” she says, citing the example of cleantech. “We all know we’re in a climate crisis, but because everything is so voluntary and regulations haven’t been set, buyers can wait. So, while we all feel the macro need, on the micro buying level, we can’t answer the ‘why now’ for customers. They’re not desperate enough.”

Sample questions

• What market trends or dynamics make this the right time for your startup?
• How do you plan to capitalize on current market conditions to drive growth?
• What political, economic, or regulatory risks could impact the business? 

Startup investor questions about the team

Venture capitalists are investing in people as much as they are investing in ideas, but for early-stage investors especially, the team is everything. In the absence of revenue, product traction, or tangible metrics to assess the viability of the business model, VCs place significant emphasis on the capabilities, experiences, and dynamics of the founding team. 

For Paquette, questions in this category come down to who’s driving the vision forward and why they’re the right individuals to do so. “Do you have unique domain expertise? Have you been in the industry or are you totally external to the industry? In some cases that can be a benefit if their industry is very stagnant and you want different thinking,” he says. “Conveying the message of why you and your team are best able to win is crucial.”

McBane will complement these background questions with ones around the team’s ability to solve for where they fall short. “Obviously early-stage teams aren’t fully baked to do certain things, so then I want to know if you can attract the best and brightest talent to your small little venture,” she says.

“The way I like to frame it is between the time we invest and a happy outcome for everybody, there’s this massive sea of uncertainty and you need to trust you’ve invested in a captain that can navigate that. If you have no confidence in their ability to figure things out then all the other questions are irrelevant.”

Investing in nascent startups is inherently risky so Rosenblatt, for his part, will lob tough questions at founders like, “Tell me how your past experience informs your right to win, and how did it help you uncover the secret that makes you want to spend the next 15-20 years of your life solving? The way I like to frame it is between the time we invest and a happy outcome for everybody, there’s this massive sea of uncertainty and you need to trust you’ve invested in a captain that can navigate that,” he adds. “If you have no confidence in their ability to figure things out then all the other questions are irrelevant.”

Sample questions: 

• Why are you the right founder to solve the problem?
• Who is on your team and what relevant domain experience do they have in this industry, particularly in management, technology, product, sales, and marketing? 
• If your team has a knowledge and skills gap, what are they and how will you fill them?

Startup investor questions about terms/the ask

Venture capitalists may love your idea, but remember, their main goal is to make money from it. In presenting how much capital you’re seeking, you’ll want to break down your use of the funds, specifying allocation for product development, marketing, sales and operations, how long the financing will last, and what you aim to achieve with it. Be ready to justify your numbers and budgeting decisions as well as how the investment will contribute to achieving key milestones. Discussing potential exit scenarios (such as acquisition or IPO) can also provide startup investors with confidence in your long-term potential and alignment with their investment goals. 

“People will give a lot of answers about what they hope to accomplish with the money we’re giving them, but specifically what I’m looking for is where you think the big risks are in the company or what hypothesis you’re trying to validate with this raise,” says Rosenblatt. “Your company might be pre-product, you have a bunch of assumptions about how the world is going to respond to what you have, so what are you hoping to prove in the next 24 months? The calculation that I’m doing in my head is whether you’re being realistic with what you intend to do with the money we’re giving you, is what they’re aiming for attractive to help secure the next layer of capital, and do I agree with your points of validation.” 

“These are 10-year journeys and we want to understand that you’re ready to go through the highest of highs and lowest of lows. What we’re really looking for are companies that are mission-driven and want to build a great company.”

Beyond money, McBane says that one question she asks consistently stumps startup founders: What do you want out of this? “I’m trying to understand your motivation,” she explains. “These are 10-year journeys and we want to understand that you’re ready and aware and have the stamina to go through the highest of highs and lowest of lows. What we’re really looking for are companies that are mission-driven and want to build a great company.”

Sample questions:

• What specific amount of funding are you seeking in this round, and how do you plan to utilize it in a way that will position your startup for future success and milestones? 
• Can you provide insights into your financial projections and how the investment will support your growth plans?
• How else do you hope an investor will help beyond money? 

Think of the questions investors for startups aren’t asking aloud

Some of the most critical questions startup investors want answered are ones that they never even ask—at least, not out loud. During a pitch, VCs are not only evaluating the viability of your business model but, crucially, they’re assessing your likability. Investors understand that successful relationships are built on trust, rapport, and shared vision, and they seek founders who can effectively convey passion, confidence, and authenticity. 

“At the end of the day, companies are built on people, so I always look at it through that lens.”

“As an investor listening to a pitch, I always ask myself one question: If I were otherwise unemployed, would I come work for you at your company?” says Paquette. “If the answer is no, I am very unlikely to do that deal as it means either the team or the mission isn’t compelling. If either of these are not compelling, how are you going to attract top talent to help you accomplish the unthinkable? The short answer is you likely can’t. At the end of the day, companies are built on people, so I always look at it through that lens.”

McBane also admits that she probes for trust and transparency: “There’s a tipping point in getting to know a founder where you kind of connect with them on a deeper level. The business partnership is 7-10 years so do you want to work with this person through thick and thin? I need to be a bit in awe of them because otherwise, it’s a long, long journey.”

San Francisco-based angel investor Leighanne Levensaler confesses that she habitually “falls in love” with the founders she meets, so developed a process to guard against it. “When I was co-heading Workday Ventures, I’d create a strategic rationale to invest pre-meeting, outlining everything I know about the company that makes me want to invest,” she says. “And then I’d do the contrarian—so, why I wouldn’t invest in this—then when I’d go into the meeting, you’re really trying to change my mind as to why I absolutely have to invest.”

Final thoughts

Ultimately, that might be the most critical question to address. As you embark on the journey of courting VCs, your success lies in your ability to understand the investor mindset. By putting yourself in their shoes, you can anticipate their concerns, prepare for potential objections, and tailor your presentation to align with their expectations in order to establish that partnership. Says Paquette: “Pitch a VC as if you were pitching somebody to join you as a co-founder. Because effectively, that’s what you’re doing. If you’re pitching, it should be about more than just money. It’s about showing your excitement about what you’re doing, the change you can drive, and understanding whether the VC will be a good partner for you.”
RBCx offers support to startups in all stages of growth, backing some of Canada’s most daring tech companies and idea generators. We turn our experience, networks, and capital into your competitive advantage to help you scale and make a meaningful impact on the world. Speak with an RBCx Advisor to learn more about how we can help your business grow.