What Potential Investors Want to Know

I usually resist blogs with lo-o-ong lists, but I found one that is such a good resource, I hope you'll bear with me.

Anthony Cerminaro lists Questions Potential Investors Ask. These questions, for the most part, are "Starting a Business 101" questions. Even if every dollar that goes into your business is your own, you'll need to think through most of these to write a business plan. And yes, your business plan will change as your business grows, but the very act of considering these questions will focus your thinking and help you make better decisions. Here's the list:

The Market

• How large is the specific market for your product?
• What growth is expected in this market?

The Product/Production

• What, specifically, are the company's products/Services?
• How are they better than other products or alternative solutions?
• Are there patents? What, specifically, do they protect?

Competitive Positioning

• Overcoming Inertia - What will it take to get customers to change what they are using/doing today?
• Where will you fit into the industry?

Product Development

• What work remains?
• Identify major development risks or challenges.

Marketing and Sales

• Briefly explain the selling cycle.
• How will you raise customers' awareness of your product and stimulate buying?
• What channels of distribution will you use to deliver your products?

Leadership

• What is your background and previous experience?
• Where did the idea for the company come from?
• How did you get involved with the company?
• Who is presently managing the company? What are their credentials especially regarding:
  • Financial management
  • Marketing
  • Product development and production

Business Strategy

• Identify the steps needed to reach positive cash flow.
• How has the company been funded to date?
• What is the business model? (i.e. how will the company make money?)
• Do you have any corporate partnerships in place?

Financials

• What kind of revenues can the business produce over the next five years? Profits?
• How will the investor get his money back? Through an IPO? Acquisition? When?

Requested Funding

• How much capital is required to carry the company to the next stage?
• What is your current "burn-rate."
• How much hard-money (cash) have the founders put in?
• What are your startup or development costs?
• What is your projected three-year revenue stream?
• How much are you planning on investing?
• What do your projected expenses look like for three years?
• What are your three-year sales forecasts?

If you anticipate being acquired

• Identify the two or three most likely buyers
• Explain why they would be interested