In unpredictable and unprecedented times, it is important to become a student of your environment. This looks different in different fields. Doctors look for emerging trends and research, and marketers analyze customer behavior, while venture capitalists study the stock market and where to invest. 

If you’re a founder of a start-up seeking investors, you’ve likely become a student of your environment as well. Maybe you’ve got your business off the ground and need help getting it to the next level. At Aquila, we specialize in helping companies evolve and scale. As venture capitalists, we are constantly evaluating the start-up market and seeing where to invest.

If you’re looking to partner with a venture capitalist, here are some questions they’re likely to ask and the information everyone seeking investment should have on hand.

What is your market opportunity?

This is a big one (in fact, it might be the most important question of all). Investors are looking for companies that can make an impact, scale effectively, and change their respective markets.

Honest self-evaluation and self-awareness are important qualities venture capitalists look for in their teams and in their investment companies. Make sure to address your company’s opportunity to grow up front, and back it up with data and historical evidence along with critical evaluations and predictions for where your market is headed.

If there is no want or need for your product, you ultimately won’t go anywhere. Venture capitalists want to know that you have an understanding of your market and how your product or service meets a unique, timely need for that market or customer base. 

How has the company’s traction been so far?

Past successes are indicators of future growth, and venture capitalists are ultimately looking for companies that have already had a small amount of success. This is a good indicator that you are meeting the needs of your customer base and indicates a positive upward growth trend for the future. 

Examples of early traction could be the creation and launch of a beta product, an existing customer base with positive feedback, and existing strategic partnerships.

This goes back to the concept of focusing on companies that want to take things from level 1 to level 10. If a company is already at level 1, they’ve already grown from level 0, meaning they’ve gotten things off the ground and have found some traction in their market. At Aquila, we really help companies do this through financial backing and mentorship.

What are some potential risks for the business, and do you understand these risks?

Understanding your environment includes understanding the risks involved. Investors are constantly seeking companies and products on the cutting edge, but being on the cutting edge often comes with a certain amount of risk. Investors understand this balance and want to partner with companies that understand the risks their companies face. Identifying those risks and having a plan in place to manage them shows potential investors that you understand the market and are planning proactively.

Venture capitalists want to understand the thought process behind your company and your risk management plan. How will you reduce these risks? How will you adjust to a downturn in the economic climate, issues with the supply chain, or a bad day in the stock market? What are your legal risks? Your thought process behind these issues reveals a significant amount about your company and your leadership style. Startups that can show they have reduced or eliminated product, technology, sales, or market risks will have an advantage in fund-raising.

What makes your company’s product or service a differentiator and competitor in its market?

It is not enough to create a better version of something that already exists. Companies seeking venture capital—and ultimately to make a difference in their market—should be at the forefront of innovation. This often means meeting a need customers aren’t even aware they have yet, but more often than not means meeting the new needs of customers (this gets back to being somewhere between the bleeding edge and the cutting edge). The balance here is finding a product or service that brings innovation to your market in a way your customer base can actually understand and engage with. 

What is your management team like? 

Your team is one of the most important parts of your company. Oftentimes, the people you work with will define the trajectory of your company. It’s important to have the right team by your side to take your company into its next iteration.

Venture capitalists want to know who they will be working with on a regular basis. This helps us understand the personality of the company, the structure of the team, and how you go about day-to-day operations. 

Many investors evaluate the team just as much as the product (if not more). This is where companies can go awry. They spend an incredible amount of time focusing on their product or offering, which is appropriate, but they neglect managing team dynamics and setting standards for how they will work together to achieve a common goal. 

Ultimately, an investor will need to decide if they want to work alongside you and your team. Make sure you’re asking critical questions of your team before you seek venture capital. What are your weaknesses? What are your strengths? How can you work better together? Where do you need to shift or grow? These questions will help you become a better company and likely help you on the road to securing funding. 

Venture capitalists are always scanning the market and looking for companies to partner with. It is important for companies seeking this capital to constantly self-evaluate and ask critical questions about themselves and their growth. If you are a business in the tech space looking to take your company from level 1 to level 10, contact Aquila Capital Partners and see how we can help.