The Trick Question Investors Love Asking Entrepreneurs

After a fundraising pitch, prospective investors usually ask entrepreneurs some combination of the same 10–20 questions. As a result, entrepreneurs learn to answer those questions in increasingly practiced ways. Because entrepreneurs get so good at answering the same questions, they aren’t always as critical of what they’re being asked as they should be. This lets savvy investors use a seemingly standard question to trick entrepreneurs, which helps them decide whether or not they should invest. Do you know which question is intentionally designed to trick you?

In my early days of fundraising, I gave a terrible answer to this trick question dozens of times. Even worse, because it was a trick question, I thought I was giving a great answer, so it never occurred to me that I was saying something wrong.

After a few years of unsuccessful fundraising for multiple failed ventures, a retired investor finally let me in on the secret, just like I’m doing for you right now. He was a former Silicon Valley VC who’d retired and moved to be closer to his grandchildren. A local angel introduced me to him as someone who might be able to help connect me with West Coast investors.

We met in a coffee shop, and the meeting started the same as most VC pitch meetings. We made smalltalk for a few minutes, then he asked what I was working on. I pulled out my computer and began flipping through slides.

After finishing my pitch, the former VC peppered me with a series of questions, all of which I’d heard before and responded to with practiced efficiency.

“How are you acquiring new customers?”

I gave a detailed answer about an effective cold emailing strategy we’d been using with 7% response rates and 2% conversion rates into sales.

“Who are your biggest competitors?”

I talked about the other companies trying to capture a similar market opportunity, and I also talked about the ways potential customers were currently solving the issue.

“How far will your next round get you?”

I told him 12–18 months. Whether or not that was true, I had no idea, but that’s the general expectation for a fundraising round, so that’s what I always said.