By: Hillel Fuld (@Hilzfuld)
If you are an investor, and you are reading this, surely you will recognize some of the questions below. If you are an entrepreneur, you are reading this, these questions will be like knives in your eyes. Now, to be clear, I am not saying that these questions are not legitimate, they are, well, at least most of them are. What I’m saying is, they are painful for every entrepreneur to hear, and answer.
Here is the thing… In most instances these questions are intended to test you and nothing more. Your answer is actually less important then the way you react to the question being asked and are prepared to get a response.
I asked some of my smartest friends and colleagues for questions they have been asked and how they would recommend entrepreneurs answer them.
There are some major gems here so read carefully. You’ll see the name and title above the question that person has been asked and below, you’ll find their proposed response.
Joseph Essas, CTO OpenTable
“What will you do when everything you are telling me, will not work one day?”
“I don’t know what will work, but I do know that I surround myself with very smart people and we have enormous passion for XYZ. We see a need and we have a desire to solve it. We will approach everything very incrementally and will learn as we go using data, not feelings.”
Tuvia Elbaum, CEO and Founder ZUtA Labs
“When are you closing the round?”
“Obviously you don’t want to go with a “soon” or “when we have a lead” or “on February 1st” etc – because anywhere outside Silicon Valley, where there’s no competition for investments, and if you’re reading this post, you’re probably not one of those entrepreneurs that investors will fight for – then investors will take their time and not feel pressured.
Therefore, you have to have a solid answer for that question. From my experience, best answer is a date that is set by a strong milestone, and if the milestone is an “external” milestone, even better.
Meaning, if you can say you’re closing the round in 2 weeks, because you’re launching the product in 2 weeks, that’s good, but since it’s only up to you to decide if you launch or not, you might postpone it, and therefore less pressure.But, if you can say you’re launching during TechCrunch Disrupt on stage in 2 weeks, well, you can understand why the pressure will be higher.
But most important rule – raising money is a relationship between founders and the investors. This relationship can be built in 1 meeting, and can take a year – but it’s a relationship. You can read as many blog posts as you want – the bottom line is getting the investors to trust you and invest in you. There’s no blog post for that…”
Bob Rosenschein, CEO of Curiyo; former CEO at Answers.com
“If your feature/product is so good, couldn’t Microsoft/Google/Facebook copy it if they put all their resources on it?”
“Yes, of course, few technologies cannot be copied by a large, determined competitor with vast technical and marketing resources. The trick is to find an area new enough, different enough, large enough, and small enough (!) to allow the entrepreneur to develop a dynamic community and target market fast. In the immortal words of Ries and Trout: “Find a weakness in the leader’s strength and attack at that point”, namely something that’s hard for the big boys to change, due to their very success. And there are a range of recent examples, from across the world of technology.”
Eran Shir, Co Founder and CEO of Nexar
“Why do you think you can get into a market you have zero experience in and play with and against giants like car manufactures etc.”
“To which my response is typically to focus on the secular shift the industry is undergoing, moving from ‘cars with CPUs’ to “Computers with wheels” – and hey, we know computers 🙂”
Nitzan Cohen-Arazi, COO and Co Founder, Jolt
“What prevents another team from just doing the same thing you do?”
“It’s 2017. Technology is not a barrier anymore for most web startups; like in the famous book “The 22 immutable laws of marketing” – it’s about inventing something you can be first in; and we currently have that huge power, the power pf being first.”
Clark Valberg, CEO, Invision
“How can you expect to get to scale with a remote company?”
“Mind you this isn’t a “bad” question it’s a very fair one and and one I expect will become both more relevant, as more companies choose the remote path, and at the same time easier to answer, as the broader market produces more examples of if and how it can be done. My answer to this was simply to prove that we’re weren’t blind to the challenges and we’re prepared to not only compensate the potential risk, but fully embrace the opportunities of remote.
I think the general approach here applies to many kinds of questions, and is an important communication skill for any entrepreneur; the ability to confidently confront, and empathetically elaborate on the concerns of stakeholders (customers, employees, investors, etc) and passionately make your case with the humility to admit you don’t have all the answers today.”
Tomer Tagrin, Co Founder, CEO, Yotpo
How do you know that you will be able to build and lead an empire 5-10 years from today?”
“I would advice answering it that you know, because you know in a self confidence, non douchey way.”
Robert Scoble, Really? Google him.
“The ones I’ve seen get funded have:
1. A strong story about why it is the one.
2. A strong story about the team and why every person there is important to the bigger story.
3. A strong story about market acceptance (our sales are doubling every month, etc etc).
If you are strong in all three categories, you probably will get funded.
So, when I’ve been in investor meetings with entrepreneurs they usually get asked questions about all three areas. By the way, one thing I’ve seen is that the best entrepreneurs can get funded just with a story and without a deck. Or, in Andy Grignon’s case, he made a deck of cards to explain what his company would do.
But, I don’t know if there’s a good question for me out of that. I usually just ask “so, what has you passionate about building a company?” The best entrepreneurs can take any question and focus it back to what they want to talk about: hopefully their company.”
Benny Shaviv, CEO, CoFounder, Fitness22
“You say you have 10 alpha customers you’re working with that are waiting to buy your software, how many of those can you get Letters Of Intent from?”
“We’re not going to ask for LOI’s from any of of them, because getting an LOI means they have to get corporate lawyers involved, and thats out of their normal software evaluation process. But I WILL give you 10 names of buyers, and phone numbers, and you can talk to them yourself.
In fact, you can visit them. Moreover, if you have similar companies that YOU know are possible target customers, we’re more than happy to demo them our idea and then you can ask them if its something they’d buy.”
Itai Tsiddon, Co Founder and Director of BD, Lightricks
“How does this become a billion dollar business? (market cap not revs)”
“You could divide the answer to two.
First, it’s a good idea to understand the entity you’re dealing with. When you’re dealing with true US tier 1s, where this question is raised seriously by professionals, it has to do with the size of the funds and expected outcomes they need to justify their modeling. Decent overview of what that means can be found here.
Israeli funds are generally smaller and as a result can legitimately seek more “”modest”” results (use the fake quotation marks because in any normal market, hundreds of millions of dollars made from very little is a lot. Venture however has it’s own characteristics). I’ve been in the room at a top 5 fund the day after a ~500mil acquisition of a portfolio company and they genuinely weren’t too excited about it. That situation is different with an Israeli fund, which can be almost an order of magnitude smaller – even at the local tier 1.
Second, to the substance: as a bootstrap company that was more operationally inclined than promotionally so (and the flat out truth is that as entrepreneurs our job is to do both, a point Bill Gurley made very well elsewhere), we were not too good at telling our story as one fit for the venture model. The real story itself is not just a question of narrative capabilities – it shows how thought out into the future the concise bet of the company, or it’s play, are.
As we matured and our ecosystem did around us, we began believing in the (new) recurring revenues model in our market (mobile tools software) as something that shows a path from double digit revs to triple digit ones. This, combined with the infrastructure of a battle tested team, technological superiority, and proven product excellence helped us chart a path forward that shows the possibility of venture scale results.”
Oren Barzilai, CEO, Co Founder, Start A Fire
“So are you going to sell your company in couple of years for $100M?”
“The problem with this question is that the press keep telling us entrepreneurs that we shouldn’t sell early, and that VCs wants a billion dollar company. So some people think the answer is “No, i’m going for the billion dollar club”.
It’s a bad answer, mainly because people won’t believe you and also because if they do its not so smart.
In my perspective, the correct answer is ” I’m building a company that is going to be independent and built to go all the way, and we will consider offers when we will get them considering the market and data that we have when we will get the offer”.
Notice that it’s not just the “correct answer” its the right way to build a good company. You need to understand that you are there for the long run and that you aren’t dependent on a specific company that might acquire you some day.”
Orit Hashay, Founder and CEO, Brayola
“Brayola’s offices are in Israel and New York and the company’s customers are in that States. Are you going to move to New York?”
The success of a venture is based on an assortment of variables. If there was a silver bullet that always worked all new ventures would be successful. At the end of the day, an entrepreneur, who already sacrifices so much of his or her self, has to look at the whole picture and figure out what works best for them. While making that decision they need to factor in a wide range of professional considerations: being close to the market, being close to the product’s staff, the ability to juggle both, the ability to hire the right people, as well as personal ones: family and children.
There isn’t one right answer. There are people that grew huge companies working from their home country and people that moved to the States. There are those that had an easier time raising funds by moving and those where moving back to their home network connected them to the right investors.The bottom line is that relationships with investors rely on trust and familiarity. A good investor knows that even an entrepreneur has a full life, and that it’s within this full life that the start-up was created and it’ll also eventually be the reason for its success.
Tzameret Fuerst, Co-Founder and former CEO of Circ MedTech
“Israelis/Israeli companies don’t understand marketing and don’t know how to reach consumers. Why do you think you will succeed when so many have failed?”
Are you suggesting you don’t believe I can do something that hasn’t been done here in Israel? If that’s the case, we’re probably not a good fit because I’m going to do something that no one in the world has done, let alone Israel. The World Health Organization and the UN have announced one of the most ambitious public health initiatives in our generation, and our innovative device is the only way their are going to succeed to reach 20 million men and save 3.4 million lives. And, I am going to make it happen.
Oh, and this is how….[here is where I would show that we’re smart enough not to go B2C because that would be a financial and logistical nightmare in Africa, and I present our well thought out and researched B2B strategy…].
Aviel Siman Tov, Co-Founder & CEO at FairFly
In my (humble) opinion, there are two questions. People always say, “Hope for the best, expect the worst”. But what if everything goes as well as you expected? It’s a question that could catch you off guard (despite common perception), because more often than not, you’ll prepare for questions challenging what you’ve accomplished and plan to achieve. The aforementioned question is reserved to Unicorn Hunters, the investors looking for enterprises with 10-digit value potential, and therefore isn’t asked often – at least from my personal experience. If I were to be asked though, I’d describe how the industry, and possibly the world, will change following our success; how processes that seem trivial nowadays will become obsolete.
The other question has a potential to be the hardest question of all, but if you have the company’s best interest in mind, it should be very easy to answer – Do you intend to hire a CEO to replace you? Do YOU have the necessary experience to take the company to the top? This type of question might cause a pit in your stomach but if you truly have the team, vision and company success at the highest priority, the following approach should feel natural: “I will do everything in my power to meet the team, founders’, board of directors’, investors’, and my own expectations. If needed, I’ll be the first to step up and declare the company has arrived to a point where someone more qualified than myself is needed, and that I will take any position that will benefit the company.
A mistake made by many of us is stating that we’ll happily step down, if a CEO of the late Steve Jobs’ caliber would want to manage their company. This attitude, from someone who only just founded a company, doesn’t reflect well. The answer and the attitude I recommended earlier applies to all startup founders. “We’ll execute any and all tasks required by us from the company, the company is of higher value than the egos and titles of its founders.”
Ok, as you can tell, I wasn’t kidding when I said there’ll be major gems in these answers. Thanks for reading and thanks to all who participated!
I’m thinkin there’ll be a follow up to this post in the near future…