Startup Funding: Avoid Making VCs Feel Ignorant

The Art of Easy Questions in Investor Pitches

Throughout nine years of experience as a venture capitalist, a common misstep observed among founders is the misapplication of advice to pose questions to potential investors during pitch meetings.

Often, these inquiries can prove disruptive, diverting attention and potentially eliciting a defensive response from investors. To mitigate this, I guide founders with a strategy rooted in my prior experience as a high school mathematics educator, emphasizing rapport building, sustained engagement, and the establishment of a common understanding. The cornerstone of this approach lies in the strategic deployment of questions requiring minimal cognitive effort.

Focus on Low Cognitive Load

Essentially, the recommendation is to pose only straightforward questions to investors.

Consider a scenario where your company specializes in paper mache products. Initiating a meeting by soliciting the investor’s perspective on the paper mache industry would be ill-advised. Lacking a pre-existing thesis on the subject, such a question would likely induce anxiety, akin to a student unprepared for a classroom inquiry.

The investor might then attempt to formulate a plausible response, but would likely recognize the superficiality of their answer. Subconsciously, they would seek to conclude the meeting promptly to avoid further challenging questions.

Timing is Crucial

If securing investment is your objective, this is not a desirable outcome. Reserve more complex inquiries for later stages, when you are evaluating offers from multiple interested investors who have already acknowledged the viability of your company. During initial conversations, prioritize simple questions, often beginning with a yes or no format.

As a former teacher, I discovered that posing easy questions to students was an effective engagement technique. Complex questions often resulted in hesitation and silence. However, a simple question, such as “What operation is the inverse of addition?” immediately elicited a response. Apply this same principle to investor pitches.

Building Rapport Through Engagement

In the paper mache example, you could inquire whether the investor has ever created anything using the material. If your company develops an automated Facebook advertising tool, ask if they have prior experience running online advertisements. Yes/no questions are perfectly acceptable at this stage; the primary goal is to foster a dialogue, not to assess the investor’s existing knowledge. With experience, you can adapt your pitch based on their answers, though this isn’t essential initially.

Let’s examine some effective strategies. If the investor confirms having run Facebook ads, follow up by asking if the process was straightforward. This maintains engagement and builds rapport, a key objective. It’s probable they will acknowledge some level of difficulty.

Creating a Shared Reality

This response moves the conversation towards establishing a shared understanding. You’ve subtly highlighted a core premise of your pitch: that running advertisements can be challenging.

If the investor hasn’t run ads themselves, you could ask if they’ve simply noticed advertisements on Facebook. The phrasing allows for an easy out ("no, not really") while also providing an opportunity for elaboration.

Their response will guide your next question. You might then say, “Interestingly, despite appearing simple, a significant amount of effort goes into creating these ads!” This gently prepares the investor to focus on Facebook advertising, confirms their engagement, and begins to establish a common ground. This questioning technique is valuable throughout your pitch.

The Power of "What's Your Guess?"

Another effective question type, particularly useful early in the pitch for building shared understanding, is “What’s your guess?” For example, “What’s your estimate for the monthly cost of hiring a marketing agency to manage Facebook ads?” These questions are most impactful when there’s a substantial difference between the typical response and the actual cost.

If the average guess is $1,000 per month, but the reality is $20,000 to $30,000, the discrepancy will be surprising and memorable. This allows you to convey a key aspect of your story without explicitly stating it. The investor will feel more connected to your narrative because they participated in its creation by aligning their perspective with yours.

These “guess” questions don’t need to be numerical. You could ask, “In which state do you believe there are the most mailboxes?” or “What is the most common color for infant clothing?” as long as the question is relevant to your overall narrative.

Points to Steer Clear Of

Employing questions framed as “Did ya know?” should be approached with caution, as they can sometimes appear unserious. For instance, posing the question, “Did you know that contemporary commercial airliners generally have a lower cruising speed compared to those from the 1960s?” might not be ideal.

A more suitable example could be, “Did you know that projections indicate online advertising expenditure will exceed one trillion dollars by the year 2025?” However, a question like, “Did you know that running advertisements on Facebook presents challenges?” is simply restating a fact in interrogative form. Avoid this practice.

Incorporating straightforward, easily processed questions into your presentation can effectively maintain the investor’s focus. This approach is also likely to foster a positive rapport, potentially influencing the investor favorably.

Refrain from attempting to dispute an investor’s expertise early in the discussion, unless presenting a surprising yet logical insight is crucial to your narrative. Should such a challenge be necessary, deliver it with tact and consideration.

When implemented effectively, questions requiring “yes” or “no” answers, or brief responses, can contribute to establishing a common understanding between you and the individual you are pitching to. This shared understanding is vital for securing a subsequent meeting and is fundamental to gaining their investment.