Investor Questions for EF Asia

Opening Questions

Problem and Solution

Mission & vision

Go to market and customer acquisition

Traction

Economics and Market Size

Defensibility

Competition

Commercials

Financials & Funding

EF (an example)

You will need to prepare for your investor questions as thoughtfully as your pitch. Each
question should have a well thought out, to some extent scripted answer, that allows you
to sell your business and progress to the greatest extent. Your responses should improve
throughout the fundraising process, as you iterate them with every investor meeting. Every
year, teams that forget to work on their investor questions fail to engage investors. Often it
takes them much longer to raise as they develop their responses on the fly.

These questions are also a useful prompt to start thinking about your business model.
Remember to do secondary research to answer some of these questions and to clarify your
thoughts on what you’ve learnt over the last couple of months.

In the run up to Investor Day you should be going through your investor questions ​every
day​. You should be practicing with your cofounder, speaking out loud - iterating and
crafting your answers as you go. C
​ reate a script and practice it as if it was the pitch.

The pitch will get you the meeting, the investor questions will get you the money.

Some tips

+ Remember investors are human. At the seed stage, they often invest in ​people and
they need to want to work with you.
 + Answer the question first. This is a common mistake; EF founders often give a
roundabout answer and this affects the investor’s first impression of you.
+ Do give full answers to the questions you are asked. Put yourself in their
shoes and think about the actual questions they are really asking.
+ For questions that are general, eg. “Why do you target this market?”, make
sure you have three points for each question. This gives the impression that
you have clarity in thinking and know your stuff.
+ Passion and vision. Know why you are working on this and communicate why you
care. Show how big it could become and why that’s exciting.
+ Add in stories. Use stories and anecdotes to bring your company to life, particularly
if you’re answering a technical question with technical terms to a non-technical
investor. By telling stories about customers, or quirks of the industry, it shows the
depth of your understanding.
+ Know your numbers. There are n
​ o excuses​ for being sloppy on numbers.
+ Strong beliefs, weakly held. Your answers may change as you have new information,
but you need to be confident in the delivery of your answers. Investors are looking
for confidence and conviction. This is something a lot of you are lacking.
+ Remember it’s a conversation. Engage them. It’s unlikely you will be standing
up and pitching (this isn’t shark’s tank). It’s more likely you will be sitting at a
table having a chat. (I can’t emphasize enough how well this works)
+ Each answer should be a sell. You are trying to put your best foot forward, even if
they ask a difficult question, how can you make sure you answer in a way that paints
you in the best light possible.
+ Surprise them. I love meetings where I walk away having learnt something. Tell the
investors something surprising about how your industry works, or current things
that customers do.

NB The list of questions below are thought starters. It is unlikely investors will ask
you these questions directly, but through the conversation you have with them, they
will want to know the answers to them.
Opening Questions

● “So, tell me what you’re up to?”

● “What are you guys building?”
● “What's the one sentence description of what you do?”

This is your opportunity to give your soft pitch - a short introduction to what you do and
why you care about it.

Problem and Solution

● What problem are you solving?

● How are you solving it?
● What is the impact on / cost to the customer for having this problem?
● How do customers currently solve this problem? (Use this question as a way to tell
stories about customers you have interacted with)
● Is your product an entirely new category, or an improvement on a product or hack
that already exists (the latter is easier)?
● Why is your solution 10x better than what currently exists?
● Can you give me a demo of the product?
● Talk me through the product road map.
● What IP does the company have (patents, patents pending, copyrights, trade secrets,
trademarks, domain names)?

Mission & vision

● Why did you start this? Where did the idea come from? What are your motivations?
● What's the grand plan / vision?
● Why do you care about solving this problem?
● How does this product change the future? What does the future look like with your
product in place?
 ● Have you invested your own money? Why or why not?
● What do the next 6, 12 and 18 months look like for you? For your team?
● What do you think you’ll be worth in 5 years?
● What’s your exit strategy?
● What keeps you up at night?

Go to market and customer acquisition

● Who is your user or client? Who is your customer? (i.e. is the person that pays for
the product different to the person who uses it?)
● How will you reach them?
● How will customers / users discover your product?
○ How much work do they need to put in to understand your offering?
○ How are you currently distributing your product? How will you do this at
scale?
○ Will you need any partnerships to distribute your product?
● Once you have customers, what will you do to keep them? Do you have any
stickiness embedded in your product? i.e. how do you stop them from leaving?
● What is the cost of acquiring a customer and what is the lifetime value of that
customer? This is a ​pretty good explanation​ ​if you’re unclear.
● Who are the buyers/decision makers? Who is the named person within the
organisation who you will be selling to? What is their job title? How big is their
budget?
○ Are these the same people as your customers? How do they relate to the end
user?
○ Are there any other stakeholders , and what are each group's
motivations/incentives?
○ What position does the problem you're addressing fall on the customer's list
of priorities?
○ What procurement process will you have to go through (B2B)? How long does
this take? What can you do to get round it?
○ How long does it take to go from first contact with customer to sale?
○ Are they actively looking for a solution like yours?
○ What other options are they currently using / considering instead?
Traction

● What traction do you have?

○ Who's signed up already?
○ Who's paying?
○ What’s your conversion rate?
○ What’s your engagement like? How often do people use the product and for
how long? How is this changing over time?
○ What have they said?
○ How excited are they?
○ What feedback do they give?
○ What particular feature/benefit convinced your existing customers to cross
the line and sign up?
○ Tell me a story about your customer that helps me understand the
relationship
● What other proxies for traction to you have? e.g., partnerships, customer pipeline,
grants etc

Economics and Market Size

● Basic questions investors will ask:

○ How do you make money? What's the revenue model?
○ Gross Profit = Revenue - Cost of goods sold. What is your gross profit margin?
● More in-depth questions to answer for your business: What are your ​unit
economics​?
○ What are your Monthly recurring revenue (MRR)?
○ Customer Lifetime Value (CLV)?
○ Customer Acquisition Cost (CAC)?
○ Churn rate?
● How big is the market? What is your T
​ AM​?
○ What's the top down calculation?
○ What's the bottom up one?
● Is the market growing?
 ● In the next 18 months, what % of the market will you capture?

Defensibility

● What barriers to entry can you set up in your business?

○ For example, do you have access to a network of customers?
○ Do you have IP/ patented technology?
○ Do you control certain factors, eg. the supplier network, exclusive licensing of
a technology, exclusive partnerships etc?
● What are the biggest risks associated with the business?
● What comfort do you have that the company’s IP does not violate the rights of a
third party?
● Do you have any regulatory risks? If you do, how do you navigate this?
● Are there any product liability risks?
● If there are big risks, how are you combating them?
● (If you have an AI/ machine learning company) How much data have you been using
to test your product? Is the critical mass of data you need to develop a good MVP?
● (If you are in a medtech space) Does your process meet the Gold standard?

Competition

● Who are your three most relevant competitors and why you are better?
● What would be their best argument for why they are better than you?
● What is the biggest competition for your customers? Inertia? What would they say?
● What is the key feature that distinguishes you from your competitors and how
defensible is this?
● What prevents others from copying you? Why won’t larger, better resourced
organizations do the same thing you are trying to do?
● What share of the market do specific competitors serve?
● Are the major competitors' sales growing, declining, or steady?
● What is your unfair advantage?
○ What proof points do you have so far for this?
 ○ Where does your defensibility come from? (note, first mover advantage is not
a viable answer. You should be looking for some sort of stickiness in your
product (i.e., it has high switching costs), or tech defensibility).

Good to have a table of comparison like this

Feature 1 … Feature X

Your Company ✓ ... ✓

Company A X ... X

Company B X ... X

Commercials

● What is your profit margin?

● What are your ​unit economics​?
● How big is the market? Is it growing? What is your ​TAM​?
● How much revenue do you expect to make over the next 18 months?

Risks

For each of these you should have a mitigation plan as well

● What are the biggest risks associated with the business?

● What legal risks do you have?
● Do you have any existing IP related issues?
● Do you have any regulatory risks?
● Are there any product liability risks?
● If there are big risks, how are you combating them?

Financials & Funding

● What is your current burn rate / average burn rate for the last 3 months?
● What is your current runway?
● What is your gross margins and COGS? (Added 11 July)
● What is your profit margin?
● What is your ARR and MRR?
● When do you break even?
● What is your main cost driver?
● How does your profit margin change over time? And why?
● How much equity and debt has the company raised; what is the capitalization
structure?
● What future equity or debt financing will be necessary?
● How much of a stock option pool is being set aside for employees?
● How much burn will occur until the company gets to profitability?
● What are the key metrics that the management team focuses on?
● How much is being raised in this round?
● What is the company’s desired valuation cap?
● What is the planned use of proceeds from this round?
● What milestones will this round of financing help you achieve?
EF (an example)

Vision
● Why did you start this? Where did the idea come from? What are your motivations?
In 2011, founding a startup was not seen as a viable career path for the most ambitious. It was
often seen as a career of last resort, while finance and consulting were seen as the most
desirable career paths. After Matt spent time at MIT, he realised that this didn’t have to be the
case and that the most ambitious and talented ​were aspiring to become founders and were
building successful companies.

We then looked into solving the barriers that prevented UK graduates from building their own
startups.

● What's the grand plan/vision? Why do you care?

We want to make founding a startup the default career for the most ambitious. This matters in
terms of developing new innovation, but also in terms of maximising the potential of talented
individuals outside of Silicon Valley.

We want to change the status quo around how companies are built. There are too many
accepted road blocks that need to be removed to encourage bigger and better entrepreneurship.

● How does this product change the future? What does the future look like with your
product in place?
In the future, talented individuals turn down lucrative roles in finance or top tech companies as
they know that building their own startup is the way to maximise their career upside. They know
that founding a startup is the most prestigious and stretching way to spend their career.

Customers and channel

● Who is your user or client? Who is your customer? (i.e. is the person that pays for
the product different to the person who uses it?)
Our user is ambitious technologists. Our customer is the Limited Partners that invest in our fund.
We have three user groups - professionals, researchers, graduates. They have the same needs
and can use the product in the same way, but will need targeted marketing messages. Our
‘beach head’ for year one is to focus on graduates as they are the early adopters for this industry
(have a lower opportunity cost/lower living costs/higher risk appetite).

● How will you reach them?

We reach these users through direct outreach from our talent team.
+ We actively source 3000 people each year alongside a programme of sales events.
+ We also have partnerships with academic institutions and research institutions.
+ Once we have reached them, we convert them through 1-2-1 interactions. Over time this
will scale to larger events that allow us to sell to many potential applicants
simultaneously.

● Who are the buyers/decision makers? Who is the named person within the
organisation who you will be selling to? What is their job title? How big is their
budget?
We sell directly to the user.
○ Are there any other stakeholders , and what are each group's
motivations/incentives?
Stakeholders include parents/spouses, academic institutions, angels and VCs, LPs, corporates.
○ What position does the problem you're addressing fall on the customer's list
of priorities?
Career concerns and lack of career choice is often front of mind for the most ambitious that feel
frustrated by the role they have taken/career choices on offer. For university graduates, they are
in an environment where they are being pressurised by the university and their family to make
choices about their career.
○ What procurement process will you have to go through (B2B)? How long does
this take? What can you do to get round it?
We don’t have to go through a procurement process, but while we focus on graduates we have to
align with the academic cycle. This means that despite beginning sales/recruitment in Sept 2011,
we cannot start with our first cohort until June 2012.

● Do your customers already know they want what you have?

Our early adopters are actively seeking a solution for this - demonstrated by 400 applications in
our first year with no brand or track record. They are actively seeking alternative career paths
and routes into entrepreneurship. You can see this through increased growth in careers fairs like
Silicon Milk Roundabout and by looking at data from university career services.
○ Are they actively looking for a solution like yours?
Early adopters are actively looking for entrepreneurial opportunities through their university
career services, department and through local startup ecosystems.
○ What other options are they currently using / considering instead?
Users who are actively thinking about startups are considering joining an entrepreneurial
company, or potentially forming a last minute team/idea to join accelerators like Y Combinator.
● Once you have customers, what will you do to keep them? Do you have any
stickiness embedded in your product? i.e. how do you stop them from leaving?
Once we start working with our users we have a close relationship with them. We are able to
build solid advisory relationships and see our users come back for career advice and startup
advice well beyond their interaction with EF on the programme.
● What is the cost of acquiring a customer and what is the life time value of that
customer? This is a ​pretty good explanation​ if you’re unclear.

Traction
● What traction do you have?
○ Who's signed up already? Who's paying? What’s your conversion rate?
In our first year, we had some solid indicators that users wanted what we were building. We
hosted events across British universities and had more than 750 people attend. We then had 450
applications for EF1 just 4 months after we had founded the business. We made 36 offers, 90%
of which were accepted.
○ What’s your engagement like? How often do people use the product and for
how long? How is this changing over time?
We have high user engagement, minimum weekly interaction. To improve stickiness before the
programme starts, we have a process to keep in touch and engage users to make sure that we
understand any concerns they may have.
● What other proxies for traction to you have? e.g., partnerships, customer pipeline,
grants etc
6 months after we were founded we had paying sponsorships with 6 corporates. We had a
partnership with Google Campus and Nesta. We had an advisory board of both our users and
corporate partners to demonstrate the depth of their engagement.

MARKET AND COMPETITION RELATED QUESTIONS

Competitors
● Describe your three most relevant competitors and why you are better?
1) The large tech giants. In 2011 there was increasing excitement about working for
Google/Facebook/Amazon, however ambitious tech graduates often saw these companies
as the only ‘prestigious’ way to gain startup experience. They felt that they would learn
how to build a startup from their experience with these companies, but would rather get
started on building their own thing right away.
2) Startups. In 2011, startups struggled to recruit graduates as they didn’t have the budget
or time to work directly with the universities. The most entrepreneurial students were
seeking out startups to work for as a way of developing their founder skills, but most
would prefer to startup straight away, rather than delaying through working for someone
else.
3) Accelerators. Accelerators require you to be in a team with an idea, alongside traction.
Most of the individuals we have spoken to are unable to build a team independently.
● What is the feature that distinguishes you from your competitors and how
defensible is this?
Unlike any other startup support programme, we select individuals, rather than teams. You don’t
need an idea to join us. The ecosystem, including investors, doesn’t believe it’s possible to build
teams from scratch, or to support individuals without ideas - we believe this is incorrect and we
have strong hypotheses around how this will work.
● What prevents others from copying you? Why won’t larger, better resourced
organizations do the same thing you are trying to do?
For VCs and accelerators, they don’t believe supporting individuals pre-team and pre-idea is
possible. They also don’t have an operational or financial model that would support startup
creation from scratch. Particularly for VCs, they have restrictions around how their funds are
deployed which means they couldn’t go earlier stage.

Commercials
● What is your profit margin?
 ● What are your ​unit economics​?
● How big is the market? Is it growing? What is your ​TAM​?
● How much revenue do you expect to make over the next 18 months?

Risks (for each of these you should have a mitigation plan as well)
● What are the biggest risks associated with the business?
● Do you have any regulatory risks? If you do, how do you navigate this?
● Are there any product liability risks?
● If there are big risks, how are you combating them?
We are using technology to help unlock the science behind building even more effective
teams. We analyse and record data each week so that we understand how to build better
teams and feed these learnings into our selection process. This knowledge helps us to build
a layer of defensibility into the work that we are doing and differentiates us from other
accelerator like Programmes.