What Questions to ask potential Investors.

Joe Gearty

I am in the final stages of talking to an investor who is very interested in my new company. He has read my business plan, cashflow statement and is very impressed with what I have to offer. I am looking for about 10-15 questions to ask the investor before I commit to him.

Please advise.

Thanks

lanternman

What will he/she bring to the business?
How much are the willing to invest an for how much?
What type of shares are the looking to get?
What sort of returns are they expecting?
What plans have you made to buy them out in time?
Ensure that you do get paid before handing over shares?
What experience do they have in your area? How successful have they been?
Do you have anyone else that might possibly invest?
Would it be possible/better to borrow from the bank?
Where do they see your company going?
Why do they want to invest?

antoinolachtnai

What role do they see themselves playing in the running and strategic planning of the company.

TheInquisitor

Could he tell you another investment he has made and could you talk to that company's directors to hear their views?

antoinolachtnai

Be careful about your approach, mind you, money is money (generally speaking) these days. But you do have to be sure you know who you are dealing with and that you understand and will get benefit from the deal you are entering into. Best of luck with it.

W!zard

Does he want to be an Active or Slient Investor?

The shareholding agreement is the most vital part of closing the deal that will protect you and protect his investment, so ask him if he has any special requirements that must go into the shareholdering agreement. See if you can get your hands on a previous shareholding agreement he has with previous / existing businesses.
As they say, the devil is in the details

515

I would have thought most of those questions would already have been discussed if you're at the final stages... but if not, ask away. I don't know about asking to speak to the board of any other company s/he has invested in.

One thing that you might want to clarify is whether s/he would be willing/able to put in more money if it is needed. I don't know if you have further rounds of investment planned, but even if not, you might find it harder to get going than either of you expect, will the investor be ready to invest more?

antoinolachtnai

Conversely, if your business is enormously successful, it will probably need further investment.