It was unbelievable and I’ll be writing about that sometime next week, so stay tuned.
Anyways, today I want to discuss some of the most common questions I see from Investors being pitched on funds.
The importance of the initial pitch with your investor cannot be overstated. How you answer the questions that they’ll ask you could very well determine if they allocate any of their capital with you.
I would strongly recommend for preparing for these potential questions when pitching, and any others that you can think of. Be confident, thorough, and specific. The more vague of an answer that you give, the more likely the investor will smell BS. (ala Dwight’s very insightful lesson to Ryan (Skip to 58 seconds))
Let’s get to it!
Question #1. How do you invest your money?
Investors are going to want to know exactly where your focus is, and if you want any shot of working with them they had better be getting your undivided attention.
What I mean by that is how can you possibly inspire confidence in potential LPs if you’re putting all your money elsewhere and worried about getting those returns.
Anthony Scaramucci from Skybridge Capital said he invests about 85% of his wealth is invested into his own funds.
He does this to clearly convey that he is all in on his strategy and his funds, something he says is a must or “otherwise it wouldn’t be fair to (his) LPs.“
2. Ask about your personal life?
You can almost always bank on the investor wanting to get to know you on a personal level.
These are not superficial relationships.
These are long-term, deep bonds where a high level of trust is crucial for success.
That’s why I’d recommend doing experiential activities with your investors to let allow them to get to know you.
If you’re able to connect with these individuals the better off you’ll be. Don’t be afraid to be open with them and manifest who you genuinely are. If you’re nervous about that than this probably isn’t the business for you.
3. Who is your biggest competitor? What strengths do you have over them?
This is a question that I think many fund managers don’t expect. You need to be extremely familiar with the competition around you and learn from them.
I’ve heard investors say, “Out of all of them, which one would you invest with?“. This shows them that you really do have an eye for talent and an awareness as to what works.
Most importantly, however, will be how you can articulate what your strengths are over your competition.
If you can effectively identify weaknesses in opposing funds and demonstrate the advantages that you bring to the table, you’ll be in good shape.
4. Under what circumstances would the investment fail?
Fund Managers want to avoid this subject as if it were an exploding volcano. While there is some strategy to that, this is something that needs to be addressed.
If you point out how the fund could possibly fail, and then display what provisions you’ve taken to prevent such an occurrence, the investors confidence in you will grow.
Remember that bumps in the road are inevitable and out of your control, but how you respond is entirely in your own hands.
5. Who ultimately makes the decision of whether to allocate a portion of the investment? Who has the final say?
There needs to be a sound foundation and hierarchy in place for your company by the time you pitch.
Who is in charge? What happens if multiple partners disagree on an action?
These are issues that at the genesis of your operation may not seem all that relevant, but with time may come to pass.
Therefore, it is greater to be prepared than to be sorry. Set clear boundaries and establish a chain of command.
Thanks for taking the time to review some of these fundamental questions with me. They are just a handful of things I would seriously prepare for if I were pitching.
I thought this comment from one of my coaches was very insightful.
He said to me “nothing is more satisfying than when an investor asks you a question and you are able to answer their question with an appendix slide.“
Preparation! Preparation is what puts us ahead of the game and invite all of you to invest your time and resources into taking the necessary steps in advance to be ready for what lies ahead.
All the best everybody,
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.