Know Your Investor (KYI) - 5 questions to ask potential investors

My good friend Craig reminded me why it's important for founders to evaluate their investors. "The average marriage lasts eight years while the average board seat lasts ten years"; you can read his post here. 

While funding is still a key driver, founders should avoid rushing to raise capital. Gaining traction or reaching P/M fit on a shoestring budget is easier today than it was a decade ago. Launching a startup has certainly become cheaper over the years. However, this means that entrepreneurs need to be more resourceful, resilient and sharp than their predecessors.

Raising funds from the wrong investor is much worse than your startup failing. The wrong investor can ruin you for all your future entrepreneurial endeavours. Startup ecosystems do a great job of filtering entrepreneurs. But they do a poor job when it comes to filtering toxic investors. 

As an entrepreneur, you learn the most by speaking to other founders. The knowledge and insights you gain will be fresh and unfiltered. So, before you meet a prospective investor, speak to founders that raised money from them before. Here are the questions;

• Did they share ideas on improving the business? Or did they only care about your KPIs? 

As a founder, you want to know if the investor thinks about the problem you're trying to solve while driving, jogging etc. You want an investor who believes in your purpose. Ideas and perspectives are what help you achieve your goal, not capital. 

• Did they do any random check-in to see how you were holding up or if they needed help? 

Being an entrepreneur can be a lonely journey. Anyone that has experienced the struggle of building a startup knows this well. Investors should care about your well-being to ensure you don't get burned out. Especially, in times like these when the whole world is experiencing a recession.  

• Did they introduce you to their network and accompany you to meetings? 

When investors see you in action, they can help you better. You can experience how others perceive the founders, the idea and its potential. Everyone boasts about having a waste network. But many are careful to open it or don't know how to leverage it. 

• What tech products do they use? Are they curious about using new tech products to improve their own lives?

All tech products, at some level, progress humanity. Tech constantly evolves, reconfiguring our norms, beliefs etc. You want an investor that knows and understand tech like the back of their palm. 

• What do they say about the founders that failed, and what's their relationship like now? 

Failure is hard on everyone. However, it exposes the true nature of people. Speaking with founders that failed (having raised capital from the said investor) will teach you vital nuances of the investor. Like in sports, your post-match behaviour can define you for the rest of your life. 

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