I get contacted by a lot of people who want to talk about their great idea for a new business. Nearly all of them want to meet for a coffee or chat.
I’m time poor and don’t drink coffee – there are unfortunately not enough hours in the day for me to talk in person with everybody.
So, as a substitute for caffeine I normally start with these eight questions:
- What is the product?
A brief description is fine, in fact if you can’t describe it succinctly that’s a warning sign straight away.
- How do you know it’s something that people want?
The only answer I’m really interested in is “because more and more of them are already paying for it”, so expand on that :-)
- Who is on the team?
Again, a brief bio/background is fine.
- How do you make money?
What are the unit economics?
- How will you overcome your obscurity?
What is your sales process? How repeatable is it? What does it cost you to get a new customer? Are there network effects? What about the idea will be remarkable?
- What is the competition and how do you compare?
If you don’t think there is any competition for what you’re doing, think harder!
- What are you doing that’s hard?
What will others find difficult to copy/replicate if you’re successful?
- What do you need?
How much investment are you looking for, and at what valuation? Or, if you don’t need/want investment, what specific help can others provide? What are your constraints?
Questions like these are a good way to test the viability of a venture. I’ve found that asking for this information ahead of a talking in person is a useful filter – it’s surprising how often I don’t get a response.
For some #3 and #8 are the difficult questions. If all you have is an idea, and haven’t given any thought to who you will need to work with and how much it will all cost, then you’re probably getting well ahead of yourself in talking to people like me. Until you understand your constraints you don’t really know what you need.
For others #4 and #5 are the toughest, because their idea doesn’t have an obvious business model. It’s important to make the distinction between a venture, which has some potential to make money, and a hobby, which is just for fun.
The best thing you can do to stand out from the crowd is to point me at a product that I can use and, even better, that you are already selling. It doesn’t have to be polished or even finished, as long as you have planned for the work required to turn it into something that is ready to be used in anger.
Remember, nothing impresses potential investors like scrappy execution. Most people don’t get that far.
Last, but not least, please don’t just ask me to refer you to the other better known investors I am fortunate to know. They are also easily contactable, are just as likely to reply to an unsolicited email and will probably ask the same questions as me anyway. If I don’t know you at all I’m unlikely to make an introduction.
After all of that, if you’re still interested, then your venture must be awesome and I look forward to hearing from you!