Could Your Startup Answer These 23 Pitch Competition Questions?
If you are an entrepreneur running your own startup company, pitch competitions are a normal part of your life – almost as common as the colorful beanbags, ping pong tables, and free beer on Fridays.
Pitch competitions are a great deal for entrepreneurs and startup companies. During these events, entrepreneurs get a chance to pitch their startup company to multiple investors with the hope of raising capital for their startup or building a partnership with an investor.
Even for those who are unable to secure funding, pitch competitions are still a great way for the entrepreneurs to expand their network, get some valuable feedback on how they can grow their new company, and gain some valuable exposure for their products and services.
While the opportunities are many at pitch competitions, the competition is also fierce. To secure the necessary funding, entrepreneurs need to have a clear strategy and to craft an excellent pitch that clearly communicates the value of their company within the allotted time.
After delivering your pitch, the judges or investors will usually ask questions about your company in order to evaluate its chances of success and whether it is a good company to invest in. The more the questions, the better, because this shows that they are probably interested in your and your business.
However, how you answer these questions these questions will play a huge role in determining the outcome of your pitching session. Answer them the wrong way and you will come out of the pitching competition with nothing.
To make sure that you don’t get caught by surprise, it is best to prepare for some of the questions the investors might ask about you and your company.
To this end, we have compiled for you a list of 23 pitch competition questions you are likely to encounter.
QUESTIONS ABOUT THE BASICS OF YOUR COMPANY
1. How Does Your Product or Service Work?
If you are going to successfully bring a product to market, you need to have a good understanding of how it works.
Knowing how it works allows you to clearly see how the product solves the problem you are trying to solve and to identify any flaws that might prevent it from being successful.
If you can’t clearly explain how your product works, you will have a hard time convincing investors to give you their money or partner with you, because it shows you don’t know your product well enough.
2. Who are Your Customers?
Are you trying to sell to everyone, or are you catering to a specific niche? If possible, your product or service should provide the most effective solutions to the specific needs of a very specific group of people.
If you try to appeal to everyone, you might end up not solving the problem effectively, in which case your product or service will flop. In addition, when you try to appeal to everyone, there will be a lot more competition to deal with, and it will become harder for your business to set itself apart from everyone else.
3. Why Do You Think People Want This Product?
Are you just developing a product with the hope that people will buy it? Even if you have already started production and made some sales, people could be purchasing the product out of curiosity, in which case the sales will stop once people are familiar with the product.
When answering this question, you need to show that you have done your market research and are certain that people are interested in this product or service.
QUESTIONS ABOUT YOUR GOALS
4. What Do You Want to Achieve Within the Next Six Months?
With this question, the investors want to know whether you are prioritizing the right thing, since focusing on the wrong thing could result in failure for your startup.
For instance, if you top priority is to hit huge profit milestones when you are barely making any sales, this might be an indicator that you are focusing on the wrong thing.
When it comes to answering this question, mention the most important metric you will be observing over the next six months, where you want this metric to be by the end of this period, and why this metric is so important to your startup.
QUESTIONS ABOUT THE TEAM
5. What is Your Background?
Investors want to know that you and the team behind your product have the expertise and experience needed to make the company a success.
They want to know whether you have any experience in the industry you are venturing in, not just management experience, and whether the team can effectively work together to grow the company.
Remember, the greatest predictor of a company’s success is not the idea, but how that idea gets executed, and execution depends on the people behind the company.
6. Why Did You Get Into This Business?
While you probably want to make money, this should not be the only reason why you started your company.
Steering a startup company from launch to success takes a lot of effort and patience. Sometimes, it might be years before you become successful.
For instance, Amazon operated for 7 years before becoming profitable. If your sole purpose for starting the company was to make money, you might give up before the money starts rolling in.
QUESTIONS ABOUT YOUR COMPANY’S COMPETITIVE EDGE
7. How is Your Product or Service Better than Currently Existing Products or Services?
For your product or service to be successful, not only does it need to be different from other similar products or services already in the market, it also needs to be better – it should either offer better service, last longer, it should be easier to use compared to alternatives, and so on.
If it doesn’t have an advantage over alternative products, you will be forced to compete on price, which is a poor strategy, especially when competing against huge, established companies.
8. How Easy is it to Improve Your Product?
Is it possible to easily make improvements to your product or service?
If the answer is yes, then there is a chance that a competitor might do just that and take away business from you.
Ideally, the unique selling proposition of your product or service should be something that other people cannot easily improve on.
If possible, get a patent for your product’s unique selling proposition, since this will prevent competitors from trying to duplicate and improve your product. Investors will also be happy to know that you have taken measures to protect your idea.
9. Who are Your Competitors?
As a serious entrepreneur, you need to take the time to research your competition.
If you cannot answer this question, this tells the investors that you do not know who you are up against and do not have a plan on how to stand out from them or poach customers from them.
Sometimes, when researching your competition, you might realize that there isn’t a lot of competition for your idea. However, don’t take this to mean that you are onto a great business opportunity. The lack of competition could actually be a sign that there is no market for the idea.
Therefore, you should aim for a market that has lots of competition, but where the current products and services are not effectively meeting the needs of customers.
QUESTIONS ABOUT PARTNERSHIPS
10. Are You Looking for a Partner or Money?
A lot of times, entrepreneurs go to pitch competitions because they are looking for funding to help them start or grow their business. However, this is not the only thing you should be looking from an investor. Aside from their cash, investors can bring a lot of value to your business.
They have decades of experience that could be highly beneficial to your new business, and they have a huge network of connections that might be just what you need. Sometimes, even the exposure that comes with partnering with a well-known investor can do wonders for your business.
Therefore, before bringing someone on board, ask yourself how you they can bring the greatest value to the business.
Sometimes, you might realize that the advice and guidance of someone with huge business experience is a lot more valuable than the money they would have given you.
11. Would You Consider a Royalty Program Instead of Giving Away Equity?
In most cases, when investors decide to give you their money, they will do it in exchange for a certain percentage of equity.
This means that you are giving them a certain percentage of ownership in your company, and they will get a similar percentage of the profits earned by the company.
Sometimes, however, investors will offer to give you their money in exchange for royalties on future sales.
Some investors use this as a way to hedge their risk, because they will get paid as long as the company makes sales, even if it hasn’t started making profits.
Taking on royalty investment allows entrepreneurs to raise cash for their new company without having to give away a share of ownership in the company.
In most cases, royalties are paid a certain period of time, or until the investor has recouped their investment plus profits.
QUESTIONS ABOUT YOUR COMPANY’S GROWTH
12. How Do You Plan on Creating Awareness About Your Product or Service?
There’s a phrase that says doing business without advertising is like winking at a beautiful lady in a dark room – while it is clear to you what you are doing, nobody else is aware of it.
If you want people to buy your products or services, you need to let them know about what you are selling.
With this question, the investors want to know if you have a plan for advertising your business, and if you know the effectiveness of your chosen advertising medium.
In other words, you should not simply be throwing money at your business. Instead, you should only be using money on advertising channels that will lead to an increase in sales.
13. How Much Inventory Do You Have?
Sometimes, various factors might result in your business seeing a sudden spike in growth.
For instance, following the exposure gained from attending a pitch competition or partnering with a renowned investor, their might be a sudden increase in sales.
With this question, the investor wants to know if you have enough inventory to cover such increases in demand, or if your products will run out of order (something that can hurt a young business).
If you have a sales tracking method that allows you to produce enough units to meet the demand for your product, this is good time to mention it.
14. How Scalable is Your Product or Service?
It doesn’t matter whether you just started your company or if you are already making profits, you need to always think growth.
Remember, investors want maximum return on their investment in your company, and if you are not growing, you are leaving earning potential on the table.
Therefore, investors will want to know if it is possible for your products or services to reach a larger group of customers, and how this can be done efficiently.
For instance, if you are currently serving 10 customers a day, what would it take your company to serve 100 or 1000 customers a day while keeping costs at a minimum?
15. Is It Possible to Mass Produce Your Product Without a Decrease in Quality?
This question is closely related to the previous question. Sometimes, mass production can be the key to growing your business.
For instance, by adopting the assembly line, Henry Ford was able to rapidly mass produce the Model T.
This allowed him to sell the Model T at a lower price than competing car manufacturers and still make more money than all of them combined.
QUESTIONS ABOUT PRICING AND REVENUE
16. What are Your Sales?
More often than not, investors will prefer putting their money into startup companies that have already developed a product and started making sales, rather than a company that has done no tangible thing.
If you can show them that you already have good sales numbers, they are more likely to come on board.
It is advisable to present this information as a spreadsheet tracking all your sales, as well as your operating expenses.
This simple thing shows investors that you understand where the money in your business is coming from and where it is going, and how much profit the company is making.
17. Who is Your Biggest Customer?
Sometimes, your startup company might have good sales figures, but majority of these sales could be coming from one customer.
While such a customer can help your company during its early stages, you should not be overly reliant on one customer, because if they stop buying, your company will be as good as dead.
When they know they are your biggest customer, they also have leverage with which to negotiate a lower price. With this question, investors want to know if there is a risk to the business in case a single customer pulls out.
18. How Much Does It Cost You to Produce Your Product or Provide Your Service?
As an entrepreneur, you need to figure out all the costs associated with bringing your product to market, including the cost of raw materials, production costs, packaging and distribution, and so on. Here, you need to include the cost of the equipment used in production, since you might need to replace this equipment regularly.
You also need to think about the costs associated with things like advertising. If you don’t understand the costs associated with running your business, it will be impossible for you to be as profitable as you could be.
19. How Much are You Selling Your Product or Service for?
With this question, the investors want to know if you are charging too high or too little for your products or services.
If you charge too high, then customers will opt for alternatives from competitors, and you won’t make as much as you could.
This could even lead to failure for your business. On the other hand, if you charge too little, you are leaving profits on the table.
The price you decide to charge for your products should be based on your production costs, your product’s unique selling point, competitors’ prices, and the profits you need from your products.
If you have a premium product, you should not be afraid to charge a premium price for it.
Actually, it is much better to create a high value product and charge a high price for it, than create an average product and start competing on price.
20. How Many Purchases Do Your Customer Typically Make?
Here, the investor is trying to understand whether your product is something people buy regularly, or if it is a one-time sale. If it is a one-time sale, you need to put a lot of focus on acquiring new clients.
If it is something people buy regularly, you should dedicate some effort to satisfying clients so that they don’t look for a similar solution elsewhere.
21. What is Your Attrition Rate?
Customer attrition rate refers to the number of number of customers your business losses each year as a percentage of your total number of customers. For instance, if you have 200 customers, and you lose about 10 customers in a year, that is an attrition rate of 5%.
With this question, the investors are trying to find out if you know how many customers you are losing, if you know why you are losing them, and if you are doing something to reduce the likelihood of losing more customers.
QUESTIONS ABOUT YOUR COMPANY’S VALUATION
22. How Did You Value Your Company the Way You Do?
Sometimes, when you ask for a certain amount of investment in exchange for a certain percentage of equity, investors might feel that you are asking for too much in exchange for too little.
In other words, they might feel like you are overvaluing your company, which is why they might ask this question to understand how you settled on that valuation.
When it comes to valuing your company for investors, there are three popular approaches you might opt for:
- The comparables approach, which finds a measure with which competitors are valued, such as enterprise value-to-sales or price-to-earnings, and then applying the same measure to your company.
- The mergers and acquisitions method takes a look at what other companies are offering when acquiring a company that is similar to yours, and then applying a similar value to your company.
- The proforma cash flow method estimates current value based on estimated sales and profits.
23. How Much Debt Do You Have?
Debt is not necessarily a bad thing. Sometimes, it is actually better to use debt financing to fund your business instead of giving away a portion of your company.
However, an investor might want to know how much debt you have to determine whether it is sustainable before putting their money in the company.
Bonus Question: How Much Money Does the Company Have, and What is Your Cash Burn Rate?
With this question, investors want to know if the company has enough money to cover operating expenses before you start making enough money to cover these expenses and hopefully make a profit.
If you are burning more money than you are making in sales, how long can you go without an increase in sales before you run out of money?
Pitch competitions are the perfect opportunity for entrepreneurs to secure funding for their startup companies, expand their networks, get some valuable feedback on how they can grow their new company, and gain some valuable exposure for their products and services.
If you plan on pitching your new business, you should expect the investors to ask your some questions about your business and your products.
How you answer these questions determines whether you will leave the pitch competition with any money, and therefore, the best approach is to prepare on how to answer these questions beforehand.
The 23 questions covered above are some of the most common questions you will encounter during pitch competitions.
Learn how to answer them and you will definitely have a smoother sailing during pitch competitions.
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