No, as the one who came up with the product/service and company in the first place you can – and certainly should – grill your potential investor too.
After all, how do you know whether or not they’re the right fit for your business? Often it’s a case of working or partnering together then finding out further down the line if you gel. However there are certain areas you can get straightened out before you take the plunge. For instance, there’s no harm in asking your potential investor the following questions so that you have a better idea where they’re coming from:
1. Their track record. How many successful businesses have they already invested in? You are looking for someone here with a good track record. If they have a history of failed investments then that definitely doesn’t bode well – unless they can justify why the other businesses didn’t make it (and it makes sense to you).
2. Are they a start-up investor? Some individuals enjoy the excitement of being in at a business venture right from the start rather than waiting until it’s already a successful going concern.
3. Do they know the industry? Obviously it helps if your investor is familiar with the individual players and sales outlets in the sector you’re hoping to break in to. That way much of your networking and contacts collecting has already been done.
4. Have they considered an exit strategy? For some investors this is a priority in order for them to ensure they can recoup their cash and move on to the next big thing.
5. Passive or a partner? Just how much of a say and day-to-day role is the investor looking for in your company? And, by the same token, how much control do you want to yield?
6. One-off or long-term investment? Will they be prepared to stay with your company at a later stage when the need for further investment might arise – or are they only prepared to put in a one-off lump sum at the start?
If the potential investor doesn’t supply the answers to the above, then do ask. You’re allowed! And anyway, it’s far better to ask at the start before realising a year down the line that you’ve chosen the wrong funding partner.
Raj Dhonota is a serial entrepreneur and investor in startup businessesRelated: Seven ways to get funded
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