Spoke to a friend in an early-stage startup recently who met with a legal team to get advice on some contracts. Apparently, the conversation went a little sour when the lawyer started asking deeper, probing questions regarding financials and the business model.
I say, “sour”, because the mood quickly changed from cordial to combative, and the startup felt they were being attacked. The startup entered the room expecting a review of documents, not an interview. The entrepreneurs felt the lawyers were testing their resolve, preparedness, and “fit” as a client.
As terrible as it may seem to be barraged with tough questions, the lawyer asks great questions about monetization, assumptions around projections, customer/ user acquisition strategy, and the vision. In many ways, the lawyer provides the harsh reality of what startups and entrepreneurs face, especially when entrepreneurs believe raising capital will be “easy”.
- Good partners are those who will not only raise the difficult questions, but will help you to address them.
- If you’re not ready to answer the tough questions, then you’re not ready to raise funding. Investors WILL CALL YOU OUT.
- Take a step back from the day-to-day, and assess the strategic to-do’s and milestones you must satisfy.
- Tough questions… tough challenges… they can be seen as walls never to be overcome, or they can be seen as great opportunities. Up to you which way you address them, if at all.
- Get savvy with the numbers. Several entrepreneurs and business leaders have advised me in the past, “the best leaders knew their ‘numbers’.”
- If you don’t have a good answer, it’s okay to say, “I don’t know, but I’ll find out”, and actually follow up.
- A business plan can be time-consuming to put together, but can be a great way to structure and think about your business holistically. Consider investing the time to put one together, or in the least, use a One-Page Strategic Plan. Update this intermittently.
- It’s so important for any relationship, especially in an early-stage company, for each party to assess each other’s fit. Too often, partnerships are started absent of a strong foundation which leads to difficult divorces later. (New employees/ team members included!)