Information asymmetries are frustrating, but the fundraising process is fraught with them. Founders know far more than investors about their business. Investors know far more about fundraising than founders. However, there is one information asymmetry that I hope to eliminate.
Investors usually have a sense of what they need to know to make a decision on investing. What is frustrating about how the process currently works is that it is often left to chance whether or not the founder provides all the necessary information. In the hopes of addressing this, I have laid out the questions that I look to answer before making an early stage investment below.
Who are the founders?
Are the founders insanely curious and obsessed?
Can the founders attract the talent requisite to achieve the vision?
Of all possible teams, in what percentile would you place this team for solving the problem at hand?
Why do they have a comparative advantage?
What is the problem?
What is the job to be done?
What is the market?
How is the market under or over estimated?
Are there notable market adjacencies?
Is their evaluation of the competitive landscape categorical, explanatory, or predictive?
Can they describe it in a short email?
What is the insight?
What is the customer acquisition strategy?
What makes their go to market strategy / distribution unique?
What are the unit economics?
What is the gross margin and how will it change over time?
How do they get 100mm in ARR?
Does the business have internal compounding advantages — advantages that others can know about but not implement?
What is their moat/accumulating advantage and does it improve with time?
What milestones does this business need to hit to raise again?
How would this company respond to economic cycles?
What could this be?
Could this be one of the most important companies on the planet?
What are the ways this company will fail?
Can you draw the flywheels?
What is anomalous?
What "secret" is the company predicated on?
What are the default beliefs for this type of business?
Where is this idea on the crazy to good spectrum (sounds crazy but is actually good)?
Why does this idea sound bad to big companies but is actually good?
How are we thinking different and avoiding consensus (second order, contrarian)?
Are you okay seeming stupid for a period of time for investing in this company?