Must Ask Questions

As you and your advisor conduct your due diligence, many questions will arise and will open the dialogue further between you and the company. To start your due diligence, however, there are certain “Must-Ask” questions that will immediately point you in the direction of where you should be drilling deeper.

As an investor do not assume all relevant and accurate information will be provided to you simply because you have the right to know. As an investor, you cannot get the right answers if you don’t ask the right questions.

Investor Tip

Document all questions and answers in writing. This provides several benefits:

  • It protects both you and founder from “selective memory”
  • It can be the basis of critical terms and conditions you want in your investment agreement
  • Putting it in writing measures how clearly you understand the answers.

To assist you and your advisor in asking the right questions, here are some suggested “must-ask” questions posed to the sales person representing the company.

  • "Will my investment funds be used for any personal expenses of the founder(s)?"
  • "What will my investment funds be used for? How will that grow my investment?"
  • "Where will my investment funds be held? Will I have access to them?"
  • "Will I be able to withdraw my funds at any time? In total?"
  • "How will you report the progress of my funds? How often?"
  • "What is the company worth? Who and how was that value determined?"
  • "What are the risks to my investment? What liabilities am I assuming?"
  • "Can you provide company financials?"
  • "Will you provide me with written representations you make for this investment?"
  • "How much and when will I be paid my Return on Investment (ROI)?"
  • "Where is the company headquartered and how will I know if the address and point of contact changes?"

Each of these questions are considered “must-ask” questions because investors before you have identified these as specific questions they now wished they would have asked in past investments.

“As an investor, you cannot get the right answers if you don’t ask the right questions."

The answers to each of these questions should be documented in the ultimate investment contract between the company and yourself. Remember both company and investor often have selective memories. Leave no question unanswered and no answer un-documented in writing.