The right questions to ask investors when fundraising in a down market

With rumblings of a recession and ongoing market uncertainty, fundraising in the current environment may feel especially daunting.

For both first-time and experienced founders, a proper fundraising toolkit can make or break a successful round — even more so in a down market. So what are those tools? I’m a firm believer in the value of data-driven storytelling when it comes to pitching your company to potential investors. Another essential factor is a strong understanding of your company’s capital needs and the ability to build the financial model to get you there.

While crunching the numbers is an important part of the process, we can’t overlook that pitching an investor is really about looking for a strong connection with a partner — someone who understands and believes in your business and is the strategic choice to bring your company to its next stage of growth. Knowing which questions to ask in the limited time you have with an investor can be challenging, especially when the current environment has led some investors to tighten their belts.

However, many investors still have capital available to deploy despite the downturn. Here’s what I tell founders to ask to make the most out of their fundraising meetings and identify the right investment partners for their companies’ future.

Core questions for every investor meeting

A downturn doesn’t necessarily mean that all investors are shutting their doors; yes, some may choose to take a more conservative approach for the time being, but when meeting with investors who are still active in the market, not much needs to change about your usual pitch.

Some fundamentals stay the same: Engage in a conversation and be prepared to back up your story with strong metrics. In fact, the more a founder can push the questions back to the investor in a way that gives a better understanding of their business and investment strategy, the easier the rest of the conversation will be. Some helpful questions to get there with investors are:

Tell me about your firm and how you operate. Are you generalists or sector specialists?

If they are generalists investing in early-stage companies, this often means they rely on their network for due diligence and deal sourcing — which can make it more difficult to secure funding if you did not come in via the network. If that’s the case, try to get them to map out their network; connecting with their portfolio companies can help secure that “in” down the line.