5 Questions to Ask a VC Mentor

What are the key traits of successful startups? 

One of the most important answers to get from your VC mentor is what they consider to be the key traits of successful startups. VC mentors have extensive experience working with startups and have evaluated many different companies’ chances of success. Based on this experience, a VC mentor is well-positioned to tell you what kinds of traits they see time and again in their most successful investments.

In addition to helping you identify these key traits, a VC mentor can also help you cultivate them in your own startup. By asking your VC mentor about the key traits of successful startups, you can unlock valuable insights into what it takes to build a successful company with a high potential for long-term growth and success.

What are some common mistakes made by founders?

It’s also important to ask your VC mentor about the most common mistakes they’ve seen founders make. VC mentors have watched all different kinds of companies succeed when they should have failed — and watched some fail when they should have succeeded. They can use this experience to help you steer clear of the same costly mistakes.

Similarly, a VC mentor has the unique experience required to understand which red flags or problem areas investors are watching out for in startups. They can help guide your pitch practice and provide pitch deck reviews to ensure that each problem area is either eliminated or confidently and convincingly addressed.

What do you see as potential challenges for my startup?

You should also ask your VC mentor about the potential challenges they foresee for your startup. This will help you anticipate obstacles and prepare for the growing pains that may arise as you scale your business. Throughout their time at their venture capital firm, your VC mentor has likely seen startups face countless unique and varied challenges, and can provide valuable guidance to help you address whatever problems come your way. 

A VC mentor can provide specific insight into the potential challenges your startup could face by drawing on their experience working with other startups in your industry. They can also use their knowledge of your market and its trends to help you identify the roadblocks your startup can expect to encounter at different stages in its growth.

In addition to identifying potential challenges, a VC mentor can help you develop strategies for addressing those challenges. They can offer guidance and share best practices as you navigate whatever hurdles your startup experiences. Support from a VC mentor that’s grounded in firsthand experience is an invaluable asset as you grow your business and progress toward your long-term goals.

How do you approach valuing a startup?

It’s also prudent to ask your VC mentor how they typically approach valuing startups like yours. This is a crucial question because your mentor’s answer can clue you in to the factors that venture capitalists will be considering when evaluating your startup. Your VC mentor has firsthand knowledge of the valuation process VCs use, and they can use this knowledge to help you position your startup to impress investors and secure a high valuation.

A VC mentor can explain the various methods VCs use to assess a startup's potential, as well as the factors that usually influence valuation, such as market size, growth potential, and competition. Your VC mentor can also show you how to prepare for due diligence and teach you how to negotiate a fair valuation. This insight from an investor’s perspective is enormously beneficial for a startup founder who is finding their feet in the fundraising world and needs to practice their pitching and negotiation skills.

How can I best prepare for due diligence?

It’s also a great idea to ask your VC mentor about preparing for due diligence. This question is important because your mentor’s answer will help to familiarize you with the steps that VCs typically take and the information they typically assess during the due diligence process. VC mentors have extensive experience conducting due diligence for their past investments and can give you valuable advice about how to prepare your startup to make it through the process with ease.

For example, a VC mentor can explain the types of documentation and information that investors in your industry normally request, such as financial statements, legal documents, or sales numbers. They can also show you how to organize this information and present it in a way that potential investors can easily review and understand — a critical but easily overlooked step which, in addition to ensuring VCs get an accurate picture of your company, also helps you make a great impression overall.

Did you know? When you’re negotiating with Silicon Valley VC partners, you should expect to deal with a diverse group of individuals who come from a wide variety of professional backgrounds, including finance, technology, engineering, sales, entrepreneurship, and much more. Each different partner brings a unique set of skills, experiences, and expertise to their firm. This means each VC firm is a blend of different perspectives, making them incredibly valuable resource pools for startup founders seeking both funding and guidance.

Take well-known venture capitalists Marc Andreessen and Ben Horowitz, for example. These two investors co-founded the VC firm Andreessen Horowitz and both have backgrounds in technology entrepreneurship. Andreessen co-founded Netscape, a pioneering internet browser, while Horowitz founded Opsware, a software company that was later acquired by Hewlett-Packard for approximately $1.65 billion. Now, they use their extensive experience in technology markets to identify and cultivate innovative technology startups.

On the other hand, Mary Meeker, founder and partner at Bond Capital, is a top finance analyst and former Morgan Stanley executive. She invests mainly in startups that are focused on the data and analytics space, and her financial acumen and industry expertise have helped many companies succeed in this area.