You have to ask five questions to get to the full answer. Ask one question, and you get the idea. Ask four more questions, and you will get you the answer you want.
In talking with startups, I find the investor must always probe for the final answer. A single question rarely reveals the full answer.
I spoke with a startup recently about their funding progress. They said, “We’re raising a million dollars, and we have raised half of it already.” On the surface, it sounded like they had $500K invested in the business.
So then I asked, “You already have $500K in the bank from your raise?” They responded: “Well, not exactly, we have several investors telling us they are interested in investing.”
After four more questions, the truth emerged: they had $100K in the bank and around $300K in soft-circled commitments. That’s good progress, but not exactly the half million we heard at the beginning.
Never take the first statement as the final answer. It takes at least 5 questions to get down to the real answer, and as an investor, you want to know what the real answer.
Hall T. Martin is the founder of TEN Capital and a builder of entrepreneur ecosystems by startup funding through angel networks, funding portals, syndicates, and more. Connect with him about fundraising, business growth, and emerging technologies