As the co-founder of Synergy Social Ventures, a Hong Kong-based organization that helps early stage social ventures find the money, skills, and support they need to grow, I spend a lot of time helping entrepreneurs prepare for talks with investors.

To avoid miscommunication, entrepreneurs and investors need to openly ask questions and share concerns. Tweet This Quote

In my experience, I’ve seen the massive potential for miscommunication between the two parties. With their financial jargon, investors often get a bad rap for being difficult to understand. On the other hand, entrepreneurs have the dual goals of impact and financial return, an intertwined narrative that can often be difficult to clearly articulate. In general, investors and entrepreneurs come from different backgrounds and perspectives, and consequently speak different languages—a potential barrier that can lead to long-term consequences for both parties.

This barrier grows when teams of founders and investors fail to openly share their critical questions and concerns. To ensure entrepreneurs and investors don’t suffer from easily avoidable miscommunications, here are four fundamental questions entrepreneurs should always ask potential investors.

1. What are the short-term and long-term goals for your investments? How does this investment fit into your overall portfolio goals?

Entrepreneurs and investors need to clearly articulate realistic goals and expectations up front. Tweet This Quote

I have seen more than a few investments made where the entrepreneurs and investors had significantly different objectives, but were unaware of the misalignment until months later. Both sides need to clearly articulate realistic goals and expectations up front. The investor needs to clearly understand your business and the way you envision its trajectory. It’s your responsibility as the entrepreneur to convince them it’s investment ready and worthy. Of all the potential high-profit ventures they can invest in, why should they want to support your venture? Why should they believe in your particular business model?

2. What is your social versus financial return expectation? Is 7% or 17% a successful financial return, for example?

Even when speaking with investors, you shouldn’t make assumptions about their financial goals. This should be openly discussed. A lot of jargon is used in investment discussions that is new for entrepreneurs. Instead of making assumptions or being afraid of clarifying what you don’t understand, don’t be afraid to ask basic questions in plain language and talk in concrete numbers.

3. What is your exit strategy for this investment?

Don’t be afraid to ask investors basic questions about their financial goals and talk in concrete numbers. Tweet This Quote

The exit is a critical part of the investment relationship. You will want to know how and when the investors expect to be repaid. It goes without saying that growing the venture is the goal, but how will that growth translate into cash back for the investor? For example, what if you find out after a year that the investor thinks the only logical exit for your venture is getting acquired by a large company, whose mission you strongly disagree with? You won’t be happy, but you might be stuck. Asking exit-related questions from the get-go helps you understand the trajectory an investor has in mind for your venture. While an investor might see an acquisition of the venture within five years as a no-brainer, you may have a different strategy in mind. Don’t forget to articulate that.

4. What attracts you most to our company? What gets you excited?

As an entrepreneur, you start a venture because you are passionate about something, whether it’s creating a new product or solving a major problem in the world. Success requires hard work, dedication and sacrifice. It is critical to partner with investors who share the same goals that make the work and sacrifice worth it for you. A shared passion for a common goal is one of the most important factors in the entrepreneur-investor relationship.

As the entrepreneur, you must realize you have the power to ask potential investors questions, too. Tweet This Quote

As the entrepreneur, you are likely used to answering questions from investors—not asking them. You don’t want to jeopardize a potential investment, or perhaps you feel intimidated by jargon-spewing investors who appear to have more knowledge about the respective sector than you do.

You must realize you have power, too. You can and should ask questions to determine if the relationship is a mutual fit. An investment is a long-term partnership, and misalignment on values and objectives can be even more detrimental to a venture than no investment at all.

About the author

Jana Svedova

Jana Svedova

Jana is the co-founder of Synergy Social Ventures, a San Francisco and Hong Kong based nonprofit organization that supports early stage social ventures in Southeast Asia. She launched this organization after recognizing the need for innovation around how we support social ventures in their early and most challenging stages. Jana is also currently Director of Impact Investing at the Sauder School of Business in Vancouver, where she previously led the Coast Capital Savings Innovation Hub, an award-winning social venture incubator program.

  • Claire Salvucci

    This article offers great insight on how entrepreneurs can find an investor who will be a good fit for their startup. The article makes a good point on how entrepreneurs and financial investors often speak “different languages”. Being able to clarify financial goals and exit strategies can help ensure that a partnership between the investor and entrepreneur is mutually beneficial.

  • Nicholas Carter

    I agree, this article does offer great incite to what entrepreneurs should look for and ask potential investors. This article does a good job defining that investors have a completely different mindset than the typical entrepreneur. The typical entrepreneur’s goal is to 1.) solve a problem and benefit their target market someway or another and 2.) find a way to develop product recognition and to distribute their product to their target market as efficiently as possible. On the contrary, the typical investors wants to know 1.) when they will be receiving their return on their investment, and 2.) their projected return on investment. So as Claire stated above, entrepreneurs and financial investors do often speak a different language and it is important to clear this information up before any partnerships are made.

  • Rachel Rodriguez

    I think this article is great and any entrepreneur who is going to present to a potential investor should read these. I think many times the entrepreneur is so enthusiastic about their idea they leave key financial information out of their pitch, or they do not know how to communicate their idea effectively. I think that if an entrepreneur can follow the steps in this article they will have a better chance of getting the investor to invest and also build a strong relationship with the investor.

  • James Robertson

    After reading this article my thought process went directly to the TV show Shark Tank. It was directed towards the show because all the questions in this article are exactly what occurs in the dialogue between the entrepreneurs and investors. Not only are these questions essential but there are even more that get asked. When preparing to present in front of potential investors I would definitely jump to these type of questions and have them nailed down before entering a meeting.

  • Kunal Patel

    I believe this article was very well written, in fact it is about time someone writes a proper article on the fact that entrepreneurs have the power to make sure they build a warm relationship with their possible investor. I think it was well put that being able to clarify financial goals can really build a strong relationship that will be beneficial for both the investor and entrepreneur in the long run

  • Amanda

    I found this article to give great insight on how to handle a meeting with an investor. I feel like starting a new venture for a new entrepreneur is a daunting task, but these guidelines help point one in the right direction and makes sure that no crucial bases are missed.

  • Kade Hanson

    I agree with what you have to say Claire! This article is a great teacher. To me it emphasizes the need for communication and directed goals. It shows the right direction for someone to talk to make sure there partnerships and ideas can become a success.

  • David Kidd

    Exactly. These questions are a key determinant on if the relationship will be a mutual fit. Clearly a necessity for a business environment.

  • Katie Frank

    This article offers some excellent advice. I really like the point that the entrepreneur has power too and it has to be a mutual benefiting relationship. I feel that miscommunication is often a common issue that arises in investor and entrepreneur relationships and following to the guidelines stated in this article can prevent these issues.

  • Hunter Ward

    I think this is a great article. Being a freshmen in college, I am coming up to a time in my life where investing is starting to be a thought in my mind. I think the tip on talking with investors and not being afraid of asking questions is very important because it helps eliminate any confusion in regards to the investment.

  • @hunter_ward:disqus @disqus_rryPw0muA4:disqus @disqus_j0xk4lEPvH:disqus @disqus_Qo0u1XaPiD:disqus @jrobertson139:disqus @disqus_H7QxuC0VXR:disqus @clairesalvucci:disqus @disqus_bPqmNWUhJp:disqus @@kadehanson:disqus @disqus_dL6OPGg6SI:disqus // thanks so much for your comments! I’d love to know from you and all readers, what other questions do you think are critical for entrepreneurs to ask potential investors? And why? Thanks again for sharing your brilliance!

  • @hunter_ward:disqus, agreed! I also think asking questions is one of the most powerful things you can do and one of the greatest assets of good employees. Asking the question to help clarify any confusion will set you way ahead of the game as opposed to hesitating to ask out of fear of looking like you aren’t as capable. This is something it took me awhile to learn but is one of the greatest pieces of advice i have for young professionals and newest members of the workforce!

  • Thanks for your comment @disqus_j0xk4lEPvH:disqus! Agreed miscommunication is a common (and harmful) issue that arises in entrepreneur-investor relationships (and many important work relationships!). Is there anything you have learned that has poignantly improved your ability to communicate effectively and avoid miscommunications? Would love to know!

  • Thanks @jrobertson139:disqus! Are there any particular additional questions that you heard on Shark Tank or that come to mind that would also be important for entrepreneurs? I agree there are tons, but would love to hear any you think stand out as more important (but aren’t on this list).