What’s the most daunting part of speaking to investors? For many, it’s answering tough investor questions.

It’s tricky to prepare for, as you don’t know exactly what they’ll ask. And, different investors approach questioning in many different ways.

So how do the most successful fundraising teams ensure that tough investor questions are handled effectively?

At Benjamin Ball Associates, we prepare ambitious managers for better investor meetings. Our clients range from the CEOs of Europe’s largest companies to fund managers and start-up teams.

We recently polled our team of expert advisors and identified the core elements of a successful investor Q&A.
 

Whether you are a senior manager at a large quoted company or the CFO of a start-up, these ten tips will help you emerge from tough investor questions with a smile on your face:

Investor Questions Tip #1. Have the mind-set of a teacher

Too many people treat tough investor questions as an exam. They feel the need to answer each question correctly in order to pass. That attitude leads to failure.

Instead, think of yourself as a teacher. You have a topic you know well, and you have a student (the investor) who wants to know more. Your job is to inform, educate and perhaps even entertain. If you do it right, you may even build a strong personal relationship, which is important in investor decision-making.
 

Investor Questions Tip #2. Each investor is different, yet every investor is the same

We all know what drives investors – it’s getting a financial return. So investors need to balance expected returns with risk. But weighing expected return and expected risk is subjective. That means each investor will assess you differently.

For some, it will be about measuring you as a person, for others it will be about gathering more data. And people have their own style – from super soft to nail hard. You’ll have to assess what they are looking for and how they work. The best way to do this is to listen to and learn from the comments they make and the questions they ask.
 

Investor Questions Tip #3. Listen to the question!

Take a mental step back when you hear a question. What’s really being asked? What’s behind the query? If you are not sure, you may need to clarify their question before answering.

Without clarification you may be answering the question you want asked, rather than the question they want answered. And if you listen you will learn something. Most investors will be looking for management teams that listen to them and want to learn.
 

Investor Questions Tip #4. There’s no such thing as a stupid question

It may sound stupid to you, but every investor question is aimed at unearthing something. Don’t assume that you know what the investor really wants.

Perhaps they don’t understand – or perhaps they are testing how you react to “stupid” investor questions (yes, they do this!). So treat every question with respect, consideration and then use it as an opportunity to help the investor understand your business (and you) even better.
 

Investor Questions Tip #5. Every question is an opportunity

If you are properly prepared for your investor meeting, then you will have key messages to get across. Use your answers to reinforce, restate, or reframe your messages. Beware of treating tough investor questions like a tennis match. You do not want to score points with your answers.

Instead, like a teacher, you want to enlighten the investor and perhaps help them see the world the way you see it. One powerful piece of advice is Show, Don’t Tell. Use stories, examples and illustrations to bring your business to life when answering investor questions.
 

Investor Questions Tip #6. How you answer is as important as what you say

As we said before, your meeting is not an exam. It’s more like a meeting of minds. So work out what the other person believes and is feeling.

How can you do this? You could ask probing questions, such as “Does what I’ve just said explain it?” and “Do you want to know more?”. For more hypothetical questions you could explore what they believe: “And what do you think?”

The more it feels like a conversation rather then a quiz, the more likely you’ll be successful.
 

Investor Questions Tip #7. You must prepare

We have seen too many people turn up to investor Q&A sessions unprepared. By contrast, successful fundraising and management teams prepare with the intensity of an elite athlete. After all, you want to be seen at your peak when meeting investors.

There are three best practice techniques for preparing:

1. List the tough questions you may be asked – especially the ones you don’t want to be asked. Work out answers to these well in advance, decide which should be answered before the Q&A by incorporating it into an earlier part of the meeting, and which will wait for the Q&A. Then select who in your team will respond to those questions. You will feel more confident in general, and if the questions do get asked, you will be properly prepared.
2. Bring in a fresh perspective. Get someone outside the organisation to identify new questions investors may ask you – and get the outsider to listen to your answers to the tough questions. A neutral third party can give you insight and expose the weaknesses in your arguments and answers.
3. Stress-test your answering. Spend time as a team firing questions back and forth, and reviewing how you answer these. Keep at this until you have got it right. The more you prepare, the more natural you will sound.

For important investor events, we frequently spend many hours preparing teams with tough questions, video review and rehearsals. Just like elite athletes, you only build muscle strength with practice.
 

Investor Questions Tip #8. Don’t try and answer impossible questions

There are some investor questions you cannot answer. If you learn our approach of Question Triage (a technique for classifying questions up front) you can spot these a mile off. Then you can use proven techniques to get yourself back to safe ground and onto a topic that you can talk about with confidence.
 

Investor Questions Tip #9. Finish strongly

Investor question sessions often end flat. Frequently, people feel pressured to finish quickly, especially if time is short. This is a mistake.

Never miss this opportunity to reinforce your important messages while also showing that you have listened to what the other person has said. Even a strong 30-second summary at the end will show that you have listened. This can also highlight what they need to hear.
 

Investor Questions Tip #10. Beware the last question trap

Aka the Columbo moment. If you are a child of the ‘70s you may remember the TV series Columbo. The bumbling detective always finished his interview with a suspect and, as he walked away, would say “Just, one more thing….’  With that one line he caught the suspect off guard and got the information he needed.
 

#11. Just one more thing…

If you’d like to improve your handing of tough investor questions, please give us a call. We’d be happy to discuss ways we can help you. You’ll find that working with our experts is a surprisingly small investment that can deliver amazingly high returns.

To discuss how you can improve your next investor question session, please call Louise Angus on 020 7018 0922 or email louise@nullbenjaminball.com.
 

Exclusive guide for Private Equity Funds & VC Firms: How to Stand Out with Investors

We’ve created a free ebook to help Private Equity Funds and VC Firms to stand out with investors. The ebook is full of practical tips, advice, and feedback from LPs. It will help you to make immediate improvements to your investor pitches and meetings. Click here to download your copy now.