How VCs Interrogated Founders Over the Past Year: Key Questions from Recent IPO Filings

On a bitterly cold, wind-swept day on Zhongguancun Street in Beijing, Founder A pushed open the glass door of a café against the strong gusts. While scanning WeChat profile pictures in his chat history to identify the VC investment director he was meeting for the first time, he mentally rehearsed the opening lines of his pitch deck.

Meanwhile, in the university studio where the air conditioning was blasting hot air, Founder B, the final speaker of the roadshow, was struggling to deliver his presentation with a faulty clicker. The audience appeared slightly fatigued, while the investor judges seated in the front row were busy taking notes.

In the understated yet refined conference room of a certain RMB-denominated venture capital firm, Founder C sat alone, stiffly facing the investment team across from him, waiting for them to speak first and break the icy pre-meeting atmosphere.

These three individuals may not be operating in the same arena, but they likely share one commonality:The unfamiliarity and awkwardness when first facing the relentless, probing questions from VC investors.

Answering these questions correctly does not necessarily guarantee a smooth fundraising process, but a single wrong answer could render all your preparation and efforts futile. Here, we have compiled the 10 most frequently asked questions by venture capitalists (VCs) and the most common incorrect answers.

Red Light Warning:I aim to achieve profitability rapidly next year.

When venture capitalists (VCs) raise this question, it may superficially appear that they are seeking clarity on the company’s profitability timeline and planning. In reality, they are primarily interested in understanding the founder’s forward-looking strategic vision for the company’s long-term development. To craft a more comprehensive response, founders should consider incorporating three key elements: milestone planning, the pathways to achieve these milestones, and the unique characteristics derived from the industry’s inherent endowments. The answer to this question serves as a condensed summary of the founder’s responses to all subsequent inquiries.

High-Scoring Answer:We will continue to strive to enhance the accessibility, efficacy, and cost-effectiveness of our company’s products.

Red Light Warning:A secretary, a customer support representative, and then my cousin, who studied finance, to manage the internal accounts.

What VCs are truly asking here is whether the founder has a clear plan for building the senior leadership team. This is also an opportunity for founders to demonstrate their forward-thinking approach to team construction. When responding, share specific details on roles to be hired, candidate profiles, and hiring timelines, thereby highlighting your emphasis on diverse team backgrounds, complementary skills and experience, access to the latest industry insights, and risk tolerance.

High-scoring Answer:A Marketing Professional with 5+ Years of Experience in Multinational CorporationsVPand two sales representatives with field experience, followed by the VP of Operations, and then the VP of Finance within 3–6 months, to optimize our part-timeCFOworking hours.

Red Light Warning:Nothing at all / The biggest risk is whether sufficient capital can be raised from investors.

In this context, investors seek to see entrepreneurs’ awareness of potential risks and their pre-established mitigation strategies. This is equally a consideration of forward-looking planning. Venture capitalists (VCs) engage in discussions with the intent to invest; problems that can be solved with capital are not considered true obstacles. What VCs are more interested in understanding are the short-, medium-, and long-term risks within the industry and the founder’s corresponding countermeasures. If you are not even familiar with the most recently promulgated regulations and standards, the meeting might as well end prematurely.

High-Scoring Answer:We have discussed this extensively internally. Assuming we secure funding, the top three risks we face are 1, 2, and 3. Therefore, at the seed stage, we need to address 1 through XXX; then use YYY to validate whether 2 will become an issue. Finally, we will shift our focus to 3.

Red Light Warning:We are seeking to raise $10 million (though you actually only need $5 million, but be prepared for investors to cut the valuation in half).

Next, we address matters of technique. The primary consideration here is not how much money to raise, but rather how it will be spent. The allocation of funds demonstrates the founder’s vision and objectives for the future, helping venture capitalists assess the feasibility of the business plan and its long-term strategy. Try outlining several key milestones along with their corresponding fund allocations to showcase the founder’s credibility and ability to manage resources and risks. By determining the funding required for each milestone, including contingency reserves, one can work backward to calculate the total amount of capital needed.

High-scoring answer:We need to raise $4 million to reach Milestone X. If multiple institutions invest jointly, we aim to raise $5 million and achieve Milestone Y.

Red Light Warning:N New Venture Capital Firms Plus Insiders

When addressing this question, founders should demonstrate a mature, collaborative mindset. After all, this is a negotiation table. At this stage, the founder likely does not know whether the investor is willing to collaborate with another institution or individual, nor whether other interested parties will join. Moreover, introducing additional participants too early in the negotiations would significantly increase the complexity of the discussions. Navigating this question serves as a rehearsal for the founder’s transition from a “technology/business” focus to a “management/operations” orientation.

High-Scoring Answer:We aim to select a suitable lead investor and then work together to identify the optimal and most compatible investment structure.

Red Light Warning:Not yet asked / They are still considering / It may depend on the situation

Internal participation in financing is a significant indicator of enhanced VC confidence. From the VC perspective, it is natural to expect to see support for the project from the internal team. This not only demonstrates team cohesion but also implicitly signals endorsement of the technological pathway or business model.

High-Scoring Answer:Yes, they would invest approximately XXX million, provided the valuation is reasonable and there is a strong lead investor.

Red Light Warning:We want X valuation

It sounds like a brain teaser, but in fact, any specific number is the wrong answer.If the valuation is set too low, venture capitalists (VCs) may perceive a discrepancy, leading to stalled negotiations; if it is set too high, VCs may similarly perceive a discrepancy, also resulting in stalled negotiations. A prudent approach to valuation demonstrates founders’ market sensitivity and conveys respect for market conditions as well as a focus on investor value. Regarding this issue, we at"Angel Round: The Contest Between 'Funding' and 'Valuation'"are discussed in greater detail.

High-scoring answer:We let the current market determine what terms are reasonable. As long as the valuation is at market levels, we will choose investors who can add the most value to our team and vision.

Red Light Warning:Next week (which is simply a gross disrespect to the institutional processes and the Investment Committee)

Prudent planning of decision-making timelines is a critical factor in the negotiation process for founders. Although certain sectors, particularly biopharmaceuticals, are experiencing an overall cooling with a slowing pace, founders must still demonstrate reasonable expectations and respect for time. Allow venture capitalists (VCs) sufficient time, but not unlimited time. Furthermore, gaining advance knowledge of the decision-making processes and key personnel at different VC firms is a testament to a founder’s capability.

High-Scoring Answer:This is merely our initial contact. I hope to receive an indication of interest (whether positive or negative) or a Term Sheet (TS) within the next four weeks or so.

Red Light Warning:“no one else” or mentioned"Institution A"。

Disclosing excessive information when discussing lead investors may entail unnecessary risks.If Firm A is more suitable or more prestigious than the VC you are currently negotiating with, the deal may fall through because they may believe they cannot win the transaction and choose to withdraw. If Firm A is less suitable or less renowned compared to the VC you are negotiating with, the deal may also collapse, as this could undermine your credibility in the eyes of that VC. If Firm A has not made the commitments you assumed, and the two VCs verify the information, your credibility will be significantly damaged, leading to a breakdown in negotiations. If Firm A is a close partner of the VC, they may abandon the competition to avoid offending their partner, resulting in a failed deal. If Firm A is a rival of the VC, it could make co-investment impossible, again causing the deal to fall apart. At this stage, specifically naming any firm is likely to be counterproductive; therefore, refrain from disclosing too much about your hand before signing the Term Sheet (TS).

High-Scoring Answer:We have been engaged in thorough discussions and have identified several institutions as potential lead investors, with your firm being one we hold in high regard. We have received substantial positive feedback and are confident about this fundraising round. At this stage, we are not prepared to convene all parties for discussions without a confirmed term sheet; however, we would be very willing to facilitate collaboration among co-investors once your firm commits to leading the round.

Red Light Warning:We happened to be in Zhongguancun for a meeting, so we searched for which organizations have offices here.

The reasons a company selects directly reflect the founder’s due diligence and key considerations regarding the institution and investors. A well-crafted response can significantly highlight the personalized and professional nature of their relationship with investors.

High-Scoring Answer:We are in the same portfolio as your company.CEOHe/She is a friend who holds your organization in high regard and made the introduction. We have previously participated in your (specificPartner) I highly appreciate the viewpoints expressed in your articles on your official account, and thus I am particularly looking forward to meeting you.

When meeting with friends or lower-priority investors,Observe Issues CarefullyWhenever a new, challenging question arises, create a slide that addresses it and add it to the ever-growing appendix of the business plan (BP), ensuring better preparedness for the future. This approach is particularly helpful for venture capital (VC) firms joining in the later stages, as they are presented with a polished deck that has been rigorously tested and refined over several weeks.

In some unplanned scenarios for founders,Investors will deliberately ask increasingly in-depth questions., as a tactic to test a CEO’s business acumen. This is an intense interview method akin to due diligence (DD); describing it as an interrogation would not be an exaggeration.

To pass this test, simply remain calm, ensure you understand the questions, and answer them truthfully.Do not fabricate a story or deflect the question.. Frankly acknowledge the parts you do not know, and commit to finding the answers as soon as possible. When investors receive your response within a day, your humility and timely follow-up will further build trust and confidence.

Investors will inevitably continue to probe deeper and challenge you relentlessly, until you are ultimately left without an answer.Sometimes, what you answer is not important; they just want to see how you handle the situation.