5 Most Common Questions Investors Ask ISIP Social Enterprise Founders on Demo Day
by Adriel Nisperos
Preparing your pitch for potential investors is one thing but answering their questions about your business is another. Your answer can make or break a prospective deal. There are no right nor wrong answers but making sure you sufficiently address their questions reflects how well you know your business and helps them better understand if your SE is a good fit with their investment portfolio.
With the recently concluded ISIP Demo Day last May 10, we’re sharing the top five questions the investors usually ask SE founders. These questions were shared to us by the SE founders of the ISIP Social Impact Accelerator Batch 1.
1. What is your social impact?
According to the 2018 Annual Impact Investor Survey of the Global Impact Investing Network, impact investors are motivated to make impact investments because of three main reasons: mission, impact goals, and commitment as impact investors. Therefore, expecting a question that focuses on your business’ social impact should not be surprising at all.
“impact investors are motivated to make impact investments because of three main reasons: mission, impact goals, and commitment as impact investors”
Zes Martinez II, Founder of Futuristic Aviation and Maritime Enterprise (FAME), shared that one of the investors asked them about their social impact and whether it fits to their company portfolio. As an SE seeking for funding, aligning your business’ impact goals to your potential investor’s impact goals is key. “We need to align more to them and make sure the timing is also right, in terms of the stage we are currently in right now,” Zes notes.
Matthew Par of Gaz Lite shares some insights when it comes to addressing questions on social impact. “You have to always go back to your business model. As a social enterprise, your activities for revenue generation and impact generation need to be one and the same,” said Matthew
2. How much equity are you willing to share for funding?
Acquiring investments is not just a one-way street. There are investors who seek equity in exchange for funding offer they’ll bring in. Determining the amount of equity which you can share to an investor can be tricky, but it can be best determined by knowing the value of your business.
In the ISIP Social Impact Accelerator, a committee is formed to help the SE founders define the amount of equity they can share to an interested investor. This is to make sure that no party is on the losing side as these exchanges may affect the future of the business.
Joji of Coffee for Peace was hesitant at first to do business with equity investors for fear of losing control over the enterprise. but later on she realized, “I was assured during conversations with equity investors that they are not interested in taking over my business... They just want to help.”
3. How will you use the funds?
The investors are keen to know how you’re going to use the funding they’ll bring in to your SE, up to the last cent. According to Martin Zwilling, a veteran startup mentor and an angel investor, you have to identify your focus and priorities when you’re allocating your funds. One to three allocations are recommended.
“…there were investors who approached us, asking if we are considering equity. What’s most important about the discussion are the questions about future plans and the use of funds, particularly on the manufacturing aspect””
Stephen Larcia, Founder of Hiraya Water, shared that many of the investors who came to them during the ISIP Demo Day probed about how they are going to use the funds they’re asking. “…there were investors who approached us, asking if we are considering equity. What’s most important about the discussion are the questions about future plans and the use of funds, particularly on the manufacturing aspect,” Stephen shared.
4. What is my return on investment (ROI) going to be?
Although impact investors may tend to focus more on realizing impact goals, asking you about their ROI is still a valid question you may want to prepare for. An SE is not only about creating social impact but equally about generating profit for sustainability. The investors are interested on how fast they can make money out of their investments, which is an inherent interest for them. As a founder, you should be aware of your business’ ROIs whether in the social impact-side or profit-side.
According to Raffy Concepcion, Founder of SolarSolutions, they talked to familiar people at the ISIP Demo Day since some of them were also guest speakers in the learning sessions conducted in the past six months under the ISIP Social Impact Accelerator. The conversations during the Demo Day were more in-depth.
“Before, it [investor/mentor questions] was more on the product, concept and execution. The conversations today were more on the return of investment, cost per unit, and other business-specific questions,” Raffy said.
5. When are you available for our next meeting/When can we discuss further?
At the end of the ISIP Demo Day, Jones Castro, Executive Vice-Chairman of PhilDev Foundation and a serial startup mentor himself, shared that there can only be three outcomes after meeting an investor or funder. It can be a “Yes,” a “No,” or a “When can we discuss further?”
“There can only be three outcomes after meeting an investor or funder. It can be a “Yes,” a “No,” or a “When can we discuss further?””
Now, this is another tricky situation for SEs. This question can mean anything since it’s neither an accept nor reject answer about the investment. At least, it is better than a straightforward “No, thanks.” So the next time you have the chance to meet, be sure to have all your ducks in a row and seal the deal with your investor.
These five questions are only some of the most common ones investors usually ask an SE founder. Managing your expectations, however, is essential as investor interests vary depending on who you’re doing business with. Remember that your goal is to acquire the funding you need to be able to reach your business and impact goals, and this will entail a lot of preparation on your part. So the next time you face an investor, have a look at these questions to help you seal the deal.
Raffy of SolarSolutions notes, “This is not the end, this is just the start. There are so many people to connect with in a more in-depth level. It’s a reality check for us that certain people have certain expectations.”