TBC: What Are the Toughest Questions Asked When Pitching?

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Hey there, welcome to another episode of the Back Channel. In today's episode, I want to recount a story of a time I was listening to a founder share how challenging a pitch meeting he went to was. I was reminded of it because another founder was asking me how to prep for her upcoming pitch meetings and and what the most difficult challenges she should expect would be.

Now, the story came to mind because it illustrates something I think that is very important when it comes to what founders need to be prepared for when going to pitch and how to handle challenging situations. So, this founder came back from a job interview. and described what happened and was a little bit flustered.

He ran a CPG company and as he was pitching to investors, they got to a question where the investor asked, what is your net revenue? And the founder [00:01:00] was perplexed. He didn't know what net revenue was, or at least, what she was asking. And so his simple answer was, I don't know. Because honestly, he didn't know what net revenue was.

But the reality was that he just didn't know what the term net revenue was. He said no because he didn't know the term. And after that, the investor kind of turned off. She was a little bit confused why this CBG, this e commerce founder, didn't know a fairly simple question of what is net revenue.

And so when I came back, I said, well, do you not know what your return rate is? Do you not know what breakage is in your company? And he's like, oh, of course I know what that is. Well, here's what it was in the last month and here's what it is on average. And that's what I believe she was asking. Now, what is fair is that net revenue doesn't mean the same to everyone.

And so what he should have done. is he should have asked. He should have said, can you clarify exactly what you're asking when you say net [00:02:00] revenue? And if the VC were to say, well, I want to know how much revenue you actually get after returns, do a lot of people return your items? Do they all keep it because they actually like it on the first And I believe if that founder were to get that clarification, he would be able to talk about that fluently.

And so that story reminds me to tell all founders that you don't necessarily have to just take every question without clarification. You always have an opportunity to discuss with the VC what it is they're actually looking for.

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Sometimes you will be asked a question that is pointed at a direction

And the VC's question is pointed at something specific that you don't know, but you know directionally other information related to that topic. For instance, if an investor asks, you know, what's your, 15 day retention on a piece of software and you don't have that information off hand. You can ask, well, what are they, what are they trying to get at?

And 15 day retention has to do with how good your onboarding is, how good and sticky your experience is right away. And you may have answers to that. Maybe you have 30 day retention, you can answer that. Maybe you don't have those retention numbers, but you have some specific information, or at least anecdotes about how much your customer likes your product.

So, [00:05:00] The other thing is, again, if you don't know the definition of the term, clarifying the definition gives you an opportunity to then understand what it is you could answer with. So when I take that anecdote, that, that story about a founder who messed up, that just didn't follow up with a, with a clarifying question, I go back to founders who ask me like, what are the toughest questions that might come up and how should I prepare for them?

And I really believe the first thing that you have to do is really deeply understand your business, deeply care about your business. And if that's the case, I actually think there shouldn't be any really tough questions. There may be questions you don't know the specific answer to, but you should know your company well enough to be able to discuss the topics in depth.

in and around it, give them enough color around the question that they're asking, such that if you didn't answer the specific question, they should be satisfied with your depth of knowledge around the whole area.

I also think as [00:06:00] long as you have information. around the topic. It is okay to say, I don't have the answer to that, but let me share a few other things that might give you insight into what you're looking for. Okay.

So don't go pitching investors until you really know your company, until you're deeply excited about your company. And if that's the case, there shouldn't be any topic that you're not excited to chat about. And there shouldn't be any topic that you can't at least say a few words to.

Okay, So I hope that answers some of your questions around what the toughest questions you might encounter during a pitch are and realize that you can get around anything and if you know your company well you'll be just fine.

All right, that's this episode of The Back Channel. I'll see you guys next time.

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