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The 30 Investor Diligence Questions You Will Get. Here Are the Answers.



Author: Yanni Papoutsi · Fractional VP of Finance and Strategy for early-stage startups · Author, *Raise Ready*

Published: 2025-03-08 · Last updated: 2025-03-08

Reading time: \~8 min

Why Pre-Building Diligence Answers Closes Rounds Faster

Investor diligence is not an exam you pass or fail. It is a conversation about whether the investor understands your business well enough to commit capital. The founder's job in that conversation is to reduce uncertainty efficiently.

Founders who walk in with pre-built answers to the likely questions move faster, inspire more confidence, and often create the impression of a better business simply because they demonstrate preparation. Here are the 30 questions that appear, in some form, in virtually every VC diligence process.

Category 1: The Market (Questions 1-6)

Q1: What is your TAM, SAM, and SOM?

Best answer: A bottom-up SAM calculation derived from the number of real potential customers times the contract value per customer. Not a top-down TAM from a market research report divided by an assumed share. Q2: Why is this market large enough for venture returns?

Best answer: An explicit path from current size to a $100M+ revenue business, with the market dynamics that make it possible.

Q3: Who are the incumbents and why have they not solved this? Best answer: Specific reasons rooted in their business model constraints (not "they are slow" or "they are not innovative").

Q4: What changes in the market have created this opportunity now? Best answer: A specific recent change (regulatory, technological, behavioural) that makes this possible today but not five years ago. Q5: How do you define your target customer?

Best answer: A specific firmographic and behavioural description, not "SMEs" or "enterprise."

Q6: What are the market adjacencies after you win the core? Best answer: A specific sequence of adjacent markets that logically follow from the core offering, not a theoretical TAM expansion.

Category 2: The Business Model (Questions 7-12)

Q7: How do you make money?

Best answer: The pricing model, who pays, when they pay, and how that scales.

Q8: What is your gross margin and why?

Best answer: The actual figure, what drives it, how it compares to sector benchmarks, and the trajectory.

Q9: What is your CAC by channel?

Best answer: Actual CAC data from real campaigns, broken down by channel, not a blended estimate.

Q10: What is your LTV and how do you calculate it?

Best answer: Monthly ARPU times gross margin divided by monthly churn, with a cohort chart showing retention over time.

Q11: What is your CAC payback period?

Best answer: The actual calculation plus the trend line and what you expect it to do as you scale.

Q12: What does the unit look like at scale?

Best answer: A specific scenario where volume is 10x current and the unit economics per customer at that point.

Category 3: The Model (Questions 13-18)

Q13: What are your key revenue drivers?

Best answer: The 2-3 variables that most directly determine revenue, with current actuals and assumptions for each.

Q14: What assumptions are you least confident in?

Best answer: An honest answer identifying the 1-2 highest-risk assumptions and the evidence that would change them.

Q15: What does conservative look like?

Best answer: A specific scenario at 60-70% of base case with the resulting cash position shown month by month.

Q16: When do you break even?

Best answer: The specific month in the model, the assumptions that determine it, and what changes if those assumptions shift. Q17: How did you size the raise?

Best answer: The specific milestones the capital funds, with each milestone mapped to a line item in the model.

Q18: What are the key milestones this raise funds?

Best answer: 3-5 specific, measurable milestones with the month each is expected to be reached.

Category 4: Traction and Evidence (Questions 19-22)

Q19: What traction do you have?

Best answer: Current revenue or users, growth rate over the last three months, and the most important leading indicator.

Q20: What do your best customers say about the product?

Best answer: Direct quotes or NPS data, plus the pattern in why customers stay.

Q21: What is your churn rate and why do customers leave?

Best answer: The actual monthly or annual churn figure, cohort retention chart, and the two most common reasons for churn.

Q22: What is your NRR (net revenue retention)?

Best answer: The calculation, how it compares to benchmarks for your stage and model, and the trajectory.

Category 5: The Team (Questions 23-26)

Q23: Why are you the team to build this?

Best answer: Specific prior experience that is directly relevant to this problem, not general credentials.

Q24: What are the gaps in the current team?

Best answer: An honest answer with the specific hires planned and the timing.

Q25: How do you divide responsibilities?

Best answer: Clear domains for each founder with minimal overlap, and a specific example of how a recent decision was made.

Q26: Have you worked together before?

Best answer: If yes, what you built together. If no, how you tested the working relationship before committing.

Category 6: The Raise (Questions 27-30)

Q27: What is your raise timeline?

Best answer: A specific target close date, the current state of the process, and who else is in conversations.

Q28: Who else is in the round?

Best answer: An honest answer. If no one yet, say you are building the syndicate. Do not exaggerate existing commitments.

Q29: What are you looking for in an investor beyond capital? Best answer: Specific value-adds you need (sector connections, operating expertise, international expansion) that map to why you are talking to this specific firm.

Q30: What would make you not take our money?

Best answer: A thoughtful answer about stage fit, sector expertise, or partner involvement that demonstrates you have thought about the relationship beyond the check.

Summary

These 30 questions appear in some form in virtually every institutional fundraising process. The founders who close faster are not the ones with the best answers in the room. They are the ones who prepared the answers before arriving. Map every question to your model and your traction data, practice the answers until they are fluent, and flag the two or three where you are genuinely uncertain. Uncertainty with honesty is a strength. Uncertainty with performance is a liability.