How to Answer Customer & Investor Questions Like A Pro
After you pitch your startup to venture investors or to potential customers, if they have any interest in what you’re doing, they’ll almost always ask you questions.
And, if you’re like most founders, you’ll immediately start to answer their questions with enthusiasm and zeal.
But what happens when you get a question that trips you up? What if an investor asks you a question that you’d rather avoid or feel the need to explain thoroughly? Many founders make the mistake of avoiding the question altogether and providing an answer to a separate question. Founders simply tiptoe around the question, assuming that investors will not notice. This is a mistake.
In our work at Dreamit, we speak with thousands of startups every year. Often, in response to simple questions like “What’s your monthly recurring revenue (MRR)?” or “How much runway do you have?” founders will launch into a long explanation that doesn’t actually provide an actual number or metric we’re looking for. They might start talking about a new, exciting potential customer that will provide a revenue windfall, or they might talk about an investor that’s “about to send” a term sheet.
When you don’t directly and concisely answer a potential customer’s or investor’s question, here’s what typically happens:
They never re-ask the question and let the issue go.
You lose out on a perfect opportunity to address a concern or objection.
You lose the momentum and energy in your meeting.
Your credibility wanes—often because investors or customers assume the direct answer to their question is unflattering for your company, even when it actually isn’t.
That customer or investor becomes much less likely to purchase your product or invest in you.
For example, watch how this seasoned entrepreneur doesn’t directly answer the question posed to him in this clip (and notice how the energy in the meeting shifts right after):
Why do so many entrepreneurs fail to directly answer investors’ questions? Because they are either:
Nervous or lack confidence.
Or, they are so busy thinking as they start to hear a question being asked that they don’t end up hearing the whole question.
To solve this problem, you first need to understand if you are in the habit of dancing around questions. Here’s how to do just that in real time:
Reflect after you answer investor or customer questions—do you remember the questions they just asked you? If not, that’s a red flag that you have this problem.
Take note if people outright say “you did not answer my question” after you give them an answer. People will rarely do this; but, if it happens, it’s a sign you need to get better at answering questions directly.
If you have a co-founder or team member in the room with you during an investor pitch or customer presentation, ask them to spot check you and tell you if you don’t actually answer each question.
Let’s say you figure out that you don’t always directly answer questions in meetings. First, that’s okay! Next, we have a two-step process to help you address this issue.
Here’s the strategy you can use to improve your ability to straightforwardly answer the question that someone is asking you:
Use the BLUF method of communication. What’s BLUF? It means Bottom Line Up Front. Whenever someone asks you a question, remember Bottom Line Up Front—and then directly answer whatever they asked you. If, and only if, you answer this question directly, can you add color or give a more nuanced explanation.
Remember, most founders don’t keep BLUF top of mind. Instead, they start off with a long explanation, get lost in their answer, and later realize they never answered the initial question. But, at this point, they don’t remember the original question and become too embarrassed to ask the other party to repeat it.
Here’s a recent example from a pitch we heard at Dreamit. Our team asked the CEO “What’s your MRR?” The CEO responded with something like “Well, first, before I answer that, let me tell you about two pilots we started last quarter and a contract we’re about to sign with a marquee customer. We also have twenty deals with $7,000,000 in potential contract value in our pipeline.”
While this information is helpful, it doesn’t address the question we asked. The founder should have started off by saying something like, “We have $10,000 in MRR and here’s how we plan to grow it…” before jumping into the above explanation.
Practice BLUFing. Think about a conversation with a potential investor or customer as if you’re playing baseball with them. Your conversation partner throws a question at you like it’s a baseball. Then you catch the question and look at it “like it’s the baseball” to make sure you understand it completely. If you do, then you throw it right back at them with your answer.
If you have co-founders, practice BLUFing with them. Spend 10 - 15 minutes having them ask you all of the questions you’d rather not get. Then, try to answer them directly and get their critical feedback about if you actually accomplished the goal. Just like any skill, you can sharpen and build this one.
If you want to close your next round of funding or acquire your next meaningful enterprise customer, you have to answer questions directly. Many founders make this simple mistake, which costs them credibility, momentum, and money!
To improve your fundraising and sales conversion rates, remember to BLUF—say the Bottom Line Up Front—and, practice BLUFing so you build it into a habit.
With time, you’ll become a pro at directly answering investors’ and customers’ toughest questions.