For a lot of investors, the quality, capability and stability of your cofounding team is one of the MAIN criteria for deciding whether to invest in your business. Why? Because your cofounding team is probably the most important factor deciding whether your business will succeed or fail (assuming you have the other basics right).

Some of the early stage conversation questions of your potential investors you should expect to receive (and be prepared to answer) include:

• Has the team worked together before?  

This reveals whether you already had a chance to test the performance, decision making and conflict resolution capability of the team, or whether you just met. How you would perform or handle stress as a team is one big question mark…

• Do the founders have relevant experience and expertise? 

Why should the investor believe that the team you have put together can deliver on the business plan. Do you already have any milestones achieved which could prove the capability of the team? If so, do not be shy to use them!

• Does anyone on your team have previous startup experience?

This is a priceless asset, because it usually takes a few mistakes when building a business to learn some valuable lessons. And if you have someone on your team who has already done that, then the chances are much higher that these mistakes will not be repeated. Or - as aptly summarised by one investor - first fail with someone else's money and then succeed with my investment. 

• Do the founders know their weaknesses and how to mitigate them? 

Self-awareness matters - big egos killed more businesses than recessions. Knowing the weaknesses of the founders and the team (!), and having had to think how to mitigate them, is a sign of experience and trustworthiness. Saying you have no weaknesses shows you are either ignorant or you did not do your homework. 

• Are the founders clear about their future roles and deliverables?

This vastly depends on the maturity of your project and the team and is often not possible to do very early. However by the time you are fundraising, this should be clear and supports the confidence of the investor in the managerial capability of the founders team as well as in its ability to execute. 

• Are the founders aligned on the vision and common goal? 

Boom! This might sound soft and fluffy, but miss this one and you will not get very far. Even if it might not be visible from the start, sooner or later you will bump into this wall whenever there is an important decision on the company strategy, investors, employees, customers… you name it. Unless you explicitly align on these matters then sometimes you might found out - too late - that it is not actually possible. 

• Are the founders fully committed to the project?

Another classic question, and especially important that you are able to demonstrate this if you have a combination of full time and part time founders. The minimum is to define what are the timelines when everyone on the cofounding team will join full time, why they have not done so yet and how can they perform what is expected of them under the current setting without being committed full time. An answer of ‘we work 200%’ is not the right one... 

• For what period of time are the founders expected to be involved with the company? 

Planned time horizons have a big input on what type of company you are building. If you want to build a scalable business and in 3 years sell it to move to another project, whereas your cofounder thinks he is building a business for his grandchildren, you have a problem. This simple question should be easy to answer and crucial to not overlook. 

• Is there anyone who worked with you on the project and is not part of the cofounding team? If so, how did they leave and why? 

This is the rabbit in the sack question. Anyone who joins you to work on the project and then leaves, without a clear agreement on what compensation (or not) and rights that person had, could potentially claim rights to the intellectual property created. Depending on the type of business you are working on is of course how potentially sensitive this issue is, but for all types of businesses any unresolved or potential third persons claims are unwanted guests at the investors party. Best practice is to have an outline framework - a memorandum of understanding - with anyone who will get involved on your project (more here)

For the later stages and from even the more traditional investors, you need to be able to answer questions like:

• Is the ownership of the company clear?  

Who are the founders, what are their equity stakes, under which conditions - and how do you protect the business for underperforming or leaving founders. As important as it is to fairly allocate the equity is to also agree on equity recovery framework - i.e. what happens if a founder leaves (more here)

• Is there anyone who could claim ownership or any rights toward the intellectual property or any other part of the business? 

Again, this could be anyone who helped you on the way - financially, socially or otherwise - and with who it was not clarified what the conditions for the help / cooperation were. 

• How did you split the equity and why? 

Can you explain and justify everyone’s role and contribution within your cofounding team? And did you allocate the equity fairly and proportionately? Why would an investor care? Because unfair and unbalanced equity splits are certain team killers - sooner or later. Also, equity splits indicating quick handshakes (typical suspects are equal equity splits) could be a red flag suggesting that the team is not able to effectively communicate about sensitive issues. 

• How do you use the founder equity to motivate and commit the founders?

Do you have any vesting schedule and / or performance incentives in place? If yes, how did you set them up? Remember that a time vesting schedule alone is relatively weak as time alone is not the best proxy for value created. 

• Do you have any options to adjust the founders’ equity in the future? 

What happens if the business pivots, the business model changes, or you onboard a  new cofounder etc… and do you have the tools to adjust your existing equity split to reflect those changes? 

This is just a selection of the most frequent questions and by no means an exhaustive list. What I want you to take away is that:

1. Your equity split needs to be fair and explainable to others 

2. The most expensive and potentially deadly mistakes happen in the early stages 

3. An investor asking these questions is probably experienced and knowledgeable - both of which are great assets to have in addition to the investors’ funds!