There’s a pretty great post on

Particletree
 about the kind of questions VCs ask when you’re doing a startup, so I thought I’d highlight them here as there seems to be a profound lack of ‘noisy’ UK-based Web 2.0 startups, and maybe finding finance is one barrier for entrepreneurs?

Where are all the UK web startups? Maybe everybody is just being very quiet (to fail in complete obscurity), or perhaps things are as dead as they seem to be (more than likely). The UK seems almost entirely barren compared with what’s happening in the US.

It’s probably worth noting that local VCs seem to be a little behind their US conterparts (two local startups that I can think of off the top of my head have been approached by US investors – names of the innocent withheld). This too could be part of the problem.

So, onto the questions, which the average investor might ask you:

Who else have you spoken to?
How will you make money?
How will your company grow?
What technologies do you use?
How easily can you be copied?
Can we see the demo?
Who are your competitors and how are you better/different?
Who are your customers?
How will you spread the word about your product?
What will your market penetration be?

These are pretty good questions, so if you’re in the business of starting up and creating something out of nothing, then these questions should be a good reality check for you. The more experienced you are, the more likely you are to see these questions as vital.

However, I’m a bit surprised that there isn’t anything about the management team or board of directors. After all, if you’re going to take what you’re doing seriously, you should come to the conclusion that you can’t do everything yourself. If you have a group of co-founders, then I’d also be asking questions around the equity split, and possibly what the blue sky exit strategy is as well.

I’m also not sure that asking about market penetration is a good question. Sure, you have general ideas and can make extrapolations, but for the most part they’re pure speculation. So it seems that if you’re going to be spouting off tales of world domination to a VC, you should know where you get your figures from (and make sure your spreadsheet skills are good!).

Perhaps a good exercise to do is to take the above questions and prioritise them – it’s no good figuring out what the technology is until you know who your customers are going to be, or more to the point, how you will reach your customers. 

So in the interests of public service, here’s a revised list that should provide motivation for answering the questions before actually getting into the elevator with the VC and doing the 30 second pitch:

Who are your customers?
How will you spread the word about your product?
Can we see the demo?
How easily can you be copied?
Who is in your management team?
Who are your competitors and how are you better/different?
Do you have a board yet, or at least a list of people you’re talking to?
How will you make money?
Do you have an ideal, blue sky exit strategy?
How will your company grow?
What technologies do you use?
What will your market penetration be?

Hope that helps provide some pivot points for lucid thinking when getting your startup off the ground.

PS – here are a few UK startups to keep an eye on: Dropsend, Crowdstorm, Webkitchen, Trustedplaces, Heyamigo, Opencage, Citysafe, Soflow and Cominded.

Do let us know if you are working on a Web 2.0 startup…