Parent Post
Before you get funded,
Before you get funded, you almost always have to answer some questions by inventors, who among other things want to ascertain if the CEO is objectively thinking about the business.
Here are 5 tactical questions that you may be asked as a startup CEO.
Airbnb is used when giving examples on how to answer the questions.
How much do you
How much do you charge customers?
Good answer:
We charge hosts a 3% fee and for guests, we charge a 10% fee. (Very clear and easy to understand)
Bad answer:
It differs, but we charge enough to make a lot of money. (No information is given and it sounds as if they don’t know)
How much does your
How much does your average customer spend?
Good answer:
Our average stay is 1.7 nights, with a total charge of $278, of which we keep around $37. (Again very clear stats)
Bad answer:
We had a few people stay for a week, one person stayed for a month, and we also have a good host who has put up a mansion for $3000 a night and we sold it for 10 nights last month. (Very fragmented and does not really give any information)
Tell me about the
Tell me about the competition?
Good answer:
Hotels and HomeAway are our two biggest competitors. They are both 2 to 3 times more expensive than Airbnb. (This is clear and shows an understanding of the market)
Bad answer:
No one is doing what we do, so we don’t have any competition. There may be some people renting out their rooms but that’s about it. (This shows no understanding of direct or indirect competition)
Tell me the top
Tell me the top 3 reasons why this business might fail?
Good answer:
Regulations are our biggest challenge, finding inventory is our second biggest challenge, and having a consistent, high-quality experience is our third biggest challenge. (It shows that they have thought about the potential problems)
Bad answer:
There is no way we can lose. The only question is how big this business can be. (It shows that they have NOT thought about the potential problems)
How do you make
How do you make money?
Good answer:
We take a transaction fee. (Simple, clear and to the point)
Bad answer:
We take a transaction fee, and also we are going to have advertising, and also sell white labeled software, and sell merchandising as well. (Confused thinking, and too much for a start-up to focus on)
