Questions Every Founder Must Ask an Investor

Imagine someone offers you ₦5,000,000 for 20% of your business. Excitement takes over, and you start thinking about everything that money could fund. Stop there for a moment. You are about to spend the next several years with this person as a co-owner. Do you know what they actually expect back? Do you know how they behave when a business has a bad year? Most founders never ask, because the money makes them forget they're allowed to.

When someone offers to invest, most founders feel they're being examined, and forget they're also the examiner. Due diligence (the careful checking done before a deal) runs both ways: the investor checks your books; you check their intentions, expectations, and staying power.

Motive & Expectations

Q1: "Why do you want to invest in this business?" Listening for: believes in the business, wants returns, has spare money to invest. Red flags: "I've always wanted to run something like this" (they're buying a job, not shares); vague answers; doing a relative a favor (favors get called in later, usually at your worst moment).

Q2: "What exactly do you expect in return?" Listening for: a number and a timeframe, "dividends yearly," "double my money in six years." Concrete expectations can be negotiated; vague ones ("we'll see how it goes") turn into resentment. Their answer tells you which Chapter 8 structure they think they're buying.

Q3: "Do you expect to work in the business?" The silent-partner question (Chapter 7, Section 6). Any answer is workable, if written down. "I'll just help out sometimes" is the Uncle Problem just beginning to form: define the role, hours, and pay now, or agree in writing there is none.

Q4: "Do you expect voting rights?" Now Chapter 4's share classes stop being theory. If they want votes and you want control, this is discovered today, cheaply, not after the money lands. What votes control: Chapter 13.

Commitment & Experience

Q5: "How long do you intend to stay invested?" Their horizon must survive your plan. Money needed "back in two years" cannot fund a five-year expansion, that mismatch is exactly what lock-in periods exist to resolve, in writing.

Q6: "Have you invested in a business before? What happened?" Experienced investors have survived bad years and understand that dividends pause. First-timers may believe investing is a savings account with better rates, if so, Chapter 6 is required reading before they sign, not after the first loss.

Conflict & Exit

Q7: "How will we resolve disagreements?" Not if, how. Good answer: a written ladder (talk → mediation → arbitration/court) in the shareholders' agreement (Chapter 12). Worst answer: "We won't disagree, we're friends." Friendship is why you write it down.

Q8: "Can you sell your shares, and to whom?" Without transfer rules, your co-owner can sell to a stranger, or your competitor. The standard protection is a right of first refusal: they must offer the shares to you first (Chapter 10 and 13).

Q9: "What happens if you die?" / Q10: "What happens if I die?" Shares pass to heirs unless documents say otherwise, meaning your next co-owner could be their spouse, or yours could inherit a business they can't run. Buy-back-on-death clauses (Chapter 14) and succession planning answer both questions while everyone is alive and friendly.

Q11: "Can either of us force a sale of the whole business?" This is the drag-along/tag-along conversation (Chapter 13), decide now whether a majority can compel a sale and whether a minority can join one.

Money Behavior

Q12: "What happens if the business loses money?" The Chapter 6 conversation, had out loud. You need to hear them say it: "Dividends pause; my investment can shrink; nobody refunds me." An investor who can't say that sentence hasn't accepted equity's deal.

Q13: "Do dividends have to be paid every year?" Correct answer: no, dividends are declared when profit and cash allow (Chapter 3, FAQ), unless preferred terms say otherwise. If they're counting on yearly payouts to live on, you have someone who really wants a lender's fixed income, not an owner's risky share, structure it honestly (Chapter 7) or not at all.

Q14: "Who decides when profits are reinvested instead of distributed?" The single most common owner-investor fight. Default: whoever controls the votes. Better: a written dividend policy, e.g., "up to 40% of profit distributed when cash reserves exceed X; the rest reinvested", agreed before the first profitable year, in the shareholders' agreement.

Take it into the meeting: Investor Due Diligence Checklist, all fourteen questions with space for answers, plus the red-flag list.

Role-play the meeting before it exists:

1. Print the checklist; answer all fourteen questions as yourself first (yes, many are questions about you too: Q10, Q14).
2. Have a friend play your likeliest investor and answer from what you know of them. Every question you can't predict is the one to ask first in real life.
3. For any red flag that appears, write the clause that would neutralize it (lock-in? non-voting class? dividend policy? buy-back-on-death?), Chapters 10–14 supply the machinery.