Before investing in a startup, investors should understand whether a business is built to grow, adapt, and create long-term value. Asking the right questions early helps investors reduce risk and focus on fundamentals. Zac Sandvig outlines five questions every investor should ask before committing capital.
Does the Founder Have a Clear Vision?
A strong founder can clearly explain where the company is headed and why it exists. Vision requires focus. Investors should listen for clarity around the problem being solved, the customer being served, and the long-term direction of the business. When founders struggle to articulate this, it often signals misalignment or uncertainty.
Do the Unit Economics Make Sense?
Even promising ideas fail when the numbers don’t work. Investors should understand how the company makes money, how much it costs to acquire customers, and whether margins improve over time. Healthy unit economics show that growth will strengthen the business rather than strain it. Zac Sandvig, CFO of Tractor Zoom sees this as one of the fastest ways to separate strong opportunities from risky ones.
Can the Business Actually Scale?
Some businesses perform well at a small size but break down when demand increases. Investors should assess whether growth depends on repeatable systems or constant hands-on effort from the founder. Scalable businesses rely on processes, automation, and teams that can handle higher volume without sacrificing quality.
Is There a Clear Exit Strategy?
An exit strategy doesn’t need a fixed timeline, but it should be realistic. Investors should ask how value could be realized in the future and whether potential outcomes align with market norms. Founders who understand likely exit paths tend to make better long-term decisions and manage growth more intentionally.
What Is the Competitive Edge?
A startup’s advantage should be difficult to replicate. Investors should look beyond pricing or speed and examine what truly sets the business apart. This could be proprietary data, operational expertise, brand loyalty, or a unique distribution model. A strong competitive edge helps protect returns as the market evolves.
Final Thoughts
Smart investing starts with disciplined questions. For Zac Sandvig, these five areas provide a practical framework for evaluating whether a startup is positioned for sustainable growth and long-term value—before capital ever changes hands.
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