What would you ask the CEO of a company you're looking to invest in?

If you were limited to 3-5 questions to ask the CEO or the founder of a company you are looking to invest in, what would you ask? Obviously you'd leave out most of the technical questions that you could ask the IR team or look into yourself. I'd like to imagine the most valuable information you could extract from meetings with CEOs are related to overall strategy and long-term visions so would probably ask questions more along those lines. The questions would also likely be sector specific but for the sake of discussion, let's focus on questions that one could ask almost any CEO.

Asking this because I have a couple of meetings lined up and want to make the most out of them as the executives are a bit difficult to pin down.

Comments (10)

Apr 2, 2019

Would be curious to see an answer to this as well

Most Helpful
Apr 3, 2019

Notes:
-No yes/no questions, more why/how.
-Do not lead their answers by framing the question or leading with your opinion.
-Be specific, don't open yourself up to an IR sales pitch-type answer.

Some Non-company-specific questions:
-Which one of your competitors gets it right, who keeps you up at night?
-How do you feel you're priced compared to competitors, do you think you're priced at a premium/discount and why are you priced that way?
-What would cause you to cut prices? What would give you the confidence to raise prices? (fluctuations in input prices is not a good answer)
-Which one of your competitors has the most price variability/volatility?
-Who do you think is the most valuable employee or what is the most valuable department/function of the company?
-What percentage of your spend would you say is growth-based vs maintenance-based?
-What kind of incremental ROI do you target when making investment decisions? (HATE the "oh, above our cost of capital" answer)
-What steps can you take to lower your cost of capital, and is that a focus?
-What is the opportunity internationally? What markets do you find most attractive?
-What are some longer-term red flags I should be watching for that would make me a seller of the stock?
-Who has the best handle on the business on the sell side that you would recommend I speak to? (not relevant if you're on the sell side)
-What do you think the market gets wrong about your business/story?
-What do you think your competitive advantage is besides scale? (if they have scale...and if they say it's just scale, that is not a great answer)
-What would stop a well-capitalized competitor from entering the market or replicating some of your business?
-What technology over the last 10-years has had the greatest impact on your business?
-What emerging technologies have the potential to impact the business in the next 10-years?
-Is there a company outside the industry that you admire or strive to emulate?
-What is the biggest mistake the company has made in the last 10-years and what did you learn from it?

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Apr 14, 2019

This is all good stuff, agree with everything here. While you shouldn't expect a CEO to really get into the weeds on financials, they should have a good handle on the fundamental drivers of the business, along with risks and opportunities in the near-term. This is in addition to them being able to clearly and concisely articulate the company's strategic plan in the long-term, expectations on how their industry/competitive landscape will develop over different periods of time, etc.

So my questions below try to address the near-/medium-term element at first before getting to questions that allow you to get a sense of how management, and the CEO in particular, think about long-term developments and strategic implications. Some of my suggestions are slightly duplicative or otherwise overlap with Secyh62's post, but are worded differently and therefore (from my perspective) will help to facilitate a purposeful discussion.

All that being said, to answer your question directly, if given only 3-5 critical questions, I would ask the following (assuming answers to the below do not disclose MNPI if these are public company CEOs, which the OP's post somewhat implies):

  • I mention this below, but I realized after writing this long post that it would be helpful to say upfront that these suggestions are informed by my background as an investor working primarily with private targets (PE/growth equity). I have diligenced some public companies and met with those management teams under NDA... I imagine conversations with public market investors require a different tact
  • Assuming management hasn't been specific about this before: What are the biggest risks to your forecast for the current year and near-term strategic initiatives, and are there multiple paths to achieving the goals you have set for the business? How do you think about prioritizing different aspects of your plan? (Like I said/implied above with my "purposeful" comment, this is a helpful way to ground the conversation in the things that might impact your decision to invest immediately or otherwise contribute to your thesis tangibly)
  • Something related to the competitive landscape; some combination of what Secyh62 mentioned would be best. In general though, I think it's extremely valuable to hear about how management thinks about developments up and down the spectrum (i.e. incumbents vs. emerging companies), and to see how that compares to the view that you and your team have been able to develop through independent research (this goes for all of your questions; try to come up with a perspective beforehand, and try to see how your conversation with management aligns with or goes against your thinking... incorporate accordingly)
  • How do you segment your customer base, and how does your current penetration within that customer base impact your thinking on sales strategy, product development, etc.? Do you see growth coming from further penetration, moving down/upmarket, upselling/cross-selling to your current customer base, etc.? (Can imply a lot from how management answers this line of questioning)
  • If you had access to unlimited capital, where would you put those dollars and why? (Might be harder to get out of, or otherwise irrelevant for, public companies with gigantic balance sheets, but always interesting to hear management's perspective - where they believe it would be helpful to double down, if there's a big adjacent opportunity on their mind that lies outside their current investment capacity, etc.)
  • How do you see your industry changing in the near, medium, and long-term, and what are you doing to adapt to those developments? (Get the chance to see how mgmt thinks about opportunities and risks over time, which should tie into the conversations that you've already had based on the above questions)

Along with absorbing the information that comes from the answers to these questions, I would also suggest judging how the CEO answers these questions. In my opinion, these are things that should be on the mind of any member of the management team; depending on the role of the person you're talking to, the answers will be framed differently (due to different focus areas of the business), but a good CEO will have a holistic view on the different areas addressed in the above. To be clear, I define holistic in this context to mean that their answers will be thematically consistent but specific enough to give you an idea of how different parts of the business will/could develop, what those developments mean/could mean for the Company's prospects, and whether their view is sober/realistic enough to be taken seriously. Of course, when you get to the folks 1-2 levels below the CEO, their answers should signal alignment with what the CEO articulated. I've found that the most effective organizations have a shared sense of urgency across all functions/business areas; if you are thinking about investing in a controlling stake, then how different members of the management team answer these questions should give you an idea of how the team could be improved (assuming you believe the CEO is a capable leader in the first place).

The above is informed by how I've approached management meetings in the past, though my experience has been in PE/growth equity looking primarily at private targets. I would have a very good idea of how targets think about some of these things broadly prior to the meeting (from CIM, data room, etc.), and often saw meetings as an opportunity to delve into the specifics.

Hope this all helps.

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Apr 15, 2019
Classica:

- How do you segment your customer base, and how does your current penetration within that customer base impact your thinking on sales strategy, product development, etc.? Do you see growth coming from further penetration, moving down/upmarket, upselling/cross-selling to your current customer base, etc.? (Can imply a lot from how management answers this line of questioning)

This is a great question, +1

Apr 3, 2019

Also, I generally save the call for management until the end. Make sure you have a good understanding of the business and what is going on before you speak with them. You're not talking to them to gather factual information that you could find via public sources, you're trying to find out how they think about their business, the competitive landscape, and the path forward.

Don't be the guy that wastes their time asking stupid questions like "are you planning any M&A??"

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Apr 13, 2019

One day, perhaps you'll be in the position to ask a CEO a question. What will you ask him? Or maybe you'll get the chance to ask a her. I guess you ask 'why'?

"Why did you start your company?" Was it a selfish reason? Were you looking to get rich? Were you looking to save the world?

If you thought you could change the world, why did you focus on last-mile delivery? Why is e-commerce world-changing? Does your business actually add anything to the sum total of human achievement?

Do you feel like you are gifted or lucky? In particular, do you feel lucky to have come across this particular idea, or do you feel you have operationalized an idea anyone might have happened upon?

Will you take your great fortune and apply it to the same goals you had before you happened upon your fortune, or will you fall into the trap of delusional self-believers who imagine their main success is destiny?

Can you accept that a great deal of your success is serendipity, and are you willing to apply the fruits of your luck to the betterment of others who were once like you?

Or will you imagine your luck and fortune were manifest? That you were always meant to achieve what you did?

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Apr 13, 2019

I guess you should ask them if they could imagine another life for themselves and what they would do if their life took a different path.

Apr 13, 2019

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Apr 14, 2019

I say the below knowing that these are obvious points to some. My purpose in writing this is to simply add context to brotherbear's post for readers who might not be as well-informed. In general, I agree with the suggestions, but I do feel like further explanation would be helpful (thinking back to when I was still in school and reading these forums). Open for debate, just providing another POV...

I like these questions for early-stage companies that don't necessarily have a defined business model (perhaps not even a marketable product). In those types of investments, you really are evaluating the team and trying to figure out if they: a) are people you trust and have confidence in (smart, humble, driven, etc. - whatever you're looking for), b) are founders who have conviction in their vision and have been thoughtful about the underlying rationale, c) are flexible in how they think about the various opportunities in the marketplace they are targeting, and d) will be responsible with how they handle your capital and the opportunity your partnership represents (sort of goes with (a), but it's different).

It seems like the OP is asking for questions to ask CEOs of later-stage companies. I'm defining "later-stage" broadly - companies with an established presence in their respective markets, defined business models, strategic plans/long-term visions that are at least grounded in the company's current context, etc.

For that reason, I don't think these questions would be the most important ones to ask since they aren't directly related to the prospects of the business currently and how that will change over time - which is ultimately what you're trying to develop a thesis for (vs. investing purely on the strength of the CEO/founder/management team).

I don't mean to dismiss the idea that questions addressing the personality/motivations of a CEO or founder are important. These can be helpful in certain situations where the company is more mature... a stellar CEO who is not a founder can elevate what might seem like a sub-par investment opportunity based on historical financials, current product, competitive positioning, etc. They just might not have had access to sustainable funding, could be new to the company, or otherwise constrained. Additionally, questions of this type would be helpful to ask a founder-CEO - in my experience, you're usually trying to figure out whether the founder is the best person to lead the company or if bringing in more professional leadership would benefit the company at that stage.

As I said at the start of this post, I'm just adding a bit of perspective; more than happy to hear how others think about this.

Apr 15, 2019
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