I remember one presentation made by a CEO who had claimed to take several companies public beforehand, yet here he was pitching to raise a relatively small amount of money that someone with his alleged previous success would have easily been able to self-fund. When the investors asked him why he didn’t just fund his own venture, his answer was, “My wife won’t let me”. I’m sure he was telling the truth (my wife won’t let me invest in all the deals I want to either), but he definitely lost a lot of points with some of the investors in the audience.
This simple question (How much of your own money have you put in the venture) is an obvious one that you should be prepared to answer. In addition to looking for the direct answer, investors are also trying to subliminally find out:
How successful have you been on your previous ventures?
If you have presented a history of previous successes, you must have money in the bank, right? If you don’t have money in the bank, then you either didn’t make as much money as your success claimed, or you spent it all on something else.
How confident are you in your current venture?
An obvious point, but extremely important nonetheless. If you’re raising $X and asking investors to pony up their money, surely you have already stepped up to the plate. If you don’t have money in the bank, did you mortgage the house to raise capital? Hock the car?
If you haven’t invested any of your own money, don’t skirt the question and exceed expectations by proactively addressing the subliminal questions. Some investors will disqualify you right away regardless, but if you have an honest and compelling story that answers both the direct and subliminal questions, you may be able to come out of it alive.