Early stage entrepreneurs want to know how to align with angel investor interests, particularly if they’ve reached the end of friends and family funding.
I’ve pulled together the angel investment criteria used by the Angel Investor Forum as well as the presentation guidelines we give to startups if selected to present at one of our monthly meetings. These are good suggestions that will not only help prepare entrepreneurs to effectively engage angel investors, but also prompt for areas you should think through in developing your business overall.
Sustainable Real Estate Solutions was kind enough to share their application data as an example of what angel investors see when you submit a business plan for review (financial forecast details and key contacts have been omitted). Most angels share a common system and collaborate across angel networks using that system, so this should be representative of what almost all angel group see behind the scenes.
Here’s the short list of the angel investment criteria. Presentation guidelines and example are provided in the PDF download.
Product Design and Stage: What does the company make and what stage is it at?
Company’s Understanding of Customers: Who will buy it and why? What is their perceived value?
Competition: What else could customers use to solve the issue?
Size of Addressable Market: What is your relevant segment? How big is it (realistically)?
Sales & Marketing Ability: How will you prioritize and target each segment? What will it cost?
Business Model: How will you make money? How does your pricing strategy align with customer value?
Cash Flow: What’s the burn rate? How much cash do you have and how much do you really need?
Management: How much experience in related fields and strengths & weaknesses? How will the day to day operations be handled?
Secret Sauce & Barriers to Entry: What’s unique about the company, the business model, the product or service? Is it protectable from incumbents and other startups?
Corporate Structure & Capitalization: Who are the prior investors? Will their involvement cause valuation or liquidity preference problems?
Deal structure: What is a reasonable valuation? What is the equity and debt mix?
Exit Strategy: What are the possible exit avenues? What timeframe? What is the potential exit value?
Overall Impression: Does the team instill confidence? Do they believe in their product? Do they have access to advisors that will open customer doors and enable access to talent?