What are angels looking for?

Angels enjoy the process of investing in and supporting businesses and they often invest in businesses that will make a social impact. But it is important to remember that an angel is also looking for a return on their investment. They will be most interested in a business which can justify delivering a solid return in line with the expected risks associated with that investment. Angel investors looking to invest in a startup or early-stage business will also focus primarily on the people, but of course they will also look carefully at the business case itself and also then the core aspects of the deal on offer. The following are the key aspects that angel investors look at:

The People

For startup or early-stage businesses, the capacity and experience of the entrepreneur and management team has been shown to be the most significant aspect for angel investors when deciding to make an investment:

  • What is your experience and skills as an entrepreneur and that of your team and what does this bring to the business?
  • What other achievements have they had in their past career (academic and business) that bring value to the current business?
  • Do you have the drive and passion to deal with the ups and downs of running an early-stage business and to devote all the time and energy that is needed – are you looking to create a big capital gain in medium term?
  • Do you have the business skills and understanding to execute the business plan to take the company through to high growth?
  • Are you able to communicate the opportunity to investors so that they can feel assured they can sell the product/technology to key customers?
  • What skills are currently missing in your team and where can an angel investor add value to the team? (This does not need to be a complete team at this stage, but you should be aware of what other experience and skills you and your team lack – this can form part of the investment proposal.)

The Business

  • Does the product, technology or service address a real challenge in the market or society – what is the pain you are solving?
  • Is it likely to be disruptive and make a real impact in the marketplace or establish a new niche?
  • Does the product or technology have identifiable Intellectual Property? This may be patentable or may be in the form of copyright or branding or other intangibles – and can you confirm ownership?
  • Do you have a defensible market position? What other businesses are in competition with this project? How does it compare and what is the unique selling point or advantage – or does it have first-mover advantage?
  • How does your business make money? Are there clear identifiable revenue streams? Are there likely to be good gross/net margins?
  • How scalable is your business model to achieve explosive growth?
  • What kind of validation have you had in the market place? Are you already selling or has this been tested out with potential customers? Can they show results of market testing/surveys?
  • What is the market size and realistic potential market share?
  • Is the deal EIS/SEIS-eligible and do you have advanced clearance?
  • Do you have a desire and strategy for exit?
  • Are you prepared to give up shares in return for investment and have an investor on your Board giving you strategic advice?

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