Before Angels invest they want to be comfortable on two levels…

When #Angels invest its about becoming comfortable on two levels…

By putting yourself in the position of an Angel, the decisions and thought processes they take to assess an investment opportunity – it’s much easier to second guess the questions you will be asked.

Structurally Angels make their own decisions , there is no back office team, investment committee. They make decisions based on their experience (how the angel made his money) which starts with becoming comfortable with the Founders, the people.

Often I reach out to Angels I know, to help authenticate a proposition, a tech stack I might not be that familiar or have current info. I do this to socialise the opportunity and get a feels for the odds of being able to place the investment.

One of these Angels came on a call with a Founder for 75 minutes, unusual because normally first call is 30 minutes to establish initial comfort. It’s not to pitch.

It IS a ‘getting to know you’ conversation.

First Gate: Angels want to understand the Founders journey – the softer issues what drives and motivates the Founder(s). Of course the elevator positioning on what, why and the opportunity, coupled with what the Founder is looking for comes into play.

A second call with this Angel I was reminded the extent to which Angels go as they dug deeper into the company.

Second Gate: Questions about existing funding, the Cap Table, voting rights, cash flow, debt, director changes, filed accounts – that might reveal underlying issues of cash consumption, founders falling out, changes of people with control more than 25%.

Third Gate: Then it was time to dig into the product, who built it, the team, the cost, prices, margins, the IP, the ownership and protection. Are the developers still on the team? Is the software in escrow, is there a patent?

Summary: Angels want to know if they put their money in – will it be consumed with legacy issues, debts, disputes, thus unlikely to see it again. Often there are buried issue related to ownership, founders, early investors – legacy things that can put off Angel investors – even though the proposition is good and sales are strong.

Angels want answers to the two primary questions –

1. Will the team (founder) loose my money?

2. When can I expect top get it out?

#founder #investor #angelinvesting #angel #startup #capitalraising

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