The Ultimate Angel Investors Checklist

An angel investor is an individual who provides financial backing for small startups or entrepreneurs, typically in exchange for ownership equity in the company.

Have you wondered What angel investors want from a startup?

They will be happy to invest in a company that has 4 characteristics:

1 .Return on investment

The first thing angel investors are looking for is a company with a potential of a high rate of return on their initial investment. 

2. Reliable management

Investors will look at the leadership team in place. Because the business is new, the founders must have the skills, experience, and character to achieve a successful business plan.

3. A convincing business plan

Expect to show investors a detailed business plan with crucial finance terms, marketing strategies, financial projections, and market research. The four most important metrics are burn rate, projected growth, customer acquisition cost, and gross margins.

4. Early Traction

Before approaching angel investors, you should already have achieved some early buzz or signs of traction, such as positive press, a successful trial run, or a beta product with positive feedback from customers.

We have compiled a list of points investors can consider when determining whether to invest in your venture.

The list includes the following areas: Product, Financials, Legal, Team, and Industry.

Product

• Have the company developed a new technology?
• Does the business idea fill a market gap with potential for significant growth?
• Have you seen at least an MVP (A minimum viable product)? If you did - what was the impression?
• Which traction has the company achieved already?
• Does the company has a USP - unique selling proposition?

Financials

• What is the burn rate?
• How much cash does the company have in the bank?
• What is the projected growth?
• What does customer acquisition cost?
• What are the gross margins?
• What is the company’s MRR?
• What is the current valuation? Can the company 50–100x their current size and valuation?
• Does the company have an exit plan?

Legal

• Is the company incorporated in some country with a legitimate rule of law) and able to take outside investment? 
• Are there other investors with at least as much experience as you?
• How is the investment relative to other 5 companies in the same industry?
• Have you seen the cap table?
• Is there any dead weight such as ex-employees or work-for-equity dev shops?
• Have you had a lawyer review the investment contract?

Team

• What first impression did you get from the entrepreneurs?
• Can you trust entrepreneurs?
• Has the founder built a company before? Have they succeeded?
• What background do entrepreneurs have in common? Have they studied together? Previously worked in the same company? How long have they known each other?
• Why do entrepreneurs want to solve the problem they aim to solve?
• What previous background do entrepreneurs have in the field?

Industry

• Do you know a thing or two about the industry?
• Who are the big players and competitors in the industry? How big/well-funded are they?
• Have you reviewed the competitor’s products?
• Do you know the Total and Serviceable Addressable Market size (TAM & SAM)?
• Have you talked to customers to get their thoughts?
• Are you able to add value to the company? (More than just money)
• Have you taken a night or two to think it over? If not, sleep on it — more often than not, you’ll be glad you did!

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