What are the criteria that an angel investor should (and does) consider?
Here they are:
Return
every investor looks for a solid return, they know that the risk is high, hence it’s worth taking only if the potential return is higher than what can be achieved with traditional investment channels.
Reason
every person has different reasons to invest. However, they can be divided in 3 categories: economic, hedonistic and altruistic. The hedonistic type gets excited in being part of the creation of something new, while the altruistic looks for an investment opportunity aligned with her/his values and that has a positive impact. Ensure that you know who you are taking to and pitch accordingly!
Team
Any early stage investor attributes as much or more value to the management team as to the product or service. The management team has to be dedicated, competent, trustworthy and knowledgeable. The right mindset will be looked for.
Business Plan
Even at an early stage, an investor will want to see a well devised business plan, it is a way of showing your vision. A business plan is both the roadmap to the vision and the binoculars to see the final outcome.
Investment readiness
While there are different modes of investment, you must ensure that you have thought about your ask and your give, that you have a basic investment memorandum ready before you speak with an investor.
Involvement
As I mentioned before, most angel investors are looking for an opportunity to contribute their skills and connections. Be prepared to offer something that allows for this to happen.
Exit
Even if they take a long term view, investors will want to see certain timeframes and an exit strategy.
In conclusion, like any relationship, establishing a relationship with an angel investor requires work and involvement in order to be profitable and fulfilling.
How many criteria do you meet? Do you know what to work on?