As an angel investor, you have the potential to make a significant impact on a startup company. But with that potential comes responsibility.
You need to due diligence in order to ensure that you are investing in the right company and team.
Note* It’s important to remember that only qualified accredited investors can be angel investors. This is an SEC rule to protect unsophisticated investors from getting hurt.
Table of Contents:
- Define Your Business Model and Value Proposition
- Understand the Basics of Startup Financing
- Develop a Pitch Deck or Executive Summary
- Do Your Homework on Potential Investors
- FAQ’s in Relation to Angel Investor Checklist
Define Your Business Model and Value Proposition
Otherwise, you will just be wasting your time and money.
To make sure you are on the right track, ask yourself these questions:
- What need does my product or service address?
- How does my product or service solve the problem better than other solutions?
- What are the unique selling points of my product or service?
- Who is my target market?
- How will I reach my target market?
- What is my pricing strategy?
- How will I make money?
- What are the risks and challenges associated with my business model?
- What are my key milestones?
- What are my long-term goals for the business?
If you can answer these questions, then you are well on your way to defining your business model and value proposition.
Understand the Basics of Startup Financing
Startups are always looking for financing and there are a number of different ways to go about it. One option is to seek out angel investors.
An angel investor is typically an individual who provides capital for a business in its early stages in exchange for equity. If you’re thinking about becoming an angel investor, there are a few things you should keep in mind.
First, you need to understand the basics of startup financing. This means understanding things like convertible notes, SAFEs, and equity.
Second, you need to do your due diligence on the startup. This means looking into the team, the business model, and the market.
Finally, you need to be prepared to lose your entire investment. This is a risk you need to be willing to take if you’re going to be an angel investor.
If you’re ready to take the plunge and become an angel investor, here’s a checklist to help you get started:
- Understand the basics of startup financing
- Do your due diligence on the startup.
- Be prepared to lose your entire investment.
Develop a Pitch Deck or Executive Summary
As an entrepreneur, you know that one of the most important things you can do is to develop a pitch deck or executive summary. After all, this is what you’ll use to convince an angel investor to invest in your company.
But what makes a good pitch deck or executive summary?
How can you make sure that yours is up to par?
Here’s a checklist of what you need to include:
- A clear and concise description of your business.
- A detailed explanation of your business model and how it will make money.
- An overview of your target market and how you plan to reach them.
- A description of your competitive landscape and how you plan to compete.
- An overview of your management team and their experience.
- A detailed financial plan, including your expected revenues and expenses.
- A description of your current status and future plans.
- A list of your risks and how you plan to mitigate them.
- A summary of your key milestones and achievements to date.
- An appendix with supporting materials, such as market research, surveys, and financial projections.
By including all of these elements, you’ll give yourself the best chance of impressing an angel investor and convincing them to invest in your company.
Do Your Homework on Potential Investors
If you’re thinking about raising money for your startup by seeking out angel investors, it’s important to do your homework first. After all, not all investors are created equal.
Some may be more interested in quick gains, while others may be more patient and focused on the long-term. To make sure you find the right fit, it’s important to have a checklist of qualities to look for in potential investors.
Here are a few things to keep in mind:
1. Does the investor have a good track record?
When you’re looking at an investor’s portfolio, pay attention to how long they’ve been investing, and what kind of companies they’ve backed in the past.
Are they mostly in early-stage startups?
Or do they tend to invest in more established companies?
2. What is the investor’s investment style?
Some investors like to be hands-on, while others prefer to take a more hands-off approach. Consider what level of involvement you’re looking for from your investors.
3. What is the investor’s timeline?
Some investors are looking for a quick return, while others are more patient. Make sure you align on timelines before taking any money from an investor.
4. Does the investor have a good network?
An investor’s network can be incredibly valuable, so it’s worth considering whether they can open any doors for you.
5. Is the investor a good fit for your company?
Investors tend to back companies that are in industries or sectors they understand. If an investor doesn’t have a good grasp of your industry, it may be difficult to get them on board.
Doing your homework on potential investors is critical to ensure you find the right fit for your company. By using this checklist, you can narrow down the field and find investors who are a good match for your business.
FAQ’s in Relation to Angel Investor Checklist
What do I need to show an angel investor?
Some items that may be on an angel investor checklist include:
- A well-researched and thought-out business plan
- A clear understanding of the market and the company’s place in it
- A strong management team with a track record of success
- A detailed financial plan and projections
What is due diligence for angel investors?
Due diligence is the process of investigating a potential investment in order to make a decision about whether or not to proceed with the investment.
An angel investor checklist is a tool that can be used to help guide the due diligence process and ensure that all important factors are considered.
How much money do you need to be an angel investor?
There is no set amount of money required to be an angel investor, but most investors have a minimum investment amount that they are looking for.
Additionally, many angel investors also look for a certain level of experience and expertise in the company or entrepreneur they are investing in.
What is a good ROI for angel investors?
There is no definitive answer to this question as it depends on the individual investor’s goals and preferences. However, a good rule of thumb is to look for an ROI that is at least double the initial investment.
By following the tips in this angel investor checklist, you can be sure that you are making a wise and informed investment.
By doing your homework on potential startups, understanding the basics of startup financing, and developing a pitch deck or executive summary, you will be well on your way to becoming a successful angel investor.
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