What Do Angel Investors Look for in Startups?

Angel Investors can inject capital into your startup to take your project to the next level of success. Most of them are successful entrepreneurs with the acumen to help steer your young venture in the right direction. An investment angel will certainly be expecting high returns from any business partnership with you. Before agreeing to provide any funding, these investors will seek to determine key facts to assess your project’s viability.
Do you have a business project that requires angel funding to take off or progress to the next development stage? You may want to keep in mind these five important things that investors look for in startups.

1. Do You Have a Great Management Team?

Your business may be young, but potential investors will expect you to have filled key management positions before agreeing to invest in your startup. They’ll be interested in your competencies as the founder or founders. The business acumen and competencies of your entire team will be under scrutiny too.

2. The Size of the Market Opportunity

Angel investors are looking for high returns and they expect the size of your target market to support their long-term objectives. What is the current size of your customer base, and can you scale from a few customers to hundreds, thousands, or even hundreds of thousands? Be sure to present a big idea that’s worth the financial commitment you seek from your investors.

3. Any Signs of Early Traction?

Most investors prefer to support startups that aren’t struggling with initial traction. Therefore, it’s important that you highlight the numbers, such as customers that have already embraced your new product. The stage of product development is vital here. For example, have you reached the beta stage? Similarly, any strategic partnerships, including technology incubation, are positive signs of an idea being received well in your industry domain.

4. What Makes Your Product Great?

Most investment angels don’t mind supporting a high-risk venture provided that it’s a great idea. You must make a convincing case for why your product is unique. What unique problems does it solve and why do users care about it? Is it a game-changing piece of technology and what differentiating features does it offer?

5. Potential Business Risks

Investors want to be aware of any risks that your business may face. You’ll also need to talk about your thought process and action plan to prevent or minimize the risks. What legal, technological, or regulatory risks do you anticipate? What about product liability? Your investors want to be sure of the risk level they might be assuming by owning part of your company.

6. Do You Have a Fine Grasp of Financials and Key Metrics of Your Business?

As the founder, you must demonstrate a proper understanding of the financials relevant to your business type and industry. Similarly, you’ll need to show how you plan to track and measure success. Some of the metrics you can use are:

● Monthly burn rate

● Projected revenue growth

● Customer acquisition cost

● Gross margin

These are some of the issues that any investment angel may need to be clarified before agreeing to fund your startup. If you need to secure your startup with insurance at the early stages, call CF&P Insurance Brokers today at (925) 956-7700. Our experts will help come up with the right insurance coverage plan for your young business.

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