What do Angels Look for in Fundable Deals – Part I

May 18 2010 No Commented

What do Angels Look for in Fundable Deals – Part I

The two most important attributes of a fundable deal for angels is the quality of the entrepreneur and management team and the scalability of the venture.

We would love to invest in entrepreneurs with prior CEO experience, but angels are most often approached by first time entrepreneurs.  So, what are the key differentiators for investors?

  • Integrity – We seek to invest in people with absolute integrity.  One “little white lie” and we move on to the next deal.
  • Coachability – Since angels invest both time and money in companies, we want to make sure entrepreneurs seek our advice and counsel. 
  • Commitment – Angels invest in entrepreneurs with “both feet in,” that is, people who have all their resources tied up in the business and are spending all their time on the business.
  • Vertical experience – Fundable entrepreneurs must have a good knowledge of the business segments and markets defined by the product.
  • Leadership – Entrepreneurs are expected to lead teams.  Experience in leadership is important.

While we would also prefer investing in teams with good business experience balance and experience in working together, the startup ventures we fund have seldom completed the building of these teams.

Scalability is the second critical attribute of fundable companies.  As was described in my last post, we angels must invest in companies capable of increasing the value of the company to twenty times the value at the time of investment.  This is best represented by rapid growth in revenues.  We seek companies that can demonstrate potential revenues of at least $25 million in 5-7 years from the time of our investment.

But the management team quality and scalability of the venture are not the only characteristics of a fundable company.  In the next post, I describe the other characteristics of fundable startup ventures.

It’s a GREAT time to be an angel.  Find a group and jump in!

Bill Payne is the 2010 BNZ University of Auckland Business School Entrepreneur In Residence. www.billpayne.com