If you are an early stage startup looking to raise some money, you’d find yourself wondering from time to time: What do angel investors want? Do I have what it takes to convince someone to write a cheque in my name? To get some answers to the question, we caught up with Ravi Gururaj, the co-founder of Harvard Business Angels. Here are the five key elements that Angels look for before investing in a startup.
1. The Team
Is it a complete team? Do they have the passion? Do they have some hustle in them? Do they have sales knowledge? Take it to market? Do they have the domain expertise? These are some of the questions Gururaj asks before investing. This is fundamental to decision making he feels.
2. Market opportunity
Again, another basic question: Does the service or product address a pain? Does it address a big enough need?
3. Is it defensible
Is it something someone else can’t easily replicate? Have they put a lot of sweat equity into it? Even if it is serendepitious, have they put together something that will take others a year to build?
4. Is this something we can take to the next level
Say your startup gets some traction, the next question is, can you take it to the next level? Can you take it to next level of invstors? Can you take it to industry leaders? Can you scale this up through distribution? This is important for an angel investor because that’s how he gets rewarded for taking the risk of investing in a startup.
5. Can we add value?
Finally, its important to ask if you we (i.e. angels) can add value to the startup instead of just writing a cheque. Is it something we identify with?
This approach varies between angels. Some angel funds have what is called a spray and pray approach while others have a pick and choose approach.