As Executive Director of the National Angel Capital Organization, I am constantly asked what business angel investors are looking for by entrepreneurs.
There is no one-size-fits-all answer. Entrepreneurs must always remember that angels, acting alone or in groups, are all individuals, with their own motivations for and interests in investing.
Some angels will only invest in one industry. Some angels will invest in many industries. Some angels will be extremely hands on – even taking senior roles within their investee company – mentoring the company and leveraging their network and expertise to help insure its success. Some angels will invest in a company and leave it to other investors to help ensure the company’s success. No one size or set of motivations describes all angels.
That said, there are a few things that all investors will look for in their potential investments; or at least should be looking for. I usually sum these things up as the “3 T’s” – being Team, Traction and Technology (Read more about the 3 T’s and their relationship to the failure modes of investee companies here.).
The Wall Street Journal in an interview with Susan Preston on April 25th, How to Win Angel Funding, did an excellent job of rounding out the investment criteria of angels. Every entrepreneur seeking capital should review this article to ensure their opportunity, at the very least, meets all of the criteria set out in the article. These include:
A solid potential for return. A good plan for the cash. A winning attitude. A seasoned team. A competitive edge. A well-defined exit strategy.
With a market for private investment capital characterised by extreme scarcity, demand far exceeding supply, an entrepreneur cannot afford to approach investors without having satisfied all of these criteria. If you have not met these, I would suggest that you will have an exceptionally hard time securing capital as, in a market such as ours today, even companies that have met and far exceeded these base criteria are having a difficult time securing capital.