How do I evaluate an offer from an angel investor?
Short answer
Start by comparing the offer with the capital your business needs, the investor's expectations, and the working relationship you want. Confirm the amount, timing, and proposed structure in writing so you can evaluate the full offer. Ask what role the investor expects to play, including any involvement in decisions, introductions, or ongoing reporting. Look for a fit between the investor's experience and your company's stage and industry. Consider how the arrangement affects your plans over time, not just the immediate cash need. For decisions about specific terms, work with qualified professional advisers.
Checklist
- Confirm the amount offered and when the funds would be available.
- Ask for the proposed structure and all terms in a written summary.
- Clarify what the investor expects from you and the leadership team.
- Ask whether the investor expects a board role, regular updates, or approval rights.
- Find out what relevant industry experience and relationships the investor brings.
- Check whether the investor understands your business and its market.
- Compare the offer with your funding needs and operating plan.
- Prepare clear materials about the opportunity, team, operations, and risks.
- Consider whether you can work constructively with this investor over time.
From my talks
"Performance does not market itself; pedigree does not swing all doors wide open."
Common scenario
An angel offers a founder enough capital to hire two people and extend the company's runway. The founder asks for the amount, funding date, proposed structure, and expectations in writing, then discusses them with the leadership team. The angel has useful experience in the company's sector, but also expects regular operating updates. The founder compares that involvement with the team's capacity and plans, then gets qualified advice on the proposed terms before deciding.
What to do next
- Write down the amount you need, what it will fund, and when you need it.
- Ask the investor for a written outline of the offer, timing, expectations, and proposed involvement.
- Make a list of questions about decision-making, updates, introductions, and future working arrangements.
- Compare the offer with your business plan and discuss the fit with your leadership team.
- Take the proposed terms to qualified professional advisers and resolve open questions before making a decision.
- Keep a record of the agreed points and any changes as the discussion continues.
Related questions
- What is an angel investor?
- How do I find angel investors?
- How much do angel investors typically invest?
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