Technology Investor Panel: How Angels Screen Tech Deals
Investor Discussion Panel - Technology Investor Mandates - Feedback from Investors on Where Tech ...
Angel investors, family office members and tech founders who want to see how experienced early stage investors screen deals and judge founders.
What stood out
- Screen with many reviewers. Ian describes a process where every incoming deal is rated by at least six members through an online survey. Nobody has to meet the company at that stage. This avoids a single partner becoming the choke point.
- Adaptability matters most. Katherine, Ian and Gary all stress agility in the founders. Ian says a company's life cycle often runs five to eight years or longer, so the entrepreneur's market knowledge and flexibility matter more than the first product.
- Diligence is mostly about people. Ian says the group's diligence focuses on culture and the team, more than the technology. Talking through market risk and barriers to entry shows how the management team thinks.
- Notes versus price rounds. One panelist says more deals are arriving as convertible debt. Another prefers price rounds but notes that the cost of setting one up is a consideration.
- Hold angel investing in proportion. Ian calls angel investing worth doing as a very small part of a large allocation. Returns are volatile and can be zero, so he suggests investing in a bunch of companies rather than a couple.
Summary
Band of Angels looks at about 50 unsolicited deals a month. At least six members rate each one, the group stack ranks the scores, and three companies pitch at the monthly meeting. Ian, Katherine, Gary, John, Skip and Ron explain how their groups screen technology deals, and why most of them care more about the team than the product.
The panel, hosted by Richard C. Wilson, also covers pandemic-era activity, deal structures and risk. Skip's group made its largest investment in May. Katherine saw two of three deals oversubscribed. The panel compares convertible notes, price rounds and a revenue royalty, and ends with advice on holding angel investing as a small part of a larger allocation.
Facts and figures
- Band of Angels was founded in 1994 and reviews about 50 deals a month, with at least six members rating each one.
- One panelist said the cost of setting up a price round is a consideration for early stage companies.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Investor Discussion Panel - Technology Investor Mandates - Feedback from Investors on Where Tech .... Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around convertible note terms, price round documents and revenue royalty structures. Do not use AI to write your own legal agreements.
In their words
"The majority were still interested in seeing deals. They still wanted to meet. They wanted to see the deal flow."
"It's so easy to fall in love with the technology and lose sight of all other flags that are going on around you because you've fallen in love with the technology."
"The worst thing to do would be to see four to 10 deals a year that you have access to, invest in a couple of them per year and do so haphazardly."
- 1Unsolicited deals arrive
- 2Six members rate each online
- 3Deals stack ranked by score
- 4Meet 10 to 20 in person
- 5Three pitch at monthly meeting
Related questions
- How do angel syndicates work for startups?An angel syndicate is a group of individual investors who back a startup together.
- How do I close a funding round?I close a funding round by focusing on investors who fit the opportunity and moving each interested prospect through clear, consistent follow-up.
- What documents do investors request during due diligence?Prepare a clear, organized package covering your operations, investments, compensation, team, and track record.
Questions about this video
How does Band of Angels screen deals?
It looks at about 50 unsolicited deals a month. At least six members rate each one, and the group meets in person with a subset of 10 to 20. Three of those pitch at the monthly meeting.
Why do some investors prefer price rounds to convertible notes?
One panelist says most investors prefer a price round because they know what they are getting. The drawback is cost, which is one reason many sponsors talk to a securities attorney about how to structure the round.
What did the panel say about investing activity during the pandemic?
Skip said fewer than half of surveyed members wanted to wait until 2021. His group made its single largest investment in May. Katherine said two of her three recent deals were oversubscribed.
Put this into practice with the how much to raise calculator. See all angel investors resources.
