Conceptual Framework to evaluate Angel Investments- My thoughts and Perspectives
I have invested in 25 start-ups so far.
Yesterday one of my friends called to ask me if I would explore to invest in another great opportunity. While typically one would require a few hours to evaluate a prospective investment, I only had an hour’s time to spend with the founders to decide regarding this particular investment.
To make the best use of this time for a meaningful outcome, I created an agenda and shared the same with the founders.
The agenda that I shared with the founders prior to the call was broken down into the following three buckets:
1. Founders Life journey and their experiences (20 minutes)
2. Philosophy of the business (20 minutes)
3. Review the Pitch Deck (20 minutes)
Here is a brief outline of each of the above mentioned three buckets:
- Founders Life journey and experiences (20 minutes)
- Life experiences and learnings of Founders
- Personal Purpose and Values and alignment and harmony with the Business
- Aspiration
2. Philosophy of the business (20 minutes)
- Purpose
- Values
- Operating Principles
- Role of Ecosystem and what is our value proposition to each stakeholder
- What is our unique value proposition and what are the Critical Success Factors
- Business Drivers to Scale
- Core capabilities for now and for Future
3. Review the Pitch Deck (20 minutes)
- Choice of Target Customers segment and size
- Go to market
- Current Business Traction
- Client value proposition and UI/UX, acquisition and retention
- Branding strategy
- Competitive intensity and entry Barriers
- Risks and challenges
- Current and future technology trends
- Monetization
- Unit economics Vs cash flow Vs aggression in scaling up
- Current Partnerships both on Supply and Demand
- Cap table and use of proceeds
We were able to close the discussion in an hour and five minutes. While we may not have touched all the issues, but I was able to get a sense of the founders and business to make my decision. The comfort that I had was that the lead investors would have done a deep dive on Business, Technology, Legal, and Accounting diligence.
I thought of sharing this framework as I believe this may be helpful to some of the people in the Angel Investment fraternity but the questions will change depending on the stage of start-up and the Business domain.
July 2020
