Is an Angel Investment Right For You?
The Nebraska Angels determine if applicants are the right fit for Angel capital based on the following criteria:
- The team is highly experienced, driven and coachable. For companies focused on software, there must be a Chief Technology Officer among the team members, or at least one team member with development skills/experience.
- Strong value proposition. Angel investors like to invest in opportunities that are solving problems or creating value for end users.
- The company has a small number of customers, the revenue model is developed and the team understands what the market can bear. Angel investors rarely consider investing in concept stage companies.
- The start up requires at least $100,000 in outside capital to fuel the current growth.
In addition to the above criteria, please use the checklist below to see if you are ready for an Angel investment. If you decide you are not ready for Angel funds, there are many other resources available to entrepreneurs in Nebraska.
- Are you an experienced entrepreneur? Are you driven and coachable?
- Is your team experienced, driven, and coachable?
- Are you and your team willing to defer some control and decision-making authority to outside investors?
Market & Competition
Angels consider the overall market, market segment, current and potential demand as well as the scalability of the business when reviewing investment opportunities. Please consider the following questions –
- Do you have an identifiable market segment?
- Are you able to demonstrate significant demand for your proposed solution?
- What is the market size of the projected spending in your product category? Is the market growing?
- How scalable is the market?
- Who are your potential/current competitors?
- How do you differentiate from your competitors?
- What are the barriers to entry, and how do these barriers help your company maintain a competitive advantage?
- Please develop reasonable financial projections, including an income statement, cash flow statement, balance sheet and supporting spreadsheets as they are applicable to your business.
- Can you demonstrate high margins (greater than 15%) and consistent cash flow growth?
- Please be able to clearly articulate the revenue structure of your business. How do you plan on making money?
Entrepreneurs should consider how much capital investment is required, and at what point in time does the investment become necessary. Please consider the following before determining whether or not angel capital is right for you –
- Angels typically consider investment opportunities requiring $100,000 to $1,000,000 in capital.
- How long will the capital last?
- Can you provide a break down of how the capital will be used?
- Have you developed a clear exit strategy enabling angel investors to generate a return of 10x or more of their initial investment?
- Be sure to include data on other mergers and acquisitions activity in the same market space to coincide with your exit strategy.
- Take into account the amount of revenue, customers, users, etc, which would attract an acquisition offer. How long would it take to achieve this growth?
Have you developed a comprehensive business plan, articulating key business strategies?