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:
- Large or rapidly growing market opportunity that could provide investors with a 10x+ return on investment within a 3-5 year period.
- The company has a unique solution to the market problem that will give it a significant advantage against competitors and alternative solutions.
- The team is highly experienced, driven and coachable. For companies focused on software, there must be at least one team member with development skills/experience.
- The company has at least a small customer base, 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 $100,000 to $1,000,000 in outside capital to fuel the current growth, and that will allow the company to achieve at least 12-24 months of sustained operations.
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.
Angel Investment Checklist
- Are you an experienced entrepreneur?
- Do you have experience building teams that can explore and identify new market opportunities?
- Do you have domain expertise in your industry?
- Are you and your team willing to defer some control and decision-making authority to outside investors?
Market & Competition
Angels consider the overall market, 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?
- Who are your current and potential 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?
Financials & Key Metrics
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 30% operating margin)?
- How scalable are your operations?
- How do you make money?
- Be prepared to discuss basic financial metrics such as Cost to Acquire Customers, Average Lifetime Value of Customers, Churn Rate, and Gross Operating Margin.
Entrepreneurs should consider how much capital investment is required, and at what point in time the investment becomes necessary. Angels typically consider investment opportunities requiring $100,000 to $1,000,000 in capital. Please consider the following questions --
- How long will the capital last?
- Can you provide a break down of how the capital will be used?
- Do you plan to raise additional capital? If so -- when, how much and from whom?
- Have you developed a clear exit strategy enabling angel investors to generate a return of 10x or more of their initial investment?
- Do you have data on other merger and acquisition activity in the same market space to coincide with your exit strategy?
- How long would it take to achieve the growth required to reach the amount of revenue, customers, users, etc, that would attract an acquisition offer?
- Have you developed a comprehensive business plan, articulating key business strategies and value drivers?