How Do Angel Investors Evaluate Startups?

What is an angel investor?

High-net-worth individuals that invest their own money in startups or small businesses in exchange for stock are known as angel investors. They are also referred to as angel funders, private investors, and seed investors.

Angel investors could be found among an entrepreneur’s family, friends, and immediate network. Friends, Family, and Fools (FFF), a well-known acronym, was developed for this reason.

Angel investors may offer a one-time upfront investment to jumpstart the business or a continuing continuous infusion to support and sustain the enterprise through its incredibly challenging early stages

Because early-stage businesses are so hazardous and full of unknowns, institutional investors typically steer clear of them. These businesses frequently have little financial success and no traction at all. Due to this, they either use their own money (bootstrapping) or angel financing.

Angel investors typically get in while the entrepreneur is just establishing the company and developing his or her prototype rather than when the venture is scaling, which results in far more favorable contract conditions than those offered by other financial backers. The investors are there to support startups while they take their first steps because they are aware that it is a lengthy game and they won't be able to make a quick profit from it (thanks to their prior entrepreneurial experience). They differ significantly from venture capitalists in that aspect (VCs).

Angel investors and startup pitches

Every year, the majority of active angel investors review hundreds of pitch decks and attend dozens of startup presentations. Regrettably, they only finance a relatively small percentage of those initiatives, which is bad news for many entrepreneurs. hence, how do angel investors decide? There is no definitive answer to that issue, but in this piece, we will attempt to describe the most frequent methods by which they evaluate the deals they get and what qualities they prioritize in company founders and teams.

Startup pitches—where entrepreneurs attempt to sell their idea to investors in order to secure funding—typically take place during screening sessions. One benefit of these meetings is that the presenter frequently receives feedback from angels. This input can be extremely helpful in enhancing not only the presentation but also the startup's overall organizational structure and the product/service in question.

It happens frequently that angel investors—who are occasionally former entrepreneurs themselves—give a single piece of guidance that enables the founder to secure the required funding. Because of this, founders shouldn't lose hope when their pitches are dissected during screening.

As was previously said, some angel investors themselves are former (or even present) startup founders, thus they are aware of how emotionally taxing the process of obtaining the required funding is. Because of this, several of them offer mentoring on how to speed things up. They might not be interested in investing at first, but if the founder shows promise during the mentoring, there is a good possibility they will.

Due to the previously mentioned reality, first-time entrepreneurs will considerably benefit from being introduced to an experienced angel. It may be even more valuable to learn from someone who has already overcome the obstacle than to receive money right now.

All around the world various organizations, associations, and hubs organize events during which startups present their ideas and try to secure funding (and possibly important to their development contacts). In this post, we will take a look at TiE Angels (and their branch in Southern California ( TiE SoCal ) pitch events and their due diligence process.

What is TiE Global Angels?

TiE Angels is a group of experienced entrepreneurs, executives, and investors dedicated to supporting startups in their early stages. With a combined Asset Under Management (AUM) of over $15 million, TiE Angels is one of the world's most influential early-stage investment groups.

Founded as a part of The Indus Entrepreneurs (TiE) global network, TiE Angels brings together a diverse group of successful individuals who share a common goal: to support the next generation of startups. With over 150 Charter Members, TiE Angels provide startups with access to a wealth of knowledge, expertise, and networks that can help them succeed.

The investment thesis of TiE Angels is simple: support startups with the potential to become successful and profitable companies. To achieve this goal, the group looks for startups with a clear business plan, a well-defined market, and a talented team. Additionally, they prioritize startups with a strong technology focus and the potential to disrupt their respective industries.

One of the key advantages of working with TiE Angels is the value-added services they provide to startups. Beyond just financial support, TiE Angels offer mentorship, access to networks, and strategic advice that can help startups succeed. With a track record of investments and value creation, TiE Angels has generated over $200 million in value in just three years.

One of the key advantages of working with TiE Angels is the exposure to the leading group of top entrepreneurs.

TiE Global Angels Investor Summit

TiE Global Angels Investor Summit (in association with TiE SoCal Angels) is one of the largest gatherings of venture capitalists, angels, family offices, and individual investors on the West Coast of the United States.

WHY ATTEND?

This event will be the hotbed for Networking, Discussing Trends & Deal-making.

Held at the prestigious Sheraton, Cerritos, this event is a must-attend event for investors as well as startups looking to build long-lasting relationships in the Southern California ecosystem. The last few years of this event were well received by Startups and Investors alike and the event attracted 550+ attendees overall. This year, the event is going to be even bigger and better.

• Thursday, April 6, 2023 – 8:30 AM to 5:30 PM
• Sheraton, Cerritos, CA 90703

200+ Investors are expected to attend the event this year including venture capital firms, angel investors, family offices, and individual investors.

All investors are screened prior to receiving admission. Fewer than 100 startups are issued tickets for admission, 25 startup tables are available and only 12 companies will be allowed to pitch.

WHO SHOULD ATTEND?

Startups from the following industries: Fin-Tech, Bio-Tech, AI/ML, Big Data, Cyber Security, Cannabis, Blockchain, Health and Wellness, Media/Entertainment, Gaming, CPG, and Enterprise Software

SUMMIT PROGRAM & FEATURES

- Access to funding resources

- Present your business ideas to investors

- Virtual profile with Videos

- Business Networking To Maximize Exposure

INVESTORS

If you are part of the startup ecosystem, this event is where you can get the pulse of the industry. Spend a day with the most prominent investors from Southern California talking about trends, deals, and plans for the future. We will have a curated list of startups that match your investment criteria available for you. The profiles will be available a week before the event so you will know exactly who will be in the room.

Get your EARLY BIRD ticket with a 5% discount by using the code LUKE5 and the following link:

TiE Global Angels Investor Summit 2023

So how does TiE Angels evaluate startups for investment?

When evaluating startups for investment, TiE Global Angels generally follows a set of criteria that includes the following:

1. Market opportunity: The first thing that TiE Global Angels looks for is a large and growing market opportunity. The startup should be able to demonstrate that there is a real need for its product or service and that the market for it is big enough to support its growth.
2. Product or service: TiE Global Angels evaluates the startup's product or service to see if it is innovative, differentiated, and has a competitive advantage. They want to see that the product or service has the potential to disrupt the market and provide a unique solution to a problem.
3. Team: TiE Global Angels evaluates the startup's team to see if they have the necessary skills and experience to execute their business plan. They want to see that the team has a track record of success, relevant industry experience, and a strong work ethic.
4. Traction: TiE Global Angels also looks at the startup's traction to see if they have achieved any significant milestones. They want to see that the startup has some customers or users and that they are generating revenue or have a clear path to revenue.
5. Financials: TiE Global Angels evaluates the startup's financials to see if they have a clear understanding of their financials and a realistic plan for growth. They want to see that the startup has a clear understanding of its costs and revenue streams and that they have a plan for managing its cash flow.

Overall, TiE Global Angels look for startups that have the potential to become successful and scalable businesses, and that can provide a strong return on investment for their members. They prioritize startups that have a strong team, a large and growing market opportunity, and a unique and innovative product or service.

Post by Lachezar Zanev (Luke), Ambassador at TiE SoCal Angels and Co-Founder at Venture Starters

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