When you need funding for your startup, finding your first angel investor can make you realize why the word “angel” is in the term. These wealthy solo investors often contribute to early funding rounds before traditional venture capitalist (VC) firms would consider an investment. This early support makes the difference between moving your product development forward or staying stuck in place.
In order to secure your first contribution, however, you must ace the interview and convince potential investors why your startup venture is worth their precious dollars. Use this list of top questions to ask angel investors to make sure the business relationship is set up for success.
4 Top Questions To Ask Angel Investors In The First Meeting
Ideally, you want to build solid, long term working relationships with angel investors who operate their own companies in complementary fields and may be able to provide assistance to your venture beyond a simple blank check. These questions will help uncover the kind of help they can offer.
1. Have you ever founded your own startup or run your own company?
If so, and if that company is in a similar space (though not in direct competition), the investor may be able to give valuable advice on getting your business up and running.
2. What are your areas of expertise?
An angel investor with an extensive tech or commerce background who could help you bring your product to market would be especially beneficial. Similarly, an investor experienced in business law or marketing could fill in your knowledge gaps if you have never dealt in those areas.
Beyond their personal experience, check out what other startups they’ve invested in and understand the synergies these portfolio companies have in common e.g. business model, addressable market,
3. Do you know other investors who might be interested in participating as angel investors?
If your investor’s network is strong, they may be able to bring in other angel or venture capitalist investors who specialize in your particular field or funding round. Even if the investor does not bring anyone else to this round, they may know investors who could participate in later-stage rounds.
That said, don’t go TOO wide with the number of angel investors you bring on board. In an article originally published to TechCrunch, Lewis Hower, Managing Director at Silicon Valley Bank, advises early entrepreneurs that less can be more. “It’s almost certain that an angel will play a role in your startup’s journey, but like everything else in a startup’s life, you need to watch out for potential problems. If you don’t manage them properly, these early backers could get in the way of your startup’s success.”
4. Are you interested in helping with other operations besides funding?
While some angel investors like to write a check and move on, others enjoy taking a more active role in getting their investments off the ground. It’s helpful to understand the level of involvement each potential investor will bring to your cap table, as involvement from the right investors can help give you a competitive advantage.
An experienced angel investor with relevant domain experience might be able to help you interview and recruit a team, refine your business plan, refer potential customers, or help review patents and other legal documents.
What Are Common Angel Investor Questions You Should Be Prepared To Answer?
Go beyond polishing your elevator pitch. If you’re interviewing with potential angel investors, it’s not enough to only focus on the best questions to ask an investor group. It’s also a good idea to spend some time preparing your answers to common questions angel investors ask of companies in which they are considering investing.
Compose thoughtful answers to the following questions before stepping into a meeting:
- What is the main goal of your startup?
- How many founders are there? Are you alone, or do you have co-founders on your team?
- Who comprises your management team, and what are their backgrounds and areas of expertise?
- Does your team have a well-rounded and varied background, or do you all specialize in one area?
- What are the current teams’ salaries and equity compensation?
- What is your intellectual property? How is it protected (e.g. trademarks, patents)?
- Does the product or service you are building stand on its own, or is it simply a new feature of an existing product?
- What traction do you have to-date?
- What are the upcoming milestones you’ve set in place for your startup?
- What assumptions have you made to inform your market opportunity, current goals, KPIs, metrics, and/or milestones?
- How much money are you trying to raise? What equity are you offering?
- What percent of the round is already funded?
- Am I the first one to contribute, or do you already have other investors?
- What is your exit strategy?
Providing the “social proof” that other investors have already taken the leap and invested with your startup can go a long way toward securing future contributors.
Where Can You Find Your First Angel Investor?
Your personal network is key. Potential investors take entrepreneurs much more seriously when they are introduced by a mutual connection or another credible source.
If you don’t have a network yet, there are other options. You can search out databases with lists of investors within your field or even try cold-emailing promising candidates on LinkedIn.
If you go the cold-outreach route, researching these connections beforehand is important. Prove that you have a solid business plan and explain why your knowledge and skills are complementary to their own, and investors will be more likely to take you seriously without a formal introduction.
Overwhelmed with financial management tasks? Let Zeni take that burden off your plate.
You are founding a startup because you believe in your product, not because you enjoy staring at spreadsheets and taking care of bookkeeping and accounting tasks. When you have secured your first investors, the last thing you want to do is spend hours managing your financials, performing your monthly close, and crafting financial projections.
Let Zeni handle the hard work for you with our real-time financial analytics and helpful full-service financial team. We will keep track of your accounts, manage your receipts, assist with the due diligence process during a fundraise, and do all the other tedious financial tasks so you don’t have to worry about them.