Questions to Angels

HB (moi!) asks a question to an angel (one with money and no wings) early one Sunday morning:

What are the three most important questions, startups will hit in their first year?

He responds:

1. How do you make money?
2. Who is in your team and what are their backgrounds?
3. Have you sold anything yet?

So let me develop/decode that. His three questions are filters for assessing risk in investing in your company.

• If you make money now, that means you have figured out at least one way to make money through this company/this business model, that lowers risk.
• If your team has people that know how to generate money from business opportunities soon (or eventually) OR know how to make products that other people will be able to generate money from, that lowers risk.
• If your team have sold something,  a) you know how to sell, b) you have identified one or more customers, that lowers risk.

Now let us flip over from risk to reward, to three other criteria in which an Angel will evaluate you when looking at your company:

1. Product
2. Team
3. Prospects

#3 is the future.

It is the dollar signs in the eyes of the investor when (s)he exits the investment in your company at a handsome profit. It comes from #1 and #2.

#1 is the Product

Maturity

• Is you product mature enough for someone to want to spend money on it and feel satisfied? Really?
• How much more time and money will it cost to get there? Really?

Capability

• Can you get to the right design, technology, and ideal/identified customer base? 
• What is the cost in terms of people, money and time?
• Can you get there without getting sued?

Competitors

• Have you properly identified existing competitors?
• Can you, through product design/IP/channels/relationships, prevent other people getting there?
• Are the barriers to competitor entry large enough to give you enough time/opportunity to be (reasonably) successful?

#2 is the Team

• Have you identified and attracted the right people? 
• Can you take care of them and keep them with you?
• Can you identify new types of people your company will need and "part ways" with people your company does not need?
• How seasoned/realistic/knowledgable is your team about 
1. the markets you want to hit
2. the products you want to build
3. your growth plan

These questions will show up regularly. If you keep thinking about them, having answers and updating your answers regularly, you may get more investor interest and you will consistently improve your company's market offering.

As always, ping me if you want me to connect you with more knowledgable people on the subject.