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Angel investor: Want my money? Here's my checklist

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Re: Angel investor: Want my money? Here's my checklist

#31

Post by wheels »

joshu wrote: post #29
wheels wrote: post #25

Earlier quoted context omitted.

It's similar to Sequoia's "Elements of Sustainable Companies", but well, not as focused: http://www.sequoiacap.com/ideas/ (Currently down, Google cache below) http://tinyurl.com/4byylj I really like the Sequoia list -- perhaps because it's like a point you can look at and aim for when trying to sort out business ideas.

I'm just saying what works for me. But I'm also looking to have fun, etc. I'm reasonably sure I don't want to be a VC...

I meant the "problematic" list -- not yours. What you said jives with what I've heard from other angel investors -- that it's more of a gut feeling / labor of love than a calculated investment.

Re: Angel investor: Want my money? Here's my checklist

#32

Post by furiouslol »

joshu wrote: post #16

The problem with this list, in my mind, is that it's a checklist of descriptions of a successful company. If the signs are this obvious then the valuation would already be high enough to be unattractive to an angel. I've done some (roughly 8 deals) angel investing myself, and prefer to look for something market-shaped; matching buyers to sellers, or similar; a team I would seriously consider working for; and a workin…

Ever thought of moving back to starting up again?

Re: Angel investor: Want my money? Here's my checklist

#33

Post by joshu »

furiouslol wrote: post #32
joshu wrote: post #16

The problem with this list, in my mind, is that it's a checklist of descriptions of a successful company. If the signs are this obvious then the valuation would already be high enough to be unattractive to an angel. I've done some (roughly 8 deals) angel investing myself, and prefer to look for something market-shaped; matching buyers to sellers, or similar; a team I would seriously consider working for; and a workin…

Ever thought of moving back to starting up again?

Yeah. I'm much happier working on products. I'm not going to be a full-time investor -- I'm not suited for it. I mostly started out doing some angel investing to see if it was for me.

I think the main problem here is that I see problems and I immediately want to solve them. The goal for an investor is not to find and solve good problems but to bet on good teams. As Josh Kopelman says, it's about the chef, not the ingredients.

So mostly you end up saying "no" a whole lot. If you give an explanation as to why you don't like it, many entrepreneurs will simply change the details and then expect money, so you can't even generally give a reason. I think I spoke to north of 90 companies to consider even the eight deals I have done. Between that and incoherent summaries, MBAs with just a powerpoint deck, etc, I just get too tired.

Re: Angel investor: Want my money? Here's my checklist

#34

Post by joshu »

quasimojo wrote: post #26

ugh, here's a better idea, i'll self-fund so i don't have to indulge stupid cunts and the lists they scribbled down in the business section of barnes and noble if things were nearly as much of a lock as this person demands, i sure as shit wouldn't have to slum it with angel funding, i could go to a marquee vc firm

I agree. Being an angel is, in my mind, about belief. If value can be easily demonstrated, the valuations would be higher.

Re: Angel investor: Want my money? Here's my checklist

#36

Post by acgourley »

joshu wrote: post #18
jd wrote: post #12

Earlier quoted context omitted.

$25 million is a lot of money, but so is $1 million in funding. Most web 2.0 companies need no more than $100k or so to get to profitability, and can easily exit at $2.5 million. Same ratio, but it sounds a lot more achievable. So the only real issue is scale. Bear in he's talking about enterprise software (i.e. support contracts, custom software, consultants). When you start doing custom work and get paid by the hou…

This is not the sort of situation I would invest in. If you are billing by the hour, it is unlikely to be a leveraged business, and the investment return is unlikely to be as comfortable. Additionally, due to the smaller size, there would have to be many, many investments; it's hard to find many of very good quality.

It's very hard to sell to large sized enterprise without supplying custom work. You're right that the custom work isn't leveraged, but it's a prerequisite to get your product installed into their (often silly) IT structure.

This only requires a portion of your engineering and support resources, and there is no reason you could not establish strong ties to an existing consulting organization to be the "consulting services" arm of your company.

Re: Angel investor: Want my money? Here's my checklist

#37

Post by joshu »

nocivus wrote: post #27

It seems to me that the hardest part about implementing an idea is probably figuring out how to make money out of it and, since that is something (smart) investors require for starters, my question is: How does one come up with a business model for, say, a website for monkey owners to ask questions about their food (not the owners', the monkeys' :))? Is the grand majority of websites limited to rely on advertisement…

Generally, I get the sense that you can either come up with a new business or a new business model. Both at the same time is rare.

Re: Angel investor: Want my money? Here's my checklist

#38

Post by netcan »

nickb wrote: post #28
wensing wrote: post #17

A business that has an inherent call option, that could boost its base-line exit value by at least 10x I will go ahead and expose my novice status and ask: what is an inherent call option?

It's just a financial vernacular. Call option is a type of a contract that gives the buyer an 'option' to buy the underlying instrument (a derivative or a stock in this case) at a later date at a specified value. Simply put: the buyer will profit if the value of the company increases. So all he's is saying that he is looking to invest into a business that will rise in value over time and that will be sold to a third…

I thought it meant mean that in the event of success, he can increase his investment.

Re: Angel investor: Want my money? Here's my checklist

#39

Post by netcan »

quasimojo wrote: post #26

ugh, here's a better idea, i'll self-fund so i don't have to indulge stupid cunts and the lists they scribbled down in the business section of barnes and noble if things were nearly as much of a lock as this person demands, i sure as shit wouldn't have to slum it with angel funding, i could go to a marquee vc firm

I don't think it's about being demonstrable. Start with plausible. A lot of the items are about intent. While you can never be sure that items like '1-$2m tops before reaching 25 -$50m value' are a yes, you can often be sure that they're a no.

It might be in the strategy. The strategy might not be viable without more down the line.

Works as an exclusion list.

Re: Angel investor: Want my money? Here's my checklist

#40

Post by netcan »

joshu wrote: post #16

The problem with this list, in my mind, is that it's a checklist of descriptions of a successful company. If the signs are this obvious then the valuation would already be high enough to be unattractive to an angel. I've done some (roughly 8 deals) angel investing myself, and prefer to look for something market-shaped; matching buyers to sellers, or similar; a team I would seriously consider working for; and a workin…

I disagree. The first list is. The latter list:

# Initially sells to the enterprise for branding, credibility, awareness and early revenues

# Can get to revenues within 6 months, tops

# Is sold on the basis of ROI, e.g., helps generate revenues or reduce headcount/costs

# Integrates easily with existing platforms and/or programs

# Either leverages existing open source programs or can itself become partially or fully open source

# Has multiple revenue streams, e.g., software, maintenance, services, etc.

That's all describing a particular kind of business. It actually seems like it's describing a reasonable sepcific area: tech/service hybrid focusing on large-ish b2b clients.

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