Signing a deal with an Angel Investor

Signing a deal with an Angel Investor

How risky is it investing as an angel investor?

The risks and stakes, including the chance of losing everything is high. Most angel investors would only put their money in a business if they feel it is worth it. Most startup businesses end up failing.

Where and how can angel investors be found?

You can find a lot of angle investors through some of the following people;

  • Lawyers or attorneys
  • Accountants
  • Other entrepreneurs
  • Bankers or even the normal venture capitalists.
  • A friend. This would usually prove to be the most helpful form of introduction.

How open would an angel investor be to sign an NDA?

Most of them would not be favorable for signing a non-disclosure. The truth is that the number of startups is higher than the number of angel investors. Hence, any roadblock which they may encounter may end their interest.

What questions should the chief executive officer of a company ask them about a prospective angel investor?

  • Are there other entrepreneurs you have worked with? Can you refer them to me?
  • What ways would you be looking to help portfolio organizations?
  • What is your goal with other venture capitalists?
  • What do you think makes you stand out when it goes to moving the company in the right direction?
  • What is your relationship with other companies you have invested in?
  • What would you like to invest in when it comes to our company?

What are some well-known terms when it comes to the issue of note seed financing which is convertible?

  • When it comes to the issue of secured and unsecured, most of the time, the assets of the company would be unsecured
  • The interest rates which is agreed upon would normally be accrued, so you shouldn’t expect it to be paid right away
  • When it comes to discount rates, you should expect a discount rate of about 20%. This is the percentage which the investor would take for their intention to deal with the risk of the startup
  • The valuation limit would also be considered. Most startups would usually set their valuation limit at about £10 million. However, you should be aware that you would probably meet a lot of resistance when it comes to this idea.

If you were to send an email message as an entrepreneur to an angel investor, what should it contain?

  • You should explain how you got the contact details of the investor
  • You should give the investor a summary of what your company does, possibly with the use of bullet points
  • Explain to him why he can trust the founders and what they can bring to the table.
  • Make sure you add an annexure of an executive summary. It should not be more than three pages.

How often do angel investors expect to get some form of update from their startup companies?

It is important to be in touch with angel investors by sending plenty of emails and communication – this will demonstrate transparency. Explaining or updating them on the situation every month would be normal and fair. Of course, if you anticipate that you might need some investment in the future, then it is extremely important to make sure that your investor is aware of the situation in the startup business.

Why would an angel investor reject my proposal?

  • The owners did not show enough passion or determination
  • The investors in question are not interested in the industry in which the startup is based
  • The financial projection of the startups was doubtful and is not worth the risk in the view of the investor
  • The company is not close to the angel investor and they would prefer to invest in a business which is nearer to them

What are some of the legal papers which an angel investor would expect to see before funding a startup?

  • Tax ID
  • Indemnification agreement
  • Statutory laws
  • Any board resolutions
  • Charter papers used in the registration
  • Capitalization table
  • All papers which deal with confidentiality when dealing with contractors