To follow up on Jason's post about unfundable deals, I wanted to lay out some guidelines for what makes a fundable deal:

Entrepreneur/Team

Angels invest time and money in seed/startup and early stage deals. They seek investments in ventures lead by inspired, experienced entrepreneurs who genuinely seek counsel of experienced investor/advisors. While the management team need not be complete, the entrepreneur should have a good understanding of the team necessary to do the job and probably has a team member or two waiting in the wings.

Scalability

Funding startup entrepreneurs is very high risk investing. Only 10 to 15% of startup ventures provide all the return on investment for angels. Consequently, angels only look at companies that can scale revenues quickly to at least $30 million in revenues in five years or less. Angels personally invest $25,000 to $50,000 in seed/startup rounds ranging in size from $250,000 to $1 million. (Less than 5% are larger than $1 million.)

Business plan/Strategy

Angels seek entrepreneurs who have a complete business plan, not just a product or technology description. Company should have a well-articulated strategy to capture and defend a significant market share, including the ability to construct significant barriers to entry. Complete proforma financials for three to five years are a must.

Location

Most, but not all, angels seek investments within an hour’s drive of the angel’s residence, so they can conveniently visit the entrepreneur, as needed. Helping local companies can also be part of the angel’s give-back strategy for his or her community.

Bill Payne is an angel investor on the west coast, and has a website here at BillPayne.com

Bill Payne :: Jul.30.2008 :: Entrepreneur, Investors, Startup, Uncategorized ::