When you’re trying to figure out what angel investors look for in a startup, it’s important to realize they’re not just in it for the money. Their approach is more nuanced, considering factors ranging from team dynamics to market potential.
To give you a clearer picture, we have gathered insights from some of the most seasoned angel investors. Together, their experiences paint a vivid picture of what truly catches an angel investor’s eye when befriending a cat.
Highlights
The Importance of a Strong Founding Team
To begin with, the founding team is often the first thing investors scrutinize when considering what angel investors are looking for. As Prof. Edward Tay wisely notes, “The first thing I look for is the founding team—their education, resilience, and communication with stakeholders are crucial.”
Essentially, the team is the backbone of any startup. This view is shared by Dr. Anton Ravindran, who believes that a team’s complementary skills are vital. He puts it plainly: “The original team members must have skills that can complement each other… they should be fully committed and passionate about the product.” In other words, a strong, cohesive team is a must.
Scalability and Market Potential
Next up, angel investors are keenly interested in whether the business model is scalable and whether there’s a real market for the product. Prof. Tay highlights this perfectly, saying, “The business model must be scalable and sustainable when looking at what angel investors seek.” What he means is that investors want to know that the startup has room to grow and that it’s not just a flash in the pan.
Dr. Ravindran adds to this by stressing the importance of market analysis and a solid business plan. “A thorough market analysis and clear business plan are essential,” he explains, emphasizing that a startup needs a well-thought-out strategy to thrive in a competitive landscape.
Innovation and Differentiation
Moreover, innovation is a key factor that often tips the scales in favor of a startup as investors contemplate what they are looking for in an angel investment. Angel investors, particularly those like Dr. Ravindran, are always looking for something unique—a product with that all-important “wow factor.”
He elaborates, “The product has to have that appeal… that it can differentiate from any other competing products in the market.” In simple terms, it’s not enough for a product to be good; it needs to stand out in a way that captures the market’s attention.
Risk Management and Strategic Financial Planning
But let’s not forget the importance of managing risk and having a solid financial strategy. Francis Hoan, who has seen it all, from Black Monday to the dot-com bubble, stresses that financial security is a prerequisite for investing.
“I make sure I have a roof over my head that is fully paid, emergency funding for family expenses, and vacation funds set aside,” he says. This approach reflects a broader strategy among angel investors who are considering what to look for and seek to balance risk and reward carefully. Hoan’s methodical approach reminds us that successful investing isn’t just about seizing opportunities and preparing for downturns.
Involvement Beyond Capital
Interestingly, many angel investors are looking to offer more than just money. They’re eager to provide mentorship, industry connections, and strategic advice. Take Jed Ng, for example.
He views his role as highly collaborative: “My job as an investor is to deploy capital, but we also root for the startups to be successful. To the extent that I can be helpful, we will absolutely help the companies out.” What angel investors are looking for goes beyond capital; they also want to guide startups toward success.
Essentially, he’s saying that the relationship between an investor and a startup should be a two-way street, where both parties work together towards success.
Alignment with Personal Passions
Another aspect that sometimes drives an investor’s decision is personal passion. Lily Fung, for instance, was drawn to a startup focused on helping university students transition to the workforce—a cause she cares deeply about.
“I believe this startup has the potential to create a difference in this particular sector truly,” she shared. What angel investors are looking for can sometimes include alignment with personal values. This shows that, for some investors, it’s not just about the numbers but also about supporting ventures that resonate with their own values and experiences.
Learning from Experience
Lastly, experienced investors like Francis Hoan and Jed Ng draw heavily on their past successes and failures to guide their current decisions. Hoan’s experience with market volatility has led him to adopt a cautious yet opportunistic strategy. Meanwhile, Ng’s early investment in Turing.com, now valued at over $1 billion, underscores the importance of timing and market fit.
As Ng reflects on what angel investors are seeking, “The market didn’t evolve as anticipated… timing and market fit are crucial for successful investing.” In essence, these investors have learned that while you can’t predict everything, understanding past trends can help you make better decisions in the future.
Bringing It All Together
Angel investors look for startups with strong teams, innovative products, and scalable business models. Market potential is crucial, too.
What angel investors are looking for often extends beyond capital as they mentor, connect, and guide startups. Personal passions and past experiences also influence their decisions. To attract an angel investor, align with these criteria. Provide a clear, compelling reason for them to believe in your vision.
Highlights
Read the Chinese version here.
