Planning, Startups, Stories

Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

10 Things Angel Investors Ask About Startups 0

Today the angel investment group I’m a member of (Willamette Angel Conference) finished our eighth year of choosing a startup to invest in. Our investment runs $100K to $500K, roughly. It’s announced every year on the second Thursday in May. The announcement comes later in the day, not here.

Our annual angel investors process

Every year we review 40 or so submissions from startups. We look at summaries, videos, financial projections, and pitches posted online at We invite our favorites to pitch to us live in a series of meetings. We assign due diligence teams to read their business plans thoroughly, check documents, talk to customers, test products, look at their legal situations, and so on. And eventually we choose a winner (or two or three).

My personal list of 10 things I want to know

Push PinDuring the process, we’ve had to review again what we want to know from startups as we review them. What information is essential? With that in mind, I wrote up my own list of what I look for in startups, from the outset. This is what I want a startup to tell me from the beginning.

  1. The startup team’s background, experience, and credibility. Specifically, what experience do you have with startups. Have you run a startup? Have you been an employee or team member of a startup? And of course your education, degrees, schools, etc. And your work experience. That goes for founder or founders, and main team members. If you don’t have a complete team, have you identified the key skills you need and candidates to hire? Are they likely to come on board? What are their backgrounds, skills, and experience? Who will do the administration, production, marketing, and sales?
  2. What problem do you solve, and how? I want to understand the needs and wants so I can decide for myself on product-market fit. What kinds of people or organizations have that problem, and how badly do they need or want what you are going to sell? For that you have to give me the whys and the background, the stories, not just the numbers; but numbers are good.
  3. And why you? Why are you more qualified than anybody else. How can you keep others from jumping in on your business if it’s successful?
  4. And who else? Who else is doing what you are, or solving what you solve? How do they do it?
  5. Key Metrics. What traction do you have so far? How long have you been up and running, and how many customers or subscribers or sales or visits or downloads or conversions or leads and inquiries? What are your metrics so far? Where do you see them going.
  6. Milestones met and milestones to come. I want to see both what you’ve done and what you plan to do. Your valuation today is about what you’ve accomplished already. What you plan to accomplish gives me an idea of possible future valuations.
  7. How much money are you raising and what are you spending it on. Investment should be used to finance deficit spending that’s going to generate a lot of growth and increased valuations. If you can relate your financial ask to milestones you plan to meet, then that’s great.
  8. Strategy. Strategy is focus. What markets, what products, what specific attributes of your business make this focus realistic? What markets and solutions are you ruling out, or leaving for later?
  9. Tactics. Tactics are essentials like pricing, channels, online, social, marketing, sales, financial plans.
  10. Essential projections. Sales forecast built from bottoms-up assumptions, spending budget, projected P&L, balance, and cash flow. I’m annoyed if you don’t provide these, but I should add that I’m also not going to eliminate a startup for bad financials. Bad financials are the easiest problem to fix.

I should note that I do care a lot about exit strategies, and even more so about the intention to exit. But I assume the intention is there when you seek angel investment. And I want to go from your product and solution to your market, your competition, and my guess about future exits. Exits happen 3-5 years from now. I want you to focus on your business, and I’ll decide whether I believe you’ll eventually become an attractive acquisition so we can get an exit.

Also, on financials, I look for understanding the relationship between spending and growth, how much you need spend in the main spending categories, in broad brush, to be able to grow. I expect growth to cost a lot of money and almost always rule out profits. If you were going to be profitable, you wouldn’t need investment, and you wouldn’t offer a great ROI. I don’t hold you accountable for accurately projecting your essential  numbers, but I do expect you to understand the assumptions and the drivers that you use to develop the forecasts.

And, a third point: We usually get this information several ways, starting with the summaries our startups post on There are summaries, slides, videos, and financials. I do always want to see a business plan, but I don’t care about all the text summaries and descriptions. I do want the business plan to include strategy, tactics, metrics, milestones, and essential business numbers.