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Before you make an angel investment: questions to ask founders (from experts)

Published:  May 14, 2024
Kaylin S.
Copywriter
Kaylin Sullivan

Copywriter

Eva Dobrzanska
Expert
Eva Dobrzanska

Head of Investments at FundIQ + Sixth Wave Ventures

Kritika Amarnath
Expert
Kritika Amarnath

Founder of Beach Level Associates

Aaron Duke
Expert
Aaron Duke

Account Associate at SeedLegals

Preparing to make an angel investment? Before you hand over a chunk of money to a passionate founder with a cool idea, make sure you’ve got all the information you need to make an informed decision.

We’ve asked industry experts to share their top questions to ask founders to gain a good understanding of a startup’s potential for success.

New to angel investing or keen to learn more? Check out How to invest in startups: step-by-step guide

What to look for in a startup investment

Based on conversations with hundreds of investors and successful founders, these are our top green flags for a startup investment 👇

What Look For Startup

A startup’s success not only depends on the market potential and business model, but equally important – if not more- is the team. If you’re going to invest in a company, make sure you believe in the founder and team. Ask questions that give you insight into who the team is, what their skills and expertise are and if the founder has a level-headed mindset geared towards success.

Jonny Seaman

I always ask about the team because I want to have a good understanding of the industry knowledge they have. I’m looking for them to demonstrate that the people behind the idea understand their industry and market. It’s important for me to trust a startup’s leadership team to achieve success before I make angel investments, and I know it’s the same for other investors I speak to daily.

Jonny Seaman

Investor Partnerships Manager,

SeedLegals

Before you invest: questions to ask founders

Eva Dobrzanska

Making an investment decision at the early stages can often feel unsubstantiated as there are few metrics to go by. What you want to test for instead is:

1. viability of the business model
2. credibility of the financials and go-to-market strategy
3. resilience and founder-market fit on the part of the team.

The best Questions to ask Founders are those that stress-test their ideas and assumptions.

Personally, in my early stage investments, I don’t want founders who are pitching the next Unicorn to me, I want founders who show me a solid plan on how they will survive and grow the first 5 years in business.

Eva Dobrzanska

Investment Manager,

Sixth Wave Ventures

    Eva Dobrzanska is an investment manager at Sixth Wave ventures. She’s a seasoned expert in understanding how to select good investment deals. Here are the top questions she asks founders.

    Tell me about your go-to-market strategy:
    (i) What are the different distribution channels you will utilise to reach your target market?
    (ii) How many users/customers/clients do you expect to come from each, and at what cost per acquisition (CAC)?
    (iii) How will you reach your first 1000 users, or first 10 paying clients?

    ✅This question helps you understand the founder’s path to monetisation and growth. A robust go-to-market strategy with many diversified channels is great, but you also need to know how equipped they are to actually deliver on their plans.

    How many people are on your team? How many full-time? Are they enough to deliver on your go-to-market strategy?

    ✅This question helps you understand how prepared the founder is to deliver on their growth strategy. Ask them if they’ll need to hire more team members, who the key hires will be and why.

    What happens to your business model if you do X (eg take away Ads?), or ‘what is your strategy if X channel does not perform as well as expected?

    ✅This question helps you stress-test the viability of the business model and understand if it’s agile enough to adapt when things change in the market.

    What are the key risks to your business?

    ✅This question helps you understand how level-headed and realistic the founder is. You want to invest in a company that knows – and can prepare for – the risks it faces.

    Kritika Amarnath

    A major green flag is a founder who cares about the customer journey and experience. Are the founders willing to listen to feedback from their customers? Are they prioritising customer satisfaction? The happier the customers of the company, the more of an advantage it’s at to succeed

    Kritika Amarnath

    Kritika Amarnath is a seasoned financial executive and angel investor with experience across capital markets and early stage advisory. Below are her top recommended questions to ask founders.

    What does your customer traction look like?

    ✅ This question helps you understand if the product/service is actually wanted by customers. Evidence in the form of customer feedback, surveys and demos really helps. High demand and customer satisfaction is a good sign.

    What are you fundraising for? Marketing? Product development? Hiring?

    ✅This question helps you understand what your investment money is going towards. Do you feel good about how it’ll be used?

    Who is your competition and what are the barriers to entry?

    ✅This question reveals how much a founder understands their market and what differentiates them from competition. Competitive analysis is a sign of maturity in a founder and shows an interest in identifying blind spots.

    Rarely is any product truly novel and new. If it is, make sure to ask what patents/protections/moats they have in place.

    Aaron Duke

    Start with ‘Explain your startup to me like I’m a seven-year-old.’ This helps you understand how the idea will translate in the market for customers. If you as an investor can’t understand it, how will the customers?

    Aaron Duke

    Account Associate,

    SeedLegals

      Aaron is an Account Manager at SeedLegals and previously worked as a partnerships manager at top VC fund Seedrs. After being immersed in the startup funding and investing ecosystem for years, these are the top questions he’s learned are important to ask.

      What is your unique selling point (USP)?

      ✅ This question helps you understand what edge this product has, and if it’s solving a real problem. It’s one of the most common question investors because you need to understand if there’s something that’ll drive customers to buy from this company.

      Make sure you understand what the problem is and how the product/service solves that problem. Ask for data that backs up the claim of the problem, so you know the company is providing a real, needed solution.

      What is your protection? Why can’t just anyone create this?

      ✅ This question helps you get a better understanding of how much the company will be able to stand out in the market. The more protected they are, the more they’ll stand out. This includes IP, patents and moats, but also things like the expertise and experience amongst the team.

      Get more ideas of good questions to ask: read our article Top 10 pitch questions investors ask.

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