What Do Angel Investors Look for in a Company?

Angel investors nurture new companies that can demonstrate high growth potential.

Angel investors invest thousands, hundreds of thousands or even millions of dollars in new, high-risk companies. They look for companies that can demonstrate a strong chance of returning five to ten times their investment within three to seven years.

Product

The product or service offered by the company is the first thing angel investors consider. The entrepreneur must be able to clearly and succinctly articulate what the company does. That description must grab the angel's attention.

Team

Angel investors provide capital in the form of equity, but they also work closely with the company to help guide it toward profitability. Therefore, angel investors look for a solid management team with experience and a good personality fit.

Market

Angel investing is a high-risk/high-return industry. New companies must be able to prove a large and growing market before an angel will invest. The product must cure a customer "pain" or need.

Industry

Angel investors look for companies with a high likelihood of a lucrative exit. An exit occurs when a company goes public or is bought out by another company. Angels look for companies whose industries provide copious opportunities for an exit.

Location

Because angel investors work closely with the companies they fund, most angels look for companies located within 200 miles of their home or office.

References

• Inc.: What does it take to impress an angel investor?
• Angel Capital Association: FAQs on Angel Investing

Resources

• Inc.: How to Find an Angel Investor