What Angel Investors Value Most When Choosing What to Fund

Regardless of all the attention and recognition venture capitalist gets, its far from the most common source of startup funding. Angel Investors - affluent investors who invest small amounts of capital, make their investment decisions quickly, and rarely require a board seat as a condition of investment. This makes them an attractive funding option for startups that don't need large investments and want to retain more control over their business.at an earlier stage than VCs do — fund more than 16 times as many companies as VCs do, “and their share is growing.”

Yet for how substantial the market is, there's relatively little data on the decision making process of those who invest in early stage startups. As a result, we're stuck with the question of how investors choose which startups to fund. It's hard to predict whether a novel idea will succeed, and these fledgling firms typically have no financial track record or tangible assets.

MANAGEMENT TEAM

“Whenever an angel investor receives a business plan, he would always read the resume section first”. Not because the people part of the new venture is the most important, but because without the right team, none of the other parts really matters.” Three-quarters of survey respondents said the management team of a startup was their biggest consideration for investing. “This suggests that a startup’s human capital is uniquely important to potential investors.”

ABILITY TO UNDERSTAND TECHNOLOGY

Many choose not to invest in specific businesses due to their inability to grasp their technology efficiently. "The easier we make it for angel investors to discover, evaluate and participate in science and technology startups, the more we'll see money going into these worthy companies and the benefits to humanity accrue,"

POTENTIAL RETURN ON INVESTMENT (ROI)

49% percent ranked potential ROI as their top motivator for making an investment decision. While some investors are indeed looking for financial compensation, not all are primarily interested in just the money. Some want a different kind of return: The ability to solve the world's biggest challenges through the businesses they fund. Nearly one-third of angels will choose to invest in a company based on its connection to important social issues.

Perhaps the best angel investment you could make is choosing the right company to work for. The value of the options associated with a successful company will swamp the return on any angel investment you are likely to make, even if you do happen to have a success.