If you are looking for an angel investor for your startup, here are the 20 rules of angel investing that will help your startup stand out as a good candidate for an angel investor’s dollars.

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ANGEL
INVESTING
20RULES OF

2. What is the typical
amount angel
investors invest
within a company?
Angel investors
typically invest
$25,000 to $100,000
into a company.
Depending on the
opportunity involved,
they are willing
to invest more to
retain a larger equity
percentage.
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3. What six criteria are most
important to angel investors?
The following is what angel investors seek in a company:
Do the founders operate on quality, is their passion behind the
company’s products or services, are the founders committed
to the long-term vision, and do the founders value integrity.
The market opportunity has to be well researched and backed
up with facts and the company has to effectively outline their
strategy to go big.
A well put together business plan, and evidence verifying that
the plan is actually producing traction within the marketplace.
Disruptive technology that impacts industries or intellectual
property that will increase in value overtime.
A valuation that is not exaggerated but rather consistent with
actual market value.
The ability to raise additional rounds of financing if growth
does occur.
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4. • An articulate elevator pitch for their
business that demonstrates they know
truly know their business.
• An executive summary outlining the
business or a pitch deck that gives a brief
but comprehensive illustration of the
business.
• A prototype demonstrating how the
proposed product or service works.
• Early adopters or customers showing that
an actual demand for the company exist.
What are the specific qualities
angel investors like to see
from an entrepreneur?
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5. It’s important to realize that it will always take
longer to raise angel financing than you
expect, and it will be a much more difficult
process than you had initially thought.
Not only are you tasked with having
to find the right investors who
typically invest in your business
sector, but you will have to go
through numerous meetings,
complete your due diligence,
come to agreement on the
negotiations of terms, and
much more. The act of raising
capital can be a very time-
consuming and frustrating
process.
4 What is the average time-frame
to raise angel financing?

6. 5 What are the standard financial questions from angel investors
that entrepreneurs should be prepared to answer?
• What is the amount of capital that you are
seeking to raise?
• How long do you project this initial round of
capital to last?
• What will be your monthly burn rate and how
long do you anticipate this rate to persist?
• Are you able to readily share your detailed
financial projections for the next two years?
• What are the key assumptions that support
your financial projections?
• What key cost components determine the
pricing for your product or service?
• Whataretheuniteconomicsofyourbusiness?
• Can you accurately predict the likely gross
margins?

7. 6 What are the key questions that an entrepreneur should anticipate in
regards to marketing and customer acquisition?
An angel investor will need to have an strategic outline of how the company plans to market itself, what are the cost of
acquiring a customer, and the long-term value of an ideal customer. Therefore, an entrepreneur should be prepared to
answer the following:
• How does your company conduct its marketing activities
or what will be your plan to market your products or
services?
• What is the strategy being used to promote your company
to the public?
• How will your company utilize social media to develop
brand followers?
• What is the cost of acquiring a customer?
• Whatistheprojectedlifetimevalueofyouridealcustomer?
• What are the advertising activities you will be utilizing?
• What will be the average sales cycle between initial
customer contact and closing of a sale?

8. What are the questions an
entrepreneur should expect in
regards to the management
team and its founders?
• Who are the founders and key team members
involved?
• What experience does the team have that will lead the
company to success?
• Whatkeyadditionstotheteamareneededimmediately
to operate more effectively ?
• Why is the team in place well suited to execute the
company’s business plan?
• How many employees do you currently have on staff?
• What are the motivating factors that push the
founders to grow the company?
• What are the plans to scale the team in the next
12 months?
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9. What is the level
of risk involved for
angel investing?
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There is a great deal of
risk involved, and it is a
huge gamble. An angel will
only invest if he or she is
comfortable with potentially
losing all of their investment.
At best, only one in ten
startups are successful.

10. What are the best ways
to find an angel investor?
There are numerous ways to find angel
investors, some options include:
• Networking with entrepreneurs
• Contacting lawyers and accountants
• Signing up on Angel List
• Joining angel investor networks (groups
that aggregate individual investors)
• Presenting to venture capitalists and
investment bankers
• Listing campaigns on crowd-funding
sites like Kicks-tarter and Indiegogo
The best way to increase your odds of securing an angel
investor is through a warm introduction from a colleague or
friend of an angel. Using a social media platform like LinkedIn
to find powerful connections can also be quite useful.
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11. Are angel investors
opposed to signing
a nondisclosure
agreements?
Yes. Angel investors are presented
with many options of deals to
choose from daily. You don’t want
to make a challenging process
even more difficult by imposing a
roadblock to getting an investor
interested in your company. You
will just have to be careful and
not disclose highly confidential
information.
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NON-DISCLOSURE AGREEM
ENTS

12. What are some of the key
questions a CEO should ask of
potential angel investors?
An entrepreneur should be thorough in analyzing whether a
prospective angel investor will be a good match for them.
Here are questions that should be asked:
• Do you have referrals of other entrepreneurs you have worked with?
• What methods do you use to help your portfolio companies?
• What amount of follow-on investment do you think our company will
need to succeed?
• Do you have good relationships with venture capitalists who would
fund our next round?
• What actions will you implement that can be helpful to us in growing
the business?
• How deeply involved are you with your portfolio companies?
• What other investments do you have that are similar to our company?
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13. 12
• Unsecured or secured on the assets of the company – the option
chosen is almost always unsecured.
• The rate of interest and payment options – interest is usually
accrued and not paid currently.
• Discount rate – this is the discount rate that investors enjoy for
making an early investment (at a risk) in the company, expressed
as a discount from the company’s Series A round of financing.
A discount rate of 20 percent is standard.
• Valuation cap – this is the maximum valuation of the company
where the note can be converted in the next round of financing. For
example, the valuation cap could be set at $15 million, so that if the
next round valuation is set at $20 million, the seed investor only
converts at the lower $15 million valuation. This option rewards
an early investor for taking the earlier stage risks. Some notes are
uncapped, but most early stage investors are strongly against this.
Angels will often choose to invest in start-
ups through a convertible note. The key terms
negotiated are:
What are typical terms for
convertible note seed financings?

14. 13
• The experience and past accomplishments of the team
• Conditions within the marketplace
• The competitive environment
• The market opportunity that exist
•Amounttobeinvestedandresultingpayouttothefounders
• The additional value expected to be brought by the investor
• Market comparables
• The potential for a big exit
Overall, valuation is determined by negotiations,
but the key factors will consist of:
What are the key factors in
determining the appropriate
valuation in a seed round of
financing?

15. 14
• How did you know how to contact them – was it a warm
referral from one their trusted colleagues or friends?
• Present some short bullet points within the email about
what your company does, what problem it’s addressing,
and any early traction it’s producing.
• Provide information that illustrates the founders
competence, experience, and passion.
• Attach a 2- to 3-page executive summary or 15-page
PowerPoint deck.
Angel investors get tons of emails from start-
ups, asking for consideration in investing in
their company. Here are the key elements that
will get an angel’s attention:
What is required within an
email introduction to an angel
investor from an entrepreneur?

16. 15
It is advisable to give monthly updates to your
angel investors, no matter if you have good or bad
news. If you are experiencing issues, this can be
an opportunity to seek help or advice. And if you
are in need extra investment, this might warrant a
discussion. No one likes to be blindsided, so regular
communication is very important. Jason Calacanis,
a noted angel investor, has said, “There is another
really awesome reason to keep investors updated:
they didn’t give you all their money — they have
more!!! They want to give you more!!! If you keep
your investors engaged with honest updates, they
will reward you by participating in future rounds.”
How frequently should an
entrepreneur give updates to
his or her angel investors?

17. 16
• The market opportunity or potential size of the business is seen as too
small to risk investing within.
• The founders don’t illustrate their knowledge or passion.
• The sector that the start-up operates in is not where the investor
typical invest.
• The pitch was made by the entrepreneur through a cold email and not
a warm referral from a trusted colleague of the angel investor.
• The financial projections are vastly exaggerated and the founders
couldn’t convince the investor of the justifications that support the
projections.
• The company was based too far away from the angel investor (most
angel investors like to invest locally, and in tech-oriented cities like
San Francisco or New York).
• The investor wasn’t convinced of the demand that would exist for your
product or service.
There are numerous reasons as to why an angel investor
will reject your pitch. Honestly, the majority of prospective
investors are likely to reject you. Here are some of the typical
reasons for rejection:
What are the main reasons angel
investors will reject an investment?

18. 17
• Charter document (Certificate or Articles of Incorporation)
• Bylaws
• Organizational Board Resolutions
• Confidentiality and Invention Assignment Agreements for all employees and contractors
• Organizational Board resolutions
• Tax ID number
• Federal and state securities law filings for any previously issued stock or options
• Stock option plan for employees and directors
• Indemnification Agreement for directors
• Stock Ledger and Capitalization Table
• Stock Vesting Agreements with founders
For the angel round of financing, the following legal documents will
likely be needed:
• Board and stockholder resolutions approving the financing
• Securities law filings
• Subscription Agreement
• Convertible note agreement, unless stock is being issued
• Amendment to the charter documents, if necessary
An investor will expect these specific documents prepared by
experienced counsel to already be in place:
What legal documents will an
angel investor expect to analyze
from a company prior to investing?

19. 18
• Not showing an investor why the market opportunity is key
• Bringing your team to the pitch meeting, but CEO only speak
- it shows a weak team dependent on one person
• Telling an investor you don’t have any competition
• Showing uninteresting or exaggerated projections
• Taking too much time in your presentation - you need to be precise
• Not demonstrating a demo
• Being unable to explain the key assumptions in your projections
• Being unable to clearly explain why your product or technology is
differentiated from a competitor
• Being unable to tell the investor how you will use their investment
capital and how long it will last
• Being uneducated about your potential customers and what they
are thinking
What are the common mistakes
made by entrepreneurs during a
pitch meeting with angel investors?

20. 19
• Network of venture capitalists
• Network of strategic partners
• Advice and counsel
• Valuable credibility added by being associated
with the investor
• Contacts to potential customers
• Contacts with lawyers, banks, accountants, and
investment bankers
• Deepknowledgeofthemarketplaceandstrategies
utilized by similar companies
Beyond investment capital, a few or all of these
benefits are obtainable from good angel investors:
What are the additional benefits
an entrepreneur can receive by
taking on an angel investor?

21. 20
• Analyze the investor’s LinkedIn profile and website to learn key information.
• Determine if you have any common connections on LinkedIn and ask those
connections for insight or advice.
• Practice your pitch in front of an audience that will give you critical feedback on
what to improve.
• Review what portfolio companies the investor has invested in.
• Be prepared to be interrupted and asked questions.
• Be prepared to answer difficult questions like “What do you think is the appropriate
pre-money valuation for your company?”
• Revise and refine your PowerPoint deck. Keep it under 20 slides. Review other
company decks for guidance.
Here are some key things an entrepreneur should
do when preparing for a pitch meeting:
Singapore has a healthy environment of angel investors who are always
looking for the next breakout startup. Listed below are few sources for
finding angel investors:
Singapore Angel Investors • Angel Investment Network • Spring Singapore • Singapore Angel Network
What are the best ways for an
entrepreneur to prepare for a pitch
meeting with an angel investor?