Want to Evaluate a Potential Angel Investor? Essential Questions.

Are you considering seeking investments from angel investors? Congratulations! It's an exciting time in the life of your SaaS business, as this influx of capital is one step closer to scaling and achieving growth.

Before entering a deal with any investor, it is essential to take the appropriate steps to evaluate their motivations.

To ensure that your decision-making process covers all angles, we'll cover 22 essential questions you should ask when evaluating potential angel investors.

But first, let's answer a crucial question.

Why Should You Care About Evaluating Potential Angel Investors?

Investors have different motivations, strengths, and weaknesses.

Some may be better suited to help you achieve your specific growth objectives, while others may not.

It's a bit like dating, actually. 

You want to be sure that the angel investors you choose are a good fit for your SaaS business and will provide the support you need to achieve your goals.

Even if you don't end up partnering with them, you'll walk away knowing that you did your due diligence and made the best decision based on your specific needs.

So, with that in mind, let's look at the 22 essential questions you should ask as you evaluate potential angel investors.

Industry Experience and Expertise

One of the most important factors to consider when evaluating angel investors is their industry expertise.

After all, you want to ensure that the individuals you partner with have a deep understanding of your target market and can share their valuable insights on achieving success.

• Does the investor have experience in your industry?
• Are they well-versed in what your customers are looking for and how to reach them?
• Do they have a strong network of other industry experts and contacts who can help you grow your business?

These are just some of the critical questions you should be asking to gauge an angel investor's level of industry expertise.

Depth and Breadth of Experience

Along with their industry expertise, you'll also want to consider the depth and breadth of an angel investor's experience.

• Are they only early-stage investors, or do they have experience with later-stage startups?
• Do they specialize in specific industries or have experience across various sectors?
• Has the investor worked with companies similar to yours in some way? Are there any notable similarities in their investment portfolios?

These factors will help you get a better understanding of whether or not the investor is a good match for your specific needs.

Motivation and Goals

Next, you'll want to dig into the motivation and goals of the angel investor you're evaluating.

• Do they want to see you achieve rapid growth, or are they just looking for a quick return on their investment?
• Are they looking to help you build a sustainable company, or do they have more short-term goals?

Understanding the motivation and goals of your potential angel investor is critical for ensuring that your company aligns with theirs. Otherwise, you may end up with an investor who isn't the right fit for your long-term success.

Risk Tolerance and Investment Style

Along with understanding the motivation and goals of potential angel investors, you'll also want to assess their risk tolerance and investment style.

• How much are they willing to invest in your startup, and over how long a period?
• Do they prefer to invest in just a few startups or make smaller investments across multiple companies?
• How much control will they have over the firm and its future?

Also, it's essential to consider how comfortable you are with the level of risk and control an investor is looking for.

After all, the more control they have, the less flexibility they may have regarding your business's future.

Network and Strategic Contacts

The next step in evaluating potential angel investors is assessing their network and strategic contacts.

• Do they have access to investors and advisors who can help you grow your startup?
• Do they have valuable connections in your industry or with potential partners?
• Do they have access to resources and influencers who can help you reach your target audience?
• Have they previously worked with successful startup companies, and what can you learn from their experiences?

These questions will provide valuable insight into the strategic value that an investor can bring to your business.

Money isn't everything.

Availability and Commitment

You'll also want to evaluate the availability and commitment of each potential angel investor.

• Do they have time to participate in your business growth actively?
• Are they more interested in making a financial contribution or want to be involved regularly?
• Is their commitment in line with your own, and can they make a long-term investment in your business?

Considering all these factors, you can ensure that the right angel investor is on your side as your startup grows and evolves.

Time is always a critical factor for any growing business.  

You must ensure that your potential investor is available and willing to commit long-term.

Unless you're explicitly looking for a silent investor who wants to provide financial support, you'll want to carefully assess the availability and commitment of each potential angel investor.

Deal Terms

Of course, it's also essential to consider the deal terms of each potential investor.

• What role will they play in your business, and what kind of control do they expect to have?
• What are their terms and expectations for an exit? Do those align with your long-term vision for your company?
• Will they help you identify and vet potential partners or acquirers?
• How will they share the risks and rewards of your startup's success?

Deal terms are critical in determining whether an investor is the right fit for your business. Do your due diligence and carefully consider all aspects of any potential partnership.

Conclusion

Overall, evaluating potential angel investors is essential in ensuring that you're making a suitable investment for your startup. 

With careful consideration of critical factors like risk tolerance, strategic contacts, and deal terms, you can find the right partner to help your business reach its full potential.

Ultimately, the right angel investor can be an invaluable asset for your business, so don't hesitate to research and consider all your options before making a decision.

Meet the author

Joran Hofman

Back in 2020 I was an affiliate for 80+ SaaS tools and I was generating an average of 30k in organic visits each month with my site. Due to the issues I experienced with the current affiliate management software tools, it never resulted in the passive income I was hoping for. Many clunky affiliate management tools lost me probably more than $20,000+ in affiliate revenue. So I decided to build my own software with a high focus on the affiliates, as in the end, they generate more money for SaaS companies.