Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By Rebecca Lovell
Approaching an angel group is like a first date. It’s a two-way street, and it can lead to a relationship. At the MIT Enterprise Forum’s October 2 “Meet the Angels” event, the moderator turned the tables on spokespeople from seven area groups (full disclosure: including yours truly), and asked us to deliver 5-minute pitches to a standing-room only crowd of entrepreneurs. This inspired me to dust off and update our Top 10 list for entrepreneurs. In Dave Letterman- meets- Fight Club style, these questions are first-date appropriate:
10. What are your fees to entrepreneurs? Your time is money, but money is money too…make sure the fee structure is transparent, as there are both for-profit and not-for-profit forums in town. The range of fees is significant, from under $100 to over $6000.
9. No, seriously, what are your fees? This is the part where you ask about application fees, presentation fees, cut of proceeds, or any additional obligations or hidden fees throughout the process. For an overview of the Seattle-area angel group’s, check out Susan Schreter’s article on the topic in the P-I.
8. How long does it take to close the deal? From submitting an application through due diligence, getting funding from an angel group may take longer than you expect (or like). Turn-around times range greatly from group to group, and expectations should be set for how much time will be required, and over what period of time.
7. How much money did your forum invest last year? Not how much investment did your network “facilitate,” not “how much did your members invest in start-ups in general”, but “what was the dollar figure of investment made only by your members in deals that you screened?”
6. In what stage of company does your forum invest? What is your profile of investments by industry? If you make the tough decision to seek equity funding, one of the perks is that professional, active angels want to invest not just their money, but their time…and can be a much-needed shot in the arm to your advisory board. Find out the group’s experience with high-tech, consumer, retail, or real estate industries…and seed, early stage, post-product, post-revenue, or growth stage companies. Does the group have members who both understand and have an appetite for your deal?
5. What is your track record? This can be a tricky one, as angels invest individually, at different times, but beware fuzzy math. Investors (and entrepreneurs) get returns upon exit, not with a VC up-round.
4. Of the companies that presented, how many received funding from your members? Don’t be shy about asking for the average and range of investment either.
3. If I present to your group, how many investors will be in the room? This is an opportunity to ask not just about attendance but about their membership base….accredited investors? Active and experienced angels? Or service providers and hangers-on?
2. What’s your deal flow? How many companies do you meet with every month? How many companies presented to your organization last year? Since your organization’s inception?
And as much as results matter, so does the experience…..so:
1. Can I contact any companies who have recently participated in your process?
For some best practice recommendations, check out this link on the Angel Capital Association web site. But don’t just read about it– ask! What they answer– and whether they answer– will speak volumes.
On a personal note, for a first date I recommend coffee or happy hour, never dinner. If you like the date, you can always have dinner afterwards…but if you start with dinner, you could be in for 90 minutes of sheer misery.
