How To Evaluate #Startups For #AngelFunding...

The moniker 'angel', in reference to angel investors, is actually an acknowledgement of the amplified risk that angel investors take by investing in ventures that are usually still trying to demonstrate their value and their potential for success and require #funds support to make progress in their endeavour. In the general run of things, #angelinvestors invest in early stage #startups, which give these businesses the impetus in the form of #capital to make it through the development phase and get ready for market entry. But how do angels decide which startup to invest in? An #angelinvestor must gauge the startup's potential based on mostly just early indications. There is no denying that they face considerable risk investors face.

Though there is no perfect way to evaluate startups, there are certain basic steps an angel investor must cover in the process:

1. What is the problem being addressed: This may seem like an obvious one, but one can't stress enough the importance of evaluating both the problem the startup is trying to address and the solution the startup is offering for it. Angels must first completely understand the precise market need or customer pain point the startup is trying to address. Once you do, understand exactly why it is important to address it.

2. Is the solution good enough: After the problem, it is time to gauge the solution. Hence, angel investors must understand what makes the startup's solution uniquely qualified to address the identified problem and how it works. And that's not all, angels must also see if the solution is better than the existing solutions in the market and if is, then understand what gives it the edge over the others. Understanding the solution's differentiating factor enables you to see if the solution has the potential to succeed.

3. Assess the team: Start with the questions such as what is the background of the #foundingteam's members, if they are qualified and well suited to run the business and deliver the solution, and how the team intends to scale so as to achieve the #goals set out in the #businessplan. It is important to evaluate the team against these parameters because if the people behind the venture are dedicated, resourceful, and generally excellent, they will attain success no matter how the initial business idea works out. To that end, it is advisable to meet as many people as one can and check with your #network to find someone who might know the founding members of the startup you are contemplating investing in.

4. What does the market look like: #Investors must get the hang of precisely who the venture's solution #targets and if there is a feasible #marketopportunity for it. Angels should also research the market and the opportunity it presents to corroborate the details and information they may have received from the startup.

5. Potential for #scalability: Scalability is the company's ability to increase revenue with a nominal increase in cost, thus developing a #profitablebusiness. Hence, scalability is a crucial factor in the evaluation of a startup. And this is why angels must understand how much growth the #founder is targeting since it will also help them understand how much capital the startup needs.

6. How is the #competition: While considering investment in a startup, angels must evaluate not only the current crop of the startup's competition but also the ones that may come up in the future. It is also imperative to understand if there are any barriers to entry, such as #IP or others, that will allow the venture to stay ahead of the curve.

At the end of the day, it is extremely important that angel investors have a complete understanding of the #businessmodel in order to evaluate a startup and thus make an informed and wise investment decision.

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