You did it: you’ve got some customers, you’ve pitched, you’ve networked, you’ve grown… but now what? There’s a whole lot to understand between pitching to an Angel Group and the final handshake. We’ll walk you through the post pitching inquiry process, due diligence rounds and how they differ from group to group: from high level overviews, to in-depth analyses of every number, customer and flaw, our Angel experts will let you in on what they expect, hope for and get turned off by so you can be prepared. We recommend for you to have attended our ‘Apply for Angel Funding with an Investor’s Perspective’ workshop. To prepare for this workshop, you can read Christopher Mirabile’s Inc article: ‘Rites of Passage: What Investors Mean By Due Diligence’

1. Due Diligence: Navigating People, Processes and Promises
Angel Funding Part 2
Jean Hammond
Golden Seeds
Launchpad Venture Group
Hub Angels
@Jeanhammond
@GoldenSeeds
@LaunchpadVG
@HubAngels
Norman Meisner
Beta Fund
Launchpad Venture Group
@LaunchpadVG
Ben Littauer
Boston Harbor Angels
Walnut Ventures
@Littweb

2. Angel Funding part 2 - Due Diligence: Navigating People, Processes and Promises
Due Diligence As Courtship
Due Diligence is just the first part of a (hopefully) long-
lasting relationship.

3. ● Find an Interesting Company
● Screen the Company
● Company Presentation to Members at Group Meeting
● Due Diligence
● Potential “syndication”
● Negotiate Deal & complete Investment
● Support & Monitor the Investment (e.g. Corporate & Advisory Boards)
● Exit (e.g. IPO, M&A, Dividends/Royalties or Shutdown)
Steps in the Angel Group Investment
Process
Angel Funding part 2 - Due Diligence: Navigating People, Processes and Promises

4. Angel Funding part 2 - Due Diligence: Navigating People, Processes and Promises
● The point of due diligence is to give the deal an appropriate (due) level
of scrutiny so that the group as a whole can make intelligent investment
decisions. As a part of the process, it develops an interested cadre of
potential investors.
● Form the team with industry knowledgeable members
● Assess the company so less involved members and syndication
members can decide
● Some groups start with a two hour “Deep Dive” which is either an on-
ramp into an exhaustive process, or results in a no-go decision
Due Diligence*

5. Angel Funding part 2 - Due Diligence: Navigating People, Processes and Promises
● Management Team
● Market Opportunity
● Market Entry Strategy
● Customers/Prospects
● Intellectual Property
Components of Due Diligence
● Competition and Barriers to Entry
● Technology Assessment
● Business Model Assessment
● Financial Analysis
● Potential Exits

6. Angel Funding part 2 - Due Diligence: Navigating People, Processes and Promises
➔ Align the investment goals and funds used with the highest risk
aspects of that company
➔ Identify most achievable funding strategy
➔ Set up metrics to use to watch the company progress
➔ Identify what type of human capital can be used and when to help the
company
➔ CEO & Deal Lead plan to be able to answer questions and advocate
for the company with potential syndication partners
Goal: Funders, CEO and Team Agree

7. Angel Funding part 2 - Due Diligence: Navigating People, Processes and Promises
- When we said YES
- When we said NO
- When Due Diligence Wasn’t Diligent Enough...
Stories From The Angel Vault

8. Angel Funding part 2 - Due Diligence: Navigating People, Processes and Promises
DO set up, organize and populate a data room, e.g., in Dropbox. Your
prospective investors will be asking for your pitch deck, team resumes,
copies of patents and patent apps, customer, competitor and market
info, financial projections, and other supporting materials. Developing,
archiving and updating this information will help you stay on track.
DO give a great deal of thought to the biggest risks facing your
company and how you are going to mitigate them. Early stage
investors are comfortable with risk, but they want to see that you
understand them and have plans to address and reduce investment
risk over time.
DO listen to and respond professionally and honestly to skepticism
and criticism. Do your best to assess the validity of the input you
receive and revise your plans accordingly.
DO project confidence and leadership. Some parts of the diligence
process can be ad hoc and some meetings may be challenging.
Investors will be impressed by your ability to manage the process.
DON'T put all your eggs in one basket. Use your network to help
identify prospective investors who are a good fit, and reach out to as
many as possible.
DON'T be defensive, dismissive, arrogant, or dishonest, ever, under
any circumstances.
DON'T run your company based on wishful thinking. Assume things
are not going to go as planned, and assume you are going to need
more money than you think.
DON'T wait until you are almost out of money to raise funds.
Dos & Don’ts