One of the most fundamental parts of the startup funding process is the pre-screening round. Here a group of investors or their representatives will do a short (~1 hour) interview with you to understand if your investment is a viable opportunity. Also gives the founder/CEO the opportunity to meet with the investor(s) and see if there would be a good fit.

1. Angel Investing 101
PRE-SCREENING

2. Agenda
 Purpose of this presentation:
 Steps to qualify or disqualify an investment opportunity
 Deal Sources
 Next Steps
 Benefits
 Low time commitment approach for initial investigation
 Mitigate some of the risks inherent to angel investing
 Useful for giving advice to fledgling entrepreneurs

3. Deal Flow:
Sourcing to Exit
Pre-Funding
•Exploratory contact
•Application
•Pre-screen
•Due diligence
•Revisions/Pivots
Funding
•Term sheet and valuation
•Presentation(s)
•Deal structure/documents/legal
•Closing
Post-
Funding
•Monitoring
•Mentoring
•Resources/Network
•Harvesting/Exit
< 2 hours

4. The Key Questions
 Question 1: Is this a good deal for our Angel group?
 Question 2: Is this the right team to execute this business?
 Question 3: Does this business have superior proprietary products?
 Question 4: Do the products address a clear need in a large
market?
 Question 5: Is the requested investment sufficient for the company
to achieve key milestones?
 Question 6: Has this company made a compelling case for the
overall attractiveness of the business opportunity?
 Question 7: Is this an attractive investment opportunity?

5. Question 1: Is this a good deal for
our Angel group?
 Industry Sector:
 High-growth industry
 Expertise within Angel Group
 Proceed with caution:
 partnerships, proprietorships, franchisees, investment funds, retail stores,
publishing, professional or consulting services, real estate,
entertainment, natural resources
 However there are always exceptions

6. Question 1: Is this a good deal for
our Angel group?
 Which one of these would you invest in?
 Publishing company
 Electronic Health Records
 Chain of dry cleaning services
 Social Gaming (e.g. Words with friends)

7. Question 2: Is this the right team to
execute this business?
 Management team can make or break any deal
 track record of key team members
 balance of operational expertise (including financial), domain
knowledge, and business acumen:
 Though at early stage, not ALL of the items above need to be present. Most
should be
 Angel Investors will help round out management gaps or find individuals
who can.
 Proceed with caution:
 “one-person-show”
 Family-based business

8. Question 3: Does this business have
superior proprietary products?
 Mostly product or technology
 Although services possible
 Scalability
 Competitive Analysis:
 Clear differentiation
 better/faster/smaller/cheaper?
 New markets/paradigm shift: AVOID.
 Sustainable Competitive Advantage
 Freedom to Operate
 Product Line

9. Question 3: Does this business have
superior proprietary products?
 Which of the following would you invest in?
 Augmedix
 A service for medical doctors that's powered by Google Glass.
 Twilio
 Build apps that communicate
 Fits.me Virtual Fitting Room
 Fits.me’s solutions help boost the profitability of online clothing retailers.
 Swifto
 Uber for Dog Walking- GPS tracked dog walking service

10. Question 4: Do the products address
a clear need in a large market?
 Clear economic value proposition:
 Need-to-have VS Nice-to-have
 Market Size:
 For Angels: >$100M. For VCs: >$1B
 Market Segment:
 niche market(s)?
 reasonable chance of market acceptance
 Identification of key decision makers
 Sales:
 Paying or Beta Customers? Proof needed (LOI e.g.)

11. Question 4: Do the products address
a clear need in a large market?
 Neverware
 automatically boosts performance of old computers for a low monthly
fee. Targeted to the education sector.
 AirBnB
 rent unoccupied living space and other short-term lodging
 OrderWithMe
 Group Buying from Factories in China

12. Question 5: Is the requested investment
sufficient for the company to achieve key
milestones?
 Attractive for follow-on venture investment
 Cash flow break-even
 Not a fit for Angel investing:
 Capital intensive industries (e.g. alternative energy) require constant
capital injections

13. Question 6: Has this company made a compelling case for the
overall attractiveness of the business
opportunity?
 Clear identification of strengths and weaknesses vs competitors
 Does the company have or can gain access to required resources?

14. Question 7: Is this an attractive investment
opportunity?
 Valuation Expectations:
 Pre-revenue valuation >$3M.
 Strongly advice against pre-revenue unless strong compelling argument (e.g. IP).
 Any company >$10M is not a good fit for Angels
 Equity too low to justify due diligence effort
 Potential for Lucrative Exit:
 For angels, exit of 10X within 3 – 7 years is the norm. Exit strategy must be
articulated.
 Prior deals:
 Previous unreasonably high valuations
 Untenable deal structure terms from individual investors/angels

15. Key Takeaways
 This is the first step in the process, should you spend time even
evaluating the deal.
 Short . < 2hours
 Main points to look for
 High growth industry, synergies with angel network
 GREAT and complementary management team
 Clearly differentiated product/technology. Scalable and sustainable
 Addresses pain points in large markets. Not too large >$100M but <$1B.
Have Sales!!!
 Clear need for capital, but do not require constant infusion
 Companies valued between $3M and $10M. Exit at 3 – 7 years.

16. Questions?