How To Navigate Angel Group Due Diligence Process
And Secure Investment
Human capital is just as important as financial capital in helping your startup succeed. One resource that encompasses both is angel groups. Defined by ACA, “Individual angels are joining together with other angels to evaluate and invest in entrepreneurial ventures. The angels can pool their capital to make larger investments.” Angel groups are important because they are generally easier to find. They also comprise some of the most sophisticated and active angel investors in the country. In the last two years, 300,000 people in the US have made an angel investment.
Typically, angel groups will only consider opportunities that have certain ties to their community or fit their investment criteria. However, all groups follow the eligibility & application process for startups. Below is a basic step-by-step process that angel groups follow in order to make investment decisions:
Step 1: Submit Application
- The application includes a small fee, pitch deck, executive summary, and financials. Most require startups to join Gust, the global platform for startup investing.
Step 2: Pre-Screening
- This is the initial screening of your application by team members.
Step 3: Screening Day
- If your venture is deemed attractive to the group then you will present to the screening committee where you will get real-time feedback. Your presentation is immediately followed by Q & A. You might be among several other startups pitching the same day.
Step 4: Presentation to Full Membership
- A select few startups will be invited to present to the full angel group. The pitch, which is usually 10 minutes followed by 10 minute Q & A, occurs during the group's monthly investor meeting. The main objective is to introduce your venture and peak investor interest.
Step 5: Investor Follow-Up
- Members fill out forms and those that express interest will lead due diligence and negotiations with your startup. This can either be led by individuals or a group depending on the level of interest.
The majority of angel groups have commitments to local ecosystems to catalyze economic growth. Below are some other criteria to consider before contacting or applying to angel groups:
- How much does the group typically invest in seed/early-stage startups?
- Do they syndicate with other angel groups and VC’s?
- How do they value pre-revenue startups?
- What are their pre-money valuation expectations?
- Do they have a fund, do they invest as a group or as individuals?
- As a group, how much did they invest in the previous year?
- Do you need to be raising capital in a certain range and stage?
- Do you have to be post-product or in a certain sector?
Pulling angel groups from a public member directory and cold-emailing might not be the best approach to raising investment. It’s advisable to get a single angel acting as a sort of ringleader or reference, around whom the rest of the angels can rally and feel more comfortable with the level of due diligence being conducted. Pinpointing an angel with resident experience in your particular field will increase the likelihood of developing into an actual investment commitment.
