Questions

Do angel investors go through a due diligence process before investing in a first time founder? What does this process looks like?

If the angel investors like the founders & team, are excited with the idea/product and already see some initial traction what are some other due diligence steps they may take before writing the first check to the company.

3answers

The only due diligence a good angel will do are any of the following:
1) Ask anyone who they know that also knows you what they think of you;
2) Use your product to whatever extent possible.
3) Look at what others have invested in that may be competitive.
4) Talk with others who have failed with a similar idea.
5 ) Review legal docs related to the actual investment.

In rare cases, an angel may ask to take a deeper dive on analytics but this is in very specific circumstances.

Anything more than that is the sign of a likely bad angel investor who is likely wasting your time.


Answered 5 years ago

It is well known in the angel community that it takes more than a person month of due diligence to have a reasonable prospect of a return on capital.

Anyone you want to work with over a decade or more will do tombstone due diligence on the past to ensure that its dead hand will not undermine the future.

At least as important is to assure themselves that the CEO has the capability to build the business and grow with it. As a founder it is in your best interests to have this done as if you were being hired to manage the money under very difficult and unforeseen circumstances. This is a case of an ounce of prevention. Have a look at the history of Google to see what is at stake for all.


Answered 5 years ago

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