As an entrepreneur, you may have considered approaching angel investors for funding at some point. And if you're in the process of doing so, it's important to be prepared to answer any questions angel investors ask. After all, these are experienced individuals who are used to putting their money into businesses that will bring them a healthy return.
The Top 5 Questions Angel Investors Ask
While raising money for your business, you will need to meet with many potential investors. Of course, not all of these people will invest, but each time you make a presentation, you will get better at it.
Each time you present, you will also get different questions and ideas. It’s worth presenting to as many people as you can, as often as you can.
Here are some of the most common questions angel investors ask business owners and the answers to those questions.
1. How Much Money Are You Looking to Raise?
If you're looking to raise money from angel investors, be prepared to answer investor questions about how much money you're looking to raise.
It's important to have a clear and concise answer to this question, as investors will want to know if you're looking for a small amount of seed funding or a larger amount of growth capital.
Be honest about the xxx amount of money you're looking to raise, and be prepared to provide the reasoning behind your request.
Some other questions angel investors may ask include:
- What are you looking to use the funding for?
- What stage of development is your business in?
- How much revenue does your business generate?
- What is your competitive landscape?
- How did you come up with your valuation?
- Who is on your team?
- How have you been funded in the past?
- What are your milestones for the next 12 months?
- What are your longer-term plans for the business?
Be prepared to answer these questions and any others that investors may have. Having a clear and concise plan for how you'll use their funding will help convince investors to give you the money you're looking for.
2. What Is Your Business Model?
This is a question that angel investors often ask when they are considering investing in a startup ecosystem. The answer to this question can help them understand how your business makes money and if it is a sustainable model.
No matter what business model you choose, it is important to ensure that it is sustainable and that you can make a profit. Angel investors will want to see that your business model is solid and that you have a plan for how you will make money.
3. Who Is on Your Team, and What Are Their Backgrounds?
Not only do investors want to see that you have the right people on board to execute your business plan, but they'll also want to know a bit about their backgrounds and experiences.
Here are a few questions angel investors might ask about your team:
- Who is on your team, and what is their background experience?
- What makes your team qualified to execute this business plan?
- What are each team member's roles and responsibilities?
- How well do your team members work together?
- Have your team members worked together before? If so, on what projects?
- Have your team members achieved success in their previous roles? If so, what were some of their key successes?
- What are your team member's strengths and weaknesses?
By having strong answers to these questions, you'll show potential investors that you have a well-rounded and qualified team in place that is capable of executing your business plan.
4. How Will This Investment Help Grow the Company?
One of the key things that angel investors look for is how their investment will help grow the company. They want to see that their money will be used to fuel the company's growth and not just used to keep the lights on.
Here are a few ways to approach this issue:
- Have a clear plan for how the investment will be used to grow the company.
- Be able to articulate how the company will generate a return on investment for the angel investor.
- Have a growth plan and a solid track record of execution.
- Have a competitive advantage that will help the company continue to grow.
- Be able to show that the company is capital efficient and can grow without a lot of additional investment.
If you can show angel investors that their investment will help grow your company, you will be in a much better position to attract their investment.
5. What Is the Exit Strategy for Investors?
As an entrepreneur, having a clear exit plan for your business is important. This is especially true when you're seeking funding from angel investors.
They'll want to know how and when they can expect to see a return on their investment and what you plan to do with the money once they're onboard.
Here are some questions angel investors will ask about your exit plan:
- What is your timeline for a return on investment?
- What is the expected value of the company upon exit?
- What are the risks and challenges associated with the exit plan?
- What are the potential tax implications for investors?
- What are the potential legal implications for investors?
- What are the possible scenarios if the exit plan fails?
- What are the contingency plans if the exit plan fails?
Exit strategies can be complex, so it's important to have a solid plan in place before seeking funding. By addressing these questions upfront, you'll be in a better position to secure the investment you need to grow your business.
FAQs in Relation to Questions Angel Investors Ask
What kind of questions do angel investors ask?
Some common questions that angel investors might ask include:
- What is your business?
- Who are your customers?
- How much revenue do you generate?
- What are your expenses?
- How much funding do you need, and what will it be used for?
- When do you expect to achieve profitability?
- What is your competitive landscape?
- Who is on your team, and what are their qualifications?
What does an angel investor want to hear?
An angel investor wants to hear that the company has a clear plan for how it will make money.
You might have thought about seeking funding from investors as a business owner. And if you're currently doing so, you'll want to be prepared for any questions angel investors ask you. Love these questions and answer them eagerly by incorporating their answers into your main pitch.
Are you an entrepreneur looking to build and scale your angel investment syndicate? If so, Angel School can help. We offer a range of services designed to help you attract and engage high-quality investors. We can also provide guidance on structuring and operating your syndicate for maximum impact. So if you're serious about building a world-class angel investment operation, contact us today and let us show you what we can do.