Decision Frameworks: How to Evaluate Startup Investment Deals Like a Pro

If you've seen any of our investment memos, you'll recognise this structure. It's designed to help you take a broad scan of a company before going deep—this helps avoid blind spots in your diligence process.

We evaluate companies across seven areas:

1. Product/Service
   What does the company do? What is the product or service? How is it sold? And how does the company make money?
   
2. Market
   Who is the target customer? Do they understand their ICP? Are buyers willing to pay? Based on this, how large is the market?
   
3. Economics
   What is the average deal size? How profitable is each unit? Higher-value sales and high-margin products are favourable.
   
4. Defensibility
   What aspects of the business are difficult to replicate once it's established? What creates long-term competitive advantage?
   
5. Traction
   Metrics matter. You want to invest in a trend, not a moment—invest in a line, not dots. Look for clear growth trajectories.
   Metrics vary by business type:
   
   • Consumer: LTV, CAC, growth rates
     
   • Marketplaces: GMV and take rate—watch out for inflated revenue claims
     
   • Fintech: True revenue vs. processing volume (e.g., $10M processed ≠ $10M revenue)
     Prioritise ARR, NRR, profitability, and capital efficiency (burn rate vs. growth).
     
6. Team
   This is inherently subjective. Look for:
   
   • Founder-market fit: Do they understand the space?
     
   • Commitment: Are they serious builders with skin in the game? Have they made sacrifices to build the company?
     
7. Valuation
   Is the company fairly priced for its stage?
   Angels often overpay—Series A and later rounds tend to offer more disciplined valuations. Don’t be afraid to walk away from unreasonable deals. You may not have negotiating leverage, but you do have the option to pass.
   

A few general guidelines:

• Product/Service: Look for step-change innovation—ideally 10x better than alternatives, not just incremental improvements.
  
• Market: Bigger markets support bigger exits. The difference between a $1B and $100B market is 100x potential.
  
• Economics: Prioritise revenue quality (e.g. stickiness, low churn) and strong unit economics—this reduces dilution and increases investor returns.
  
• Defensibility: What structural or proprietary advantages make replication difficult?
  
• Traction: Use real data to validate founder claims.
  
• Team: Serious founders show up with something built—not just a pitch deck.
  
• Valuation: As an angel, understand local benchmarks and don’t chase inflated deals. Your buy-in price matters, and your exit depends on the market size and the team’s ability to execute.
  

This is the core framework I use. If you're interested in seeing sample investment memos built around this structure, feel free to reach out. We also explore this framework in depth in our programs using real-world case studies.

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