Ask me Anything — Angel Investment.

General getting started questions

How did you get started with angel investment?

What is your success criteria as an angel investor?

How much do you invest?

What portion of your net worth is investment in startups?

What are the best traits of a good Angel investor?

  1. Being founder friendly, add value when you can or were asked to, don’t bother the founders unless absolutely necessary. Startup life is a hard mess of ups and downs — support your founders as much as you can, but at the minimum, make sure you do no harm.
  2. Remember it is their startup, not yours. As much as possible share experience not opinions. Do not micromanage or get into every detail.
  3. Stay positive and encouraging in hard times. Don’t make your founder worry about you losing faith in them or the startup. Be their cheer-person.
  4. Let go of your ego.

Deal flow, due diligence, and selection process

What is your investment strategy?

Would you invest outside of your strategy?

How do you startups reach out to you/how do you source your deal flow?

Do warm intros matter/ do you take cold emails?

How many startups have you seen this year/how many have you rejected?

How do you choose which startups to invest in? what do you look for in a startup?

  1. Team: I look for a great team (experience, good chemistry, rounded skill sets of tech and business) that I feel good working with.
  2. Idea: I look for a big disruptive idea in a domain I understand and believe in. For example, this year I invested in a next generation source control that modernizes Git, called Diversion — super disruptive, in a domain I love (developer tool), and lots of pain in this area. I ask myself — Am I excited by the idea?
  3. Deal terms: I look at deal terms — is it a price round? Is it a Safe investment? What is the amount raised as a whole? What is the amount allocated to me? Who is leading? Who are the notable other investors? What were the last round terms? I look for founder friendly terms and a setup that will not hinder the startup’s future success.
  4. No red flags: I check that there are no red flags (see question about red flags in this article)
  5. Peer review: I try to get at least one more person I invested with in the past, to review the opportunity and tell me what they think.

What does a great pitch meeting look like?

What is the least important part of a pitch meeting for you?

What are common mistakes founders make during the pitch meeting?

  1. Be late, not realizing the time is up, reschedule at the last minute without a good reason. I find that disrespectful and I like to have a respectful relationship with the founders I invest in.
  2. On the same topic of time management, some founders spend too much time on the pitch, and not leave time for discussion — this is simple and fixable problem.
  3. Not knowing your important numbers — how many users you have? What is your ARR? What’s your retention numbers? What are the deal terms? These questions are example of basic information that sometimes founders do not know — if you do not have that data, how can you run your business. If you do not have the information because you are still figuring it out — that is OK, just say that.
  4. Lie / fudge the truth / exaggerates — If you do not know something say “I do not know”. Assume the investor has seen hundreds of pitches, so they become good bullshit detectors. Same with slides — if you use cumulative numbers to make the graph look up and to the right, please don’t. Unless you are directly competing with Amazon, don’t tell me that the e-commerce market is 3536 gazzilion dollars, it’s not relevant.
  5. Not taking feedback well. Founders need to deal with feedback all the time. Even if you do not agree with the feedback, taking it with grace is a very good sign.

What are the red flags when considering investment?

  1. Lack of strategy/product focus — if the customer is “everyone” and the use case is not clearly defined, or there are two products/solutions.
  2. Broken cap table — when the founders have given away too much of the company, too early, that is a major red flag. This means that it will be harder for them to raise funds in the future while maintaining control of the company.
  3. Ill-structured board — if the founders do not have majority in the board in the early stages of the company, I am out.
  4. Ill-structured deal terms — if there is anything that is not standard, that is a red flag — things like promises made to past investors, spacial rights to early investors, IP limitations (gov grants for example), and governing law are examples I have seen in the past.
  5. Founders still working on other things — if the founders are not 100% committed, I do not feel committed.
  6. Other non-founder-friendly investors — there is a very small list of investors that I know are not founder friendly, I will not invest alongside them.
  7. Competition with my other investments — This is very simple, I am very founder friendly, I do not want conflict of interest with any of my investments.

How many of your investments have female founders?

What are your thoughts about diversity?

Is there a perfect pitch deck / one pager?

Who do you consult with? Do you have pier angel investors?

What were the main reasons you did not invest in the other companies?

  1. Startups in domains I do not understand / domains I do not like (ads for example).
  2. Not connecting/gelling with the founders.
  3. No bandwidth to review the deal / being busy doing another deal.
  4. Poison pills like a bad cap table, team issues, legal complexities.
  5. No excitement / conviction

Would you reject the deal because of other investors/other circumstances?

Do you rather invest in a great team or a great idea?

How many of the founders did you have close acquaintance with before the investment?

The investment itself

What's the average time between the first meeting and money in the bank?

What are the terms negotiation like?

Do you use syndication or direct investment?

After the investment

What is your involvement in the startup after the investment?

What are Best practices you see founders do after the investments?

  1. Communication — I find it very useful for founders to send out a monthly update. It is a great way to stay in touch, but also a solid way to let the investors know how they can help.
  2. Know where your investor can help and use them when needed — investors are busy people too, but they’re usually very open to help when you need them. It is important to note that investors are not superheroes, for example I really suck at sales so using me that way might not be optimal.
  3. Refer founders and startups to your investors — most of my investments are done through referrals, if you like working with me send me awesome startups.
  4. Share challenges and be transparent — If you have a friendly investor, who was a founder in the past, they will more than happy to hear your challenges and help you work them through.

What were your successes and failures so far?

Is there a startup you wished would be your 14th investment this year?

Do you regret any of your investments this year?

What surprised you this year?

What are your lessons learned this year? how did you implement them?

  1. I learned how to say no gracefully. This has been the hardest part of this journey so far. If you are planning to be an angel, this is going to be a major part of your job.
  2. I learned to work with a team of peer angels. I built an infrastructure (Slack, Monthly meetings, syndication setup).
  3. I learned to manage my time through calendly — I share a link with founders and other investors and they can send that link to founders they want me to see. This saves me hundreds of emails of coordination.

What is your advise to early stage founders?

  1. Focus on your customers/users. Too many founders are focused on the investors and forget their product market fit. Providing huge value for the customer is the only way to grow a company, and the only way to do right by your investors.
  2. Read about and practice Grit. Life of a startup founder is a crazy rollercoaster — there will be many days of ups and downs. You need to be optimistic on the down days, and realistic on the up days.
  3. Always be communicating. Send updates, collect feedback, talk to your customers and partners often.
  4. You are all the roles you have not hired for yet. If you are missing a marketing person, you are the marketing person.
  5. Choose your investors well. Investors are not just money- they can be immensely helpful or a big pain in the butt. Make sure you like to work with and trust your investors.

What is your advise to early stage investors?

  1. Be helpful when needed, and stay out of the way when not. The startup founder’s life is hard enough without you breathing down their neck.
  2. Learn to say “no” politely and transparently.
  3. Find friends to invest with. It makes the investment experience much better and more likely to be successful.
  4. Give credit to the founders. Remember this is not your start up but theirs.

What’s next?

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Amir Shevat

Amir Shevat

Head of Product, Twitter Developer Platform