Startup businesses need to have their financial, regulatory, organizational, and intellectual property ducks in a row before planning for any capital fund-raising. Angel investors are offering capital funding in exchange for equity ownership. Competition for startup funding is fierce, and risk is high for investors. Below are some of the questions you can expect from investors.
Leadership and Management
• Are the founders still part of the leadership team?
• Is there a founder’s agreement in place that details how much of the company equity each founder owns and under what circumstances that capital can be liquidated?
• Who are your key leaders and what experience do they have in the industry?
• How to you plan to scale up leadership and management with a capital expansion?
• Have you secured intellectual property rights?
• Is there anyone outside of the company who can claim rights to any part of your intellectual property?
• Do you have a prototype or demonstration model?
• What regulatory agencies have authority to oversee your business and product, and what have you done to secure regulatory approvals?
Market and Competition
• What is your market and your market share?
• Who is your competition and what is their market share?
Plan to be able to speak extemporaneously and knowledgeably on markets and competition for your business.
• Have 2-3 year projections with the capital expansion.
• Where has the previous investment money come from?
• Have the leadership team members invested in the company?
• How is the business structured?
• What is the exit plan?
Any early traction? Attorney Jake Posey advises that you should be able to speak comfortably about early successes and your business values; be able to address social and environmental responsibility, transparency, and plans for diversity and inclusion.