What should I ask an investor before starting a business relationship?
1
“WHEN EVALUATING AN INVESTMENT IN A STARTUP, WHAT ARE THE KEY CRITERIA THAT YOU’RE LOOKING FOR?”
Udell says this will ultimately help you, the founder, understand the mindset of the investor. “Are they focused on you as the founder and how you’ll tackle problems and run their investment? This will help to make sure you understand what’s really important to the investor.”
2
“WHAT IS YOUR TIME-HORIZON FOR AN ANGEL INVESTMENT AND EXPECTED RETURN?”
His advice is to figure out early on whether you’re aligned on long-term goals. If you end up working together, posing this question in advance will ensure you both have the same end goals in mind.
3
“HOW INVOLVED DO YOU WANT TO BE, OR CAN YOU BE, IN YOUR PORTFOLIO COMPANIES?”
“If you, as the entrepreneur, are looking for advice and guidance at an early stage, you may be looking for strategic investors who can give assistance, but you also want to be sure that you are not getting into bed with someone who is going to try to get into too much of your business, if that is not what you want,” he says. Most angel investors are more than happy to provide advice and help (mentorship is a key part of angel investing), but Udell says this can be overwhelming. “Asking this question will help to establish boundaries early. Knowing what to expect going forward is very important.”
