Angel Investment Criteria

from Sand Hill Angels who invests in early stage companies in the following areas: Information Sciences including: SW, communications/ networking, and semiconductors +the Life Sciences including; bio-informatics, medical devices, drugs, diagnostics & clean-tech. Enhanced by Peter/CXO Wiz4.biz 9/12

The following business plan fundamentals serve as important criteria for our decision on what we choose to consider for investment.

1. Founding Team: should consist of the key individuals that can execute and achieve the critical milestones to the next stage of funding. It should ideally have a CEO that can lead the team even if the individual is not the long term CEO. In any case the team should be committed to building a company, passionate, accomplished, work well together, and be well referenced.

2. Market: The opportunity to build a company really starts with the attractiveness of the market opportunity. The size & growth rate are the most important metrics, but there are other factors that are also important. The industry structure, barriers to entry, customer switching costs, competitive landscape, behavior of incumbents, etc. all play into the attractiveness of the market. Small markets seldom deliver the opportunity to build big companies. We prefer companies that can deliver revenues of $50M to $100M within a 4-5 year period. This is only realizable in a large growing market.

3. Product/Service: offered should be unique, disruptive to the current way of doing things and solve a customer problem or meet a need. The value propositions should be very clear and the product should not require significant behavioral change on the part of the customer.

4. Business Model: conveys the way by which you can develop profitable business in a repeatable manner. While some investors will have an appetite for businesses that require large amounts of capital, we do not. We prefer businesses and models that are not capital intensive. We prefer businesses with high and sustainable gross margins. The combination of these two factors with a high growth market supports a high, internally, sustainable growth rate.

5. Competition: The management team should appreciate the competitive landscape and understand both its present and future direct & indirect competitors. They should also have a grasp on the sustainable competitive advantage that it can build through various means.

6. Communication: As Investors, we want to stay informed about the progress of the company as it moves towards growth, with regular (typically quarterly) updates, covering:
• significant events (ie, closing of a funding round, major customer)
• milestones achieved: product, legal, IP, financial etc
• key business indicators status (ie, # users, advertisers, rollouts, sales, profit)
• barriers or roadblocks (including assistance sought from our resources)
• priorities for the next quarter/year
• financials review
• personnel matters (discussed privately)
• anything else you deem significant, (ie, new competition, potential strategic partner etc.)

7. Exit Strategy
We are primarily interested in teams that wish to build a company that can independently thrive and have an IPO scenario. We realize that most successful investor exits will be the result of Merger & Acquisition, but we favor the manage-ment team that has the company-building mindset versus the “build-it” to flip.

Comments: Do you have any advice from your experience?