I have the opportunity to be an Angel investor in a tech startup. The SaaS product enables Territory Optimization , Geo-spatial mapping and Analytics to Sales, its an add-on to any CRM out there like Zoho, SugarCRM etc. Product is ready, GTM strategy is complete, with agreements from partner resellers, no customers today, expected to have 100’s of customers by end of 2021, and thousands by 2022. Board consists of 3 people including founder. Plus another 6 angel investors. They have valued the company at 2.5M, and offering me 2% ownership if I invest 50k. 138K shares out there today. I will get 2777 shares at $18 a pop based on that 2.5M valuation. I am new to ‘Angel Investing’ in a startup like this. Looking for tips/advice/guidance on how to evaluate if this is a good investment? Update1: The founder had done a previous startup, raised VC funding of 14M and eventually his product was bought out. Customers are going to come from partners. The partners are well established companies that could potentially sell this as an added feature to their existing customers. Running the company very frugal right now, burn rate is 120K per year. Developing on ‘free credits’ provided by major cloud provider for startups. Small staff of 3 developers outside the US. Update2: Founders are looking to raise an additional 300k , they can easily find that betw themselves, but they are coming to me and few others for two reasons. 1/ Spread the risk 2/ Expertise, Connections, Advise. I have 15 YOE in software development. The founders have fixed a 50k minimum per investor. They dont want to deal with a large number of investors
With less than 200 words worth of description, you want anonymous internet idiots to tell you if you should piss away 50k?
Tell me how to evaluate. I agree the description does not do justice. I cannot have the founder pitch to an anonymous crowd on blind
Angel investments are extremely risky in general. That’s why the numbers are lower, and people tend to do a bunch of deals. If you’re only doing one then the odds are your money will evaporate. This is also why a lot of VC’s say they invest in founders and not just the product. If you know the founder well and know they will hustle and try their best then it might be worth risking the $50k. But > 90% chance you lose your money.
Thanks for your perspective. This will be my first one, but I have always wanted to invest in more of these type of opportunities. But whenever I come across one of these, I dont invest due to higher risk of losing principal. I fall back and continue to invest in real estate or stocks, ETFs etc.
A few of my friends have pooled money and invested. That way you’re not investing the entire $50k and mitigating the risk a little bit
They are doing a priced round so early? Huge red flag.
True. They do convertible notes at this stage
Do they have potential customers who are also angel investors? That is always a good sign. Other than that I’ll be interested to see the track record of the founding team and the other investors
No. Founding team seems pretty solid. The founder had done a previous startup, raised VC funding of 14M and eventually his product was bought out
How do you know the founder?
Dont know him that well. Acquaintance. Friends circle. Lives in the same neighborhood
Customers are going to come from partners. The partners are well established companies that could potentially sell this as an added feature to their existing customers
Running the company very frugal right now, burn rate is 120K per year. Developing on ‘free credits’ provided by major cloud provider for startups. Small staff of 3 developers outside the US
Why do the founder want your money vs other angels? Most founders go for angels who can help beyond just capital. It’s connections, experience and advice, help to secure next round, a lot more. You can also start with lower investment if you just want to learn.
Yes, I forgot to mention that. Founders are looking to raise an additional 300k , they can easily find that betw themselves, but they are coming to me and few others for two reasons. 1/ Spread the risk 2/ Expertise, Connections, Advise. I have 15 YOE in software development. The founders have fixed a 50k minimum per investor. They dont want to deal with a large number of investors
How much have they already raised? How many external investors are there? Usually you would go to your existing investors first to raise more.
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Can I get in as well?
Lol…why? You have extra cash lying around that you can afford to loose?
If it’s a great opportunity to grow why not. I’ll do my due diligence before making the decision