When thinking about taking money from angel investors, entrepreneurs are often drilled with a number of questions, but there are a questions that you the entrepreneur should be asking of your angels.
One of the most basic questions, and sometimes you don't have to ask this to find out the answer. What is your criteria for investing in a startup? This includes finding out what stage (i.e. concept, product launched, customers acquired, etc.) of the business they like to invest at and the type of businesses they invest in. This should be an initial screening question to narrow down the investor pool.
Do you have to pay them to present your pitch? Some 60% of angel investors tend to charge fees for listening to pitches. Never pay to pitch your company. The best angels are the hardest to get access to, but they don't charge you to pitch.
Have they invested in other companies? How many and over what time frame (i.e. 6 months, 6 years, etc.)? Ideally, the angel investor you're considering will have invested in at least one company. If they have not made any or only a limited number of investments, make sure they can secure viable funding. Beyond taking money from the investor and giving them equity or a combination of debt and equity, they might be a number of contingencies that investors will try to stipulate. We can get into preferences and terms if there is enough interest (feel free to shoot me an email beingunordinary@gmail.c).
How involved do they wish to be in the business? Set guidelines from the get go and manage expectations. This can range from passive, with the call every now and then, from the over the top, wants to be involved in every day to day operations. Usually you want something in-between, but it's more important to ensure investors don't hinder progress.
Can they fund additional rounds? A number of investors will only be focused on the short-term and seek to exit within a few years. Given that, they don’t always consider funding beyond the angel round. But if you company is everything you hope and begins to take off then additional funding will be needed.
What is their exit strategy? As Some angels have unrealistic expectations of when an exit will take place, which makes them put unnecessary pressure on companies. Be sure to ask what their exit strategy is and exit time frame is, and make sure that it lines up with your expectations or that you are comfortable with it. The broad exit expectations range is usually from 1-3 years, 5-7 years or 10 plus years. But it's not all about when these investors are looking to exit, but how...are they looking to sell their shares back to the company, another investor or pushing for an outright acquisition by another company.
As always, whether it be with investors, partners, potential employees, make sure they are serious and never reveal too much about your business. Also, generally avoid friends, family and fools as investors whenever possible.