When investors evaluate the opportunity you present, they will look at the following factors:
The people who will manage the company; this includes your management team and your advisors.
The concept value. This is the opportunity you present to them. It includes many of the following:
What need does your business satisfy? What is your business model? What is the size of the market? Who are your potential or actual customers? What external problems (economy, industry, regulatory, or technological) may affect your estimates?
The price that you put on the deal. How much equity is the angel going to receive for the investment? What are the terms of the investment? This will include operational information such as salaries, costs, ownership control, or other information that may affect the return on investment.
Deal Structure. What are the terms of the investment? Are the investors going to provide debt or ask for equity? Are the angels going to be active or passive investors?
Exit Strategy. How are investors going to cash-out of this opportunity? Will they receive dividends? Will these dividends be through a partial sell to management or another party (shareholder or outsider)? A strategic sell to another company? A financial sell for your company’s cash flows? Are you planning to take your company public?
A Word on Valuation
There are different methodologies to value your company. You can use asset-valuation analysis, income-valuation analysis, market-valuation analysis, or a combination of methods. There is no single best-valuation method for your business; usually a combination of methods is used. Putting a value on a start-up or new business is particularly challenging because there are no cash flows to analyze and most of the revenues are best-guess projections. Consult with your financial advisor about the best way to value your proposal.