30+ Questions You Could be Asked About Your Startup During a Screening Meeting with an Angel Group
As Managing Director of an angel group, I review approximately 400 executive summaries per year.
We invite the few companies that pass this initial filter to discuss their opportunity further in a screening meeting. The purpose of the screening meeting is to take the next steps in determining if the company meets our group’s investment criteria.
All angel groups and VCs have specific, unique criteria that startups must meet in order to be considered investible.
This criterion is established based on the wants and needs of the investors in the group and may be based on factors including:
- risk profiles
- expectations of returns
- experience and familiarity with the different sectors and industries
- access to experts
- portfolio needs
- social and philanthropic objectives
Generally speaking, an invitation to participate in the screening meeting means the review process has already began. This early filtering helps initially determine if the investment opportunity fits the investors needs and takes place during elevator pitches, reviewing executive summaries, etc. However, the process does not end there.
36 sample questions you may encounter in a screening meeting:
- Where is your business located?
In the geographic area in which the investors have an interest in investing?
- Is the stage of your company’s development consistent with those in which the group desires to invest?
- Is your startup within one of the sectors/industries in which the group has an interest?
- Does your management team possess a group of strong, diverse and passionate members?
- Does your company present an opportunity to create a sustainable competitive advantage and will it provide exceptional returns?
If your answers to those questions align with the group’s criteria, your company may qualify for further screening. However, beware; the questions get more difficult and more specific.
- Is your product/service unique and scalable?
- Is the market opportunity for your product/service large?
($100.0M revenues vs $5.0M revenues)
- Can you clearly and crisply articulate the value proposition and is your business model well developed?
- Is your product/service in the concept, Beta or commercial stage of development?
- Is the IP imbedded in the company?
While the idea, stage of development, scalability, and value potential is critical to the group, so is the team. In fact, a fabulous idea and business plan/model is nothing more than an idea without the team to execute it. As such, the screening will also focus on the team and its potential to execute.
- What is the make-up of your management team?
Are they part-time or full-time? Do they have a history of being able to execute?
- Are your team members comfortable with the investors conducting background checks?
- What are the salary expectations of your key management team players, post funding?
- Are there multiple members of any founder’s family on your payroll?
- Is your company’s advisory board active?
Assuming the investors recognize a potential to execute, they may migrate to operations questions to help validate these assumptions.
- Are there any governmental regulations that could result in extending the runway time to commercialization of your product or service?
- What is your company’s current cash burn?
- How much cash does your company have on hand? Based on the cash on hand, how long is your runway?
- What is the timeframe in which you expect to be cash-flow positive?
The screening is also likely to address detailed questions about financial returns and potential participation. The investors want to be comfortable with their portion of the company and the related rights they accrue.
- Does the opportunity have the potential to provide investors a return of 8 to 10 times their invested capital in 3 to 5 years?
- What level of funding is your company seeking?
Early stage investment, a Series A round, a Series B round?
- How much funding are you raising?
- What will you do with the funds raised?
- Are you offering convertible debt, common or preferred shares?
- If you are offering convertible debt, under what terms are you offering it?
What discount are you offering? Is there a cap on the future valuation to convertible debtholders? Are you offering interest, and if so at what rate?
- If you are offering equity, under what terms are you offering it? What shareholders’ rights does the offering include?
- What is your company’s pre-money valuation?
- Do you have an employee options plan?
- Describe the Cap Table.
- What investment do the founders have in your company?
- Do anti-dilution rights accompany the equity of any equity holder?
- Does your company have a lead investor for the round?
Are you open to providing a Board Seat? Are you comfortable providing board observer rights?
- What is your company’s legal structure? Is your company a LLC, a C-Corp or something else?
- In which country, state/province did you register your company?
- How much Debt does your company have on its Balance Sheet?
What are the terms of your debt?
Finally, the investors will want to understand the objectives of the founders. If the investors hope to cash out in 3 to 5 years but the founders’ goals are to build and operate the company over time, their objectives do not align. As such, the following becomes critically important:
- Describe your optimal “liquidity event” or exit.
In sum, if you are well prepared and both parties conclude that there is a mutual fit, the potential for follow-up discussions exists. However, if that fit is not there, it doesn’t mean that the project/founders do not have potential. Conversely, it simply means there was not a good fit between the parties. The entrepreneur should work hard to find other investors where a better fit may exist.