In Part I, I explored who the angel investors in the UK are and where you can find them. In the Part II I’ll cover how to do your due diligence on these angels and questions to ask before agreeing to take investment from angels or angel groups.

1. What’s your best guess for your cheque size in my company if you invest? Cheque sizes vary hugely and it’s important to know early on if you are talking to an angel who could invest £100k, or £10k, to help you prioritise your list. This is a question you can ask before the first meeting.
2. What’s your due diligence process for making investments? Processes vary so try to get a sense for how they work. This is a helpful guide to some of the questions angel investors might ask.
3. Will you lead my round and set a price? It is very important to understand, early in the process, whether an angel or an angel group will lead your round, or whether they need you to have a lead investor (who could be an angel as well), set the terms and price the round.
4. What’s your time horizon and success criteria for exit? It’s important to be aligned with your angels on their expectations for exit and when that may happen. If the answer is ‘within three years’ or similar, this is is a red flag and suggests that the angel is not truly realistic about the illiquid and long-term nature of start-up investing. Despite the fact that they might not have a legal right to block an exit on their own, they could cause problems for you if you want to take an offer which is different from their return expectations.
5. Have you angel invested before? If so can I take references? Once an angel is looking like to commit to investing in your company, reference them with founders they have previously invested in. Try to understand precisely what their expectations for the company and the communication rhythm will be, reference them with former or current colleagues, spend time together before accepting a cheque from them. Once they are invested it is very difficult to unwind the relationship, so go into it with your eyes wide open.
6. What fees, if any, will you charge to my company for making this investment? Individual angels are unlikely to charge fees, but angel groups sometimes charge various kinds of fees. Always find out the fees and any special requirements that angel groups have. Fees can be taken upfront, or on an ongoing basis and can be well hidden — for example, a clause in the termsheet or long-form legal documents which specifies paying the angel group a non-exec or board fee. A good example of an angel network explaining their fees is here.
7. What terms will you require in the legals? Can you share an example termsheet that you’ve used previously? Try to understand if the angel has any off-market terms or specific requirements (a good lawyer should help you understand what is ‘market’ for your stage).
8. Do you expect to follow your money in the next round? If so, what are your criteria for deciding and will you simply hold your pro-rata or look to invest more & double down?
9. Do you invest with other angels who I can speak to about participating? Some investors invest with friends so it is worth asking this question to see if you can unlock more capital once you have a commitment.
10. Will you want to take a board director or observer seat? Some angels will want to be actively involved on the board and in key decisions, which may or may not be suitable for your company. Often the ‘investor group’ at any given round will be entitled to one board seat, usually taken up by the investor director in a VC fund, or the lead angel. This is not always necessary, so make sure you discuss whether it’s right for your company before agreeing.
11. How do you help the companies you invest in post-investment? There are some angels who like to be very hands on and helpful, some that are passive. Ask the angel about the specific type of support they can provide, and ideally test them on this before accepting a cheque. For example, if an angel tells you that they can provide commercial introductions, ask who they would introduce you to and what level of relationships they have.
12. How would you like me to communicate with you? Establishing the right style, rhythm and content of communications between angel and start-up is extremely important for a positive relationship. I suggest monthly emails, but most will want some kind of quarterly report at a minimum.

Are there other essential questions to ask angels? If you have anything to add, please send me a message on check@diversity.vc, or DM me.

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