Evaluating – Winning Angels

Winning Angels: the seven fundamentals of early-stage investing

Winning Angels: the seven fundamentals of early-stage investing

The title says it all. In this section of Winning Angels, evaluating, the book describes how an Angel investor evaluates a business for early-stage investing. Every Angel investor has their way of evaluating a business. Some investors look at different facets of the business or entrepreneur, but all agree that the Harvard Framework (Amis, D., & Stevenson, H. H., pg. 75) if a solid benchmark to evaluate a business. The Harvard Framework was developed by William Sahlman and Howard Stevenson for a business class at Harvard University. The framework includes the four things that an investor should evaluate; people, opportunity, context, and deal. If any of these four elements do not line up the investment deal has a high probability of failure.

As I get older, I pay less attention to what people say and more to what they do.” – Andrew Carnegie

The “people” in the deal could include; entrepreneurs, team members, investors, advisors, and significant stakeholders (Amis, D., & Stevenson, H. H., pg. 77). An Angel must look at not just the face of the business but all the key players that stand behind him or her. A deal can go sour by lack of experience or commitment of a key team member in marketing, sales, or accounting.

The “opportunity” is all about the established or proposed business. An Angel can sometimes follow their gut, but their gut feeling should be based on facts after looking at the business model, size and scope, customers, and how much time is needed for growth (Amis, D., & Stevenson, H. H., pg. 77). A business without a customer is doomed to fail just as fast as not having a plan to succeed.

The “context” is the outside factors that will leverage the business into success or failure. If there is a customer base for a project, does that customer base have resources to buy the product or services offered by the business? Having a new product in a saturated market, where the competition is selling a comparable product for a lower price can hinder sales. Lastly, does technology to develop the product exist, or will there be development time needed to go to market.

The “deal” is all about the terms and price. The investor needs to evaluate if what the entrepreneur wants/offering is worth the investment. An investor needs to be mindful that a project might be flashy, new, and interesting, but if the terms are not favorable then the potential to have a winning deal will be diminished. 

What does this mean to the entrepreneur?

As I read this book, I take the time for the “so what” or “how does this information matter to me the non-investor”. The biggest take away that I get from this section is to be prepared. When preparing a proposal, the entrepreneur needs to have these subjects covered and sorted before emailing or walking into the meeting (if it even makes it that far). Most investors have gone through the sourcing phase to pre-sort out deals that meet their interests. If a proposal has made it to evaluation, that is not the time to prepare the proposal. The evaluation phase has the flexibility to work on things that to be can be adjusted to make the investor and entrepreneur arrive on the same page of feeling comfortable with the deal.

In conclusion, not every investor is interested in every proposal. However, many investors ultimately want the entrepreneur to reach their goal. Some investors will give feedback on how to fix their proposals, might point them to a different investor that might be interested, or let them know that they would be interested in working with them in the future. As the investor must do a lot of evaluating proposals, the entrepreneur might have to do a lot of evaluating of investors. 

Source –

Amis, D., & Stevenson, H. H. (2001). Winning angels: the seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

2 thoughts on “Evaluating – Winning Angels

  1. I feel like I am a non-investor. I agree that as an entrepreneur it is important to be prepared to present an investment to an investor. I have never done anything that needs an investor. The million-dollar numbers mentioned in the book scare me to death. Who knows, one day I may be seeking a large investment, and reading this book will guide me in the correct thing to do to attract an investor or get a referral from an investor. It will be our job as an entrepreneur to be the person that an investor can get along with and work with.
    Tina Jones


  2. Hi Dustin,
    From what I have heard and learned, opportunities are often driven by one of the investors from an investing group. Other investors who have trust in that persons ability will often follow their lead for that investor. The same will go for another deal, whereas someone else will take the lead on evaluating the opportunity. I have also learned that they have a lot of trust for other people they (the angel investors) know, such as a Venture capitalist who provides them with a lead, because it is better suited for an angel investment.


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