Initial due diligence
Experience has shown that successful angel investments require specific due diligence on the proposed investment.
UKBAA research has shown that at least 20 hours due diligence has a positive impact on the likelihood of a multiple investment return (Siding with Angels; Robert Wiltbank, Nesta-UKBAA).
Some angels commission external expertise. However, it is very beneficial to share due diligence among a syndicate of angels so that you can each take responsibility for different aspects of the business proposition.
There are a number of key areas where you should focus your due diligence and these are set out below. The Due Diligence forms the basis of your decision to the deal, your confidence in the team and the growth potential of the business and is reflected in the Legal agreement Term Sheet and Shareholders Agreement.
Due Diligence Checklists
People and Management
Finance and Tax