The things angel investors look for in a company are very similar to those that any investor would look for in an investment. The following are only 6 of those criteria:
Great Potential to Achieve a Liquidity Event:- Much like venture capitalists, angel investors want to harvest or exit their investment with an upside. Simply put they want their share of an investment to become marketable very soon so they can sell their investment if they wish to turn the investment into cash. Investors get nervous when they have no potential to get out of an investment even if it is successful.
Significant Return on Investment: -In addition to being marketable, investors want to sell their investments at much higher values than they bought them for. They want to buy low and sell VERY high. There is no point to an angel investor in undertaking such great risk without a potentially substantial return.
Barriers to Entry:- Here is a very short one sentence story: you have a business idea and it does well but the business is so easy to get into that everyone and their grandmothers start the same business and your returns dwindle to the market average. An angel investor will not want to invest in such a business. They want your business to have something others can't easily get: a patent, a copyright, years of research & development or other expertise; pretty much anything someone else can't get without spending a ton of time and/or money.
Strong Management Team:- There are many great ideas out there but without a strong, experienced management team many of them get nowhere. Professional investors have tons of experience with people and can tell who has what it takes to succeed. Even if you alone, are very experienced, you might want back up from other savvy individuals to show that your business has a good backbone.
Exit Strategy:- There are two main ways that angel investors can exit their investments: an IPO or sale. They don't want their money to get tied up in a risky venture. Once a business is at a stable point, they want to sell their investment to the public through an IPO or sell to a company who would like to add the investee's business to its operating units or portfolio.
Geography:- Angel investors like to invest in businesses in their respective vicinities. If investors are close to you, they can meet you and keep up with the happenings of the business. Also, since investors tend to understand their geographical area much more than someplace hundreds of miles away or on the opposite coast, they want to invest nearby.
Price:- Investors want a price that is reasonable for an equity share in your company. What is reasonable is different from person to person and therefore from investee to the investor. There will most likely be compromises that will have to be made if the investee is desperate for investment.
