WINNING ANGELS: Evaluating

A reflection on “Winning Angels: The 7 Fundamentals of early stage investing” by: David Amis and Howard Stevenson

The first section of this book talking about the sourcing stage of investment. See my reflection on sourcing here. In the first page of the section about sourcing the authors make an immediate connection between sourcing and evaluating.

For a split second I wasn’t sure why Amis and Stevenson chose to separate the two since they married them early in the reading. After reading about evaluating, I understood why.

Evaluating an investment opportunity is related to four essential elements and highly based on intuition.

PEOPLE (1)

When evaluating, you want to know who the deal is with and that goes beyond the business owner. The people include the entrepreneur, team members, investors, advisors and any significant stakeholder. What is the track record? Are they synced with one another and the common goal?

BUSINESS OPPORTUNITY (2)

Within business opportunity are four subelements: model, customer, timing and size. All other these elements are important to understand as an entrepreneur and investor because they tell the story of how the company will make money.

THE CONTEXT (3)

The most common factors related to context are: economy, technology development, regulation, and stage of the industry. In my opinion, this is where the intuition coms in the most. Think about it, intuition is the ability to understanding something immediately without the need for conscious reasoning. If you can project success of an industry, in part based on economy (not solely based on economy), that’s a lot of power.

THE DEAL (4)

Terms of the deal may be the most interesting part to both parties. How much will this deal gain or cost (depending on which side you are on) – price and what will the structure of this deal be?

There are other things to consider during the evaluating stage. Like, what is the risk? Are you asking the right questions? Are you adding value, if so what kind? Do’t ignore the red flags?

7 thoughts on “WINNING ANGELS: Evaluating”

  1. Elaina,
    Well done on your post and great job with the layout of your site, it is very intuitive and flows well! You are absolutely right on each of your assessments of the four key components of evaluating. I think what I picked up on the most was that the evaluation was primarily of the people and the business part. Many of the angels really only shop for good people before considering the deal!

    1. Hi Jake,

      Thanks so much! I try to keep the structure of my site clean for ease of navigation. It makes so much sense for Angels to shop for good people versus businesses because you can teach people how to conduct business, but its’ not really their job to teach people how to be “good people”.

      Great point.
      Elaina

  2. Intuitiveness has been of interest for me for a long time. It is such an abstract concept/feeling that is very difficult to describe, and people have varying degrees of it. It is always so interesting to me when people are bold enough to talk about a feeling that is really difficult to harness and put words to. A lot of my life I have doubted my intuition. For a long time, I didn’t have the language to express what i felt, and I surely didn’t possess the emotional maturity to explore it as much as I wish I could. As I am getting older I feel more at ease with the gut feelings that I have. I am learning to lean more into trusting myself and those moments where I just “know.” I am also noticing how beneficial it is to have in all avenues of my life. I think the most beautiful thing about intuition both inside and outside of business is how it urges you to honor and trust yourself. I don’t know about you, but it is definitely something I am striving to do more often.

    1. Harmony,

      That is such an honest and real thing to recognize within yourself. There are so many factors that stop us from trusting our gut. I had a mentor very early in life that would always tell me to “trust my gut”…so many times I didn’t and I wish I had. I, too, lacked the emotional maturity to “know” how to do it. It was also probably hard to do because like you said, it is a feeling that is hard to put into words. Having intuition is a powerful tool to have, in general, but especially in business. It can be just as predictable as numbers.

      Thanks again for your response!
      Elaina

  3. I enjoyed reading your post on evaluating. You did a wonderful job breaking down and explaining each aspect of the Harvard Framework. I agree that during the evaluation process, one should determine the risks involved, and how to mitigate those risks, if interested in making a deal.

  4. Elaina,

    The book does seem to talk about two topics at once, and then go into more depth in the next chapter. It’s nice because it creates a nice link that carries you through the book. I think one of the important themes throughout the book is your 1st point on evaluating; people. The people in any business or deal can make or break the business, even if the business idea is top notch. I think each of the areas you and the book outline become easier to evaluate the more you practice (another common theme in the book).

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