Criteria

 

Early stage startups—and established companies seeking expansion funding—that meet certain criteria are eligible for consideration by BayAngels.

Investment size

Typically, our members invest between $25k and $200k individually. For companies with especially attractive prospects, several members may invest to enable the desired funding to be completed.

Stage

Unlike many angel organizations, Bay Angels will consider early stage startups. We often provide the first outside investor money that a company raises. We also fund expansion rounds for companies with demonstrated market traction.

Capital efficiency

We look for companies with high potential to generate or expand sales revenue with a relatively modest amount of capital. Prime BayAngel investor targets are efficiently run new companies that are able to use the funding to increase revenue and operational functionality.

Target Industries

While most Bay Area angel and VC funding organizations focus primarily on technology, BayAngels will consider a broad range of industries. We like companies in major industries in large or expanding target markets—and possess highly scalable business models. Companies that address major problems for large (or potentially large) target markets that can generate significant demand are highly desirable. However, we generally avoid participating with companies that have long investment and exit cycles, such as biotech and hardware.

Technology

We prefer to invest in unique, one-of-a-kind ideas, rather than in companies providing incremental improvements in established products or services. However, our philosophy is to approach highly complex concepts with caution, preferring to invest in companies operating in industries that have shown a clear path to commercialization. For funding consideration, “breakthrough” innovation must be accompanied by a strong business plan.

Competitive advantage

We like to invest in companies with salable and scalable products or services that distinguish them from competitors. Companies demonstrating they have features that provide protective barriers from entry by potential competitors or are not easily duplicated by companies with large capital investment budgets are preferred. Companies must also show that these advantages are sustainable over time.

Pre-money valuation

BayAngels typically only considers deals with pre-money valuations less than $3mm for pre-revenue companies. Our sweet spot for pre-revenue deals falls between $1.5mm and $2.0mm for pre-money valuations. In the case of companies with existing revenues—and a clear path to increased revenue—we will consider deals with pre-money valuations that exceed $3mm.

Expected return

We prefer to invest in companies that have the potential of returning at least 10X to 20X our investment within three to five years. This level of return is commensurate with our level of risk and possibility of failure among early stage ventures.

We look for companies that can reach cash flow break-even with minimal investment, grow quickly, and be acquired within three to seven years. This means none of the parties—entrepreneurs or investors—get wealthy until the company is acquired or find a solution (royalty) for return on investment based upon revenue.

We also want our investment to buy a significant part of the company. That means we aren’t likely to consider deals in industries such as pharmaceuticals, which take a longer time to materialize and require a larger investment than we typically make.

BayAngels typically take equity in the form of preferred stock. This comes with significant provisions to give investors more control than is indicated by percentage of ownership. It’s our goal to have your interests as founders to be aligned with ours as investors.

Exit strategy

A clearly articulated exit strategy—how investors will realize returns—is essential. Do you plan to sell the company to an established corporation in your industry? Will you exit be through subsequent rounds of financing—venture capital or public markets? BayAngels are interested both in the strategy you select to exit as well as the operational strategy showing specific steps you will take.

Fit

All BayAngels are carefully selected, accredited individual investors with significant executive experience in a variety of fields. Their collective investment wisdom is formidable. One of the greatest benefits of working with angel investors is the sizeable network of contacts they can provide. As a result, there must be a “fit” between BayAngel members and your idea and team.

Management team

We invest in people first. At BayAngels we consider talented people to be the biggest driver of success.

We look for:

  • Management teams with direct experience in their industry.
  • Entrepreneurs with a track-record of leadership and performance.
  • Passionate, driven, persistent mindset.
  • Open and flexible, willing to pivot toward opportunities as they develop.
  • Collaborative, coachable teams willing to cede some operational control to outside investors.
  • The ability to inspire confidence among future stakeholders, employees, potential customers, and investors.

When you accept funding from BayAngels, you must also be willing to embrace us as your trusted and enthusiastic partner working toward mutual success. Together we can make great things happen.